(What’s Left of) Our Economy: A Major China-Related Conflict of Interest Ignored by the Media

Tags

Canyon Bridge Capital Partners, CFIUS, China, conflicts of interest, EETimes, foreign direct investment, journalism, national security, Ray Bingham, transparency, {What's Left of) Our Economy

EETimes is a great source of information about the technology world that I’ve long found invaluable for following and understanding the development of the microelectronics industry in particular and its implications. So it genuinely pains me to report that this news site did a major disservice to its readers yesterday by posting a column on Chinese investment in the U.S. economy written by an author whose close ties to the Chinese government went completely unmentioned.

The column, by venture capitalist Ray Bingham, failed badly on substantive grounds, too – so badly, in fact, that it represents a significant failure of the site’s editorial process. After all, it’s one thing – and an entirely legitimate thing – to argue, as per the author, that the federal government’s process for screening prospective foreign acquisitions of American companies for national security reasons (known by the acronym CFIUS) might be making some serious mistakes. Its mandate is to balance the national security threats with the economic benefits that such investments might create, and it’s always possible when such judgment calls are involved to overemphasize one consideration and underemphasize the other.

But EETimes should by no means have had Bingham to get away with simply describing China as a “perceived threat” and a country that is thought “to have motivations beyond the standard economic drivers.” The site should have at least required to the author to acknowledge that Beijing is mounting a serious challenge to American security interests throughout East Asia, and especially in the South China Sea, and that China’s state-dominated system as a whole operates in ways having absolutely nothing to do with “the standard economic drivers.” By letting Bingham off the hook, EETimes wound up publishing not an opinion article, but a piece of propaganda.

At the same time, even this serious failing pales against EETimes‘ blunder on the transparency front. Readers of all opinion pieces must always be told by media organizations when the author or authors of these articles have self-interested stakes in propagating certain viewpoints. (Think tanks and individual researchers should be held to the same standards.) Bingham qualifies in spades.

As EETimes told its readers:

“Ray Bingham is co-founder and partner at Palo Alto-based Canyon Bridge Capital Partners, a global private equity investment fund focusing on the technology sector. He has considerable experience in identifying growth and mature technology firms for investment, giving them new life and helping them to reach their full long-term growth potential.”

As it should have added, Canyon Bridge (in the words of the Financial Times newspaper) “sits at the end of a long chain of Chinese funds and investors with ties to the government. “

“The parent company of its largest backer, Yitai Capital, is China Venture Capital Fund Corporation Limited, which Chinese state media reported last year has a mandate to ‘carry out our national strategies and to mainly invest in projects about technological innovation and industrial upgrading’.

“One of CVC’s state-owned investors, China Reform Holdings Corporation, aims to help state ventures invest domestically and internationally. Benjamin Chow, Canyon Bridge’s [other] founder and managing partner, previously worked for a CRHC-controlled fund, China Reform Fund Management. The website for China Reform Fund Management describes CRHC as a ‘state-owned assets management corporation under direct supervision from central government” that among other priorities makes strategic investments in “new emerging industries as well as other sectors related to national security and economic lifelines.'”

In other words, Bingham and his company work for the Chinese government. He contends that Canyon Bridge’s Chinese investors were merely “‘limited partners’, with no active role in how the fund is run. ‘They have no decision-making authority over what we invest in, how we manage it or the disposition of those assets ultimately,’ he said. But so what? Can anyone seriously doubt that when these ‘limited partners’ say ‘Jump!’, Bingham and colleagues respond, ‘How high?’”

Therefore, Bingham’s job, along with Canyon Bridge’s, is representing Chinese government interests. Whatever you think of the morality or wisdom of this choice, the information is absolutely essential to a reader’s ability to judge the accuracy of his claims, merits of his arguments, and the critical issue of what he might be concealing about the subjects he discusses.

And in this vein, something else EETimes should have forced Bingham to disclose:  He and his Chinese backers had just been rebuffed by that same U.S. government investment-screening system in their effort to take over the American-owned microchip semiconductor firm Lattice Semiconductor. So small wonder the author has problems with its operations. It’s crimped his own income stream.

Again, Bingham asd others like him have every right to work for the Chinese government, and EETimes has every right to publish them. But EETimes failure to reveal Bingham’s enormous personal stake in loosening Washington’s foreign direct investment policies is a flat-out breach of journalistic ethics. And the site should correct this mistake and tell its readers the whole story without delay.

(What’s Left of) Our Economy: Why TPP Fantasies Can’t Contain China

Tags

China, EETimes, fast track, Junko Yoshida, Obama, semiconductors, technology, TPP, Trade, Trade Promotion Authority, Trans-Pacific Partnership, {What's Left of) Our Economy

One of the more peculiar – and dangerous – varieties of wildlife found in American politics and policy is the China Chicken Hawk. This is an office-holder or other member of the national ruling and chattering classes who warns loudly about the growing national security threat posed by China to the United States, but enthusiastically supports the U.S. trade and investment policies that have fed the beast.

On the Democratic side, there’s no better example than President Obama, who has portrayed his Pacific Rim trade deal (the TPP or Trans-Pacific Partnership) as a must for offsetting China’s growing power in economically dynamic East Asia. On the Republican side, practically every member of the party’s leadership qualifies. Just check out this recent TV ad put together by an advocacy group linked to House Speaker John Boehner.

Ironically, though, as these leaders have been concocting fantasies about the TPP’s potential to contain China, news came out making clear how powerfully the political establishment’s favored China trade policies have enabled Beijing to make startling progress in technologies with major military implications. According to Junko Yoshida, Chief International Correspondent for the authoritative technology publication EETimes, domestically made chips now make up some 20 percent of China’s market for semiconductors.

These devices are of course the prime building blocks of every advanced electronic device produced in recent decades, and have become vital to building advanced weaponry. China’s ambitions for semiconductor self-sufficiency have long been well known, and Beijing has recently upped its game by deciding to invest $20 billion during the three-year period between 2014 and 2017 to reduce its dependency on foreign supplies. On top of traditional national security concerns, the Chinese are also determined to reduce the threat they perceive from spying systems that the United States and other countries could insert in their products and services.

Yoshida’s market share was so much higher than other figures I’d seen charting the Chinese semiconductor industry’s rise (here’s an example, where the number is less than half of Yoshida’s) that I wrote her to make sure exactly what she was describing. And she confirmed that the 20 percent figure in her article represented the output of Chinese-owned semiconductor firms, not mainly that of foreign firms assembling in China.

America’s technology lead over China seems wide for now, but if these new semiconductor findings are accurate, this margin has narrowed in qualitative, not just quantitative, terms. For they’re signs that China is gaining not only technological prowess, but technology independence. I recall that as they were pushing to ramp up U.S.-China trade and investment in the 1990s, tech executives would often claim that supporting technology development in China would enable them to exercise some control over the process. Yoshida’s findings are just the latest evidence that this strategy continues to backfire, and that these shortsighted corporate transfers of critical knowhow keep enabling China’s capabilities to reach critical mass sooner rather than later.

Congress’ debate over fast track trade negotiating authority for the president and by extension the TPP has just been extended through late July.  But don’t expect these alarming and concrete developments to have any more influence on the anti-China bombast of supporters than they’ve had to date.