The China Hawks Are Lying Us into War

You are receiving this email because you signed up to receive our free e-letter Gilder's Guideposts, or you purchased a product or service from its publisher, Eagle Financial Publications. [Gilder Guideposts] [Technology Report]( [Tech Report PRO]( [Moonshots]( [Private Reserve]( The China Hawks Are Lying Us into War by George Gilder and Richard Vigilante 06/19/2024 SPONSORED CONTENT [The Biggest Winner of the AI Boom Isn’t Nvidia…]( Nvidia (NVDA) has soared more than 1,700% over the past 5 years. For investors who missed out on the profits, America’s #1 Futurist says AI is converging with a ‘miracle material’ right now, and [one company]( leading the way, could see its shares post 10X gains… The GOP Hawks claim China’s ascendancy is owed to its totalitarian system, extraordinary organization, and immense population, as one of their leading lights has proclaimed. They brush aside the post-Mao liberalization as mere smoke and mirrors, a "40-year-long propaganda campaign" masking the "real China." This stance presents them with a real challenge. As life-long advocates of free enterprise, committed to the idea that liberty and prosperity go together, the GOP hawks must explain how, for the first time in history, a totalitarian state got rich. Their answer, repeated endlessly in books, op-eds, speeches, and congressional testimony is that China owes its economic progress and technology prowess not to an upsurge of freedom but to massive theft, especially of high-tech intellectual property. In support of this claim, the hawks repeatedly cite dozens of official reports “finding” that China’s intellectual property (IP) theft was on the order of $200 billion to $600 billion annually, even a decade ago, and now likely reaches trillions of dollars per year, most of the theft being from the United States. This is a lie, and assuming the hawks read their own footnotes, they know it is a lie. They are attempting to lie our country into war, which is a fair definition of treason. We did read the footnotes. We found that this endlessly repeated claim of $200 billion to $600 billion a year is the product of just two aging reports assembled using methodology about as reliable as throwing darts at a dartboard. The $200 to $600 billion figure is based on assumptions the original authors admit are guesses chosen not for their accuracy but their surface plausibility. One of the reports, by the U.S. International Trade Commission (USITC), China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy, was published in 2011. The second, an Organisation for Economic Co-operation and Development (OECD) study titled, Trade in Counterfeit and Pirated Goods, was first issued in 2008 and updated in 2016. Nearly every other report on the theme, not to mention hundreds of op-eds and speeches and mainstream media items, cites these two studies as their only quantitative evidence. The OECD report is the source of the specific claim that China's I.P. theft tallied up to a whopping $200 billion to $600 billion annually throughout the 2010s. The OECD model extrapolates from shaky data on customs seizures of counterfeit products to estimate global IP theft. We won’t rehearse the methodology in detail here. (You can find more in Richard’s recent article in Reason magazine, [The Mirage of Chinese IP Theft](). Suffice it to say that after a series of multiplicative and, at best, possibly defensible assumptions, at the critical moment the authors leave reality behind entirely. [The Next Nvidia?]( Wall Street legend has just uncovered one tiny Maryland company that could become the next Nvidia. Few in the media are talking about this story yet... but in the next 6 months that's all they'll talk about. [Go here now for this breaking story.]( A shot in the dark Their $200-600 billion figure depends on the determination of a "fixed point"—essentially, an estimate of what percentage of goods in a specific baseline category are fake. Depending on that number, the scale of IP theft can swing wildly from mere billions to an eye-watering trillion dollars annually. How did the OECD wizards arrive at their fixed point? They took a stab in the dark. Initially, they set their sights on a 20% figure for the baseline category used to model everything else. That, however, caused the model to spit out numbers that “appeared excessive.” To maintain credibility, they dialed the number back to 5%. They also noted, however, that the amount “could be higher.” Needing to establish a “credible ceiling” for counterfeit trade, they picked 10% as their high fixed point. Ultimately, the OECD planted its flag on a $200 billion estimate for 2005's counterfeit trade, with the caveat that it could be much more. A figure of legend was born. In 2016, a second edition of the report, using similar methods, offered a new headline-grabbing figure: “In 2013, international trade in [counterfeit] products represented up to 2.5 percent of world trade, or as much as USD $461 billion. This is the equivalent of the GDP of Austria, or the combined GDP of Ireland and the Czech Republic.” This 2.5% figure has since become the default estimate for claims of rampant I.P. theft by China. Just multiply total global trade by 2.5% and assume that’s what China steals. This is the study routinely cited by the hawks as “rigorous.” The 2011 USITC report is, if possible, even less credible. Focusing on I.P.-intensive U.S. firms operating in China in 2009, the report claims these firms “reported losses of approximately $48.2 billion in sales, royalties, or license fees,” due to I.P. infringement. It’s a made-up number. A closer look reveals the actual range of estimated losses stretches from $14.2 billion to $90.5 billion. More damningly, these numbers are not, as claimed, based on direct reports from companies. Most of the figures come from third-party guesstimates by industry associations. Essentially, these firms were parroting back guesses fed to them by industry groups with a vested interest in painting the grimmest picture possible to grab government attention. Appalled yet? The worst deception is yet to come. These two reports, endlessly cited to explain China’s surging progress in cutting-edge electronic and defense technology, have nothing to do with high-tech. [Level up your trading intuition]( To buy, sell, or stand aside? That is the question. And it’s simple to answer when you [sharpen your market intuition](. At a single glance of a (powerful) chart, I want to show you how to always make the right decision. [Trade this way >]( We’re talking about sneakers The “I.P.” allegedly stolen most consists of trademarks affixed to faux high-fashion sneakers (a perennial leader), watches, handbags, and other accessories, or copyrights on pirated music. Most shipments intercepted are in retail quantities, often fewer than 10 items. Most come by mail. Somewhere in China, Mom and Pop are ripping off Rolex, Louis Vuitton, and probably Taylor Swift. They should worry about Number 87, but they are not the reason China is rich. These phony numbers have been essential to the hawks’ war mongering. Without such eye-catching numbers to cite, no reporter would write this story. As it is, every major U.S. media outlet—the New York Times, the Wall Street Journal, the Washington Post, USA Today, all the cable and network news outlets—have published these numbers as evidence of rampant Chinese IP theft. The two Chinas To be sure, the Chinese espionage apparatus tries to steal U.S. technology and sometimes succeeds. Case in point: In March of this year, Chinese national Linwei Ding was indicted by a federal grand jury for four counts of theft of trade secrets in connection with an alleged plan to steal proprietary artificial intelligence technology from Google. He aimed to kick-start his own AI venture back home. The hawks, however, know they can’t base the case for war on occasional wrongdoing. Essential to their case that today’s China is as Communist as ever is the claim that China’s growth is owed not to loosening up but doubling down. Above all, the charge of IP theft enables the hawks to deny the relevant reality that should guide American policy: Since Mao’s death, two Chinas have struggled for dominance. There is the legacy authoritarian regime. And there is the amazing land of explosive entrepreneurship and stunning innovation, thriving on new freedoms. Denying this admittedly challenging circumstance will not advance American interests. To the small extent we can influence the outcome of the struggle, we should celebrate and encourage the fruits of Chinese liberty, not wave the bloody shirt and talk of war. P.S. Be sure to check your inbox on June 27 at 11:00 a.m. EST for an exciting announcement about a groundbreaking new technology that could revolutionize medicine more than antibiotics, x-rays and anesthesia... COMBINED! Sincerely, [The Editors] George Gilder, Richard Vigilante, Steve Waite, and John Schroeter Editors, Gilder's Guideposts, Technology Report, Technology Report Pro, Moonshots, and Private Reserve About George Gilder: [George Gilder]George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives. He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance. George and his team are the editors of Gilder Technology Report, Gilder Technology Report Pro, Moonshots and Private Reserve. About Us: Eagle Financial Publications is located in Washington, D.C. – only a few blocks from the Capitol. Our products have been helping investors build their wealth for several decades. Whether you’re a long-term investor or short-term trader, you’ll find the right strategy for you, including how to earn more steady income to spend now, preserve and grow your capital to enjoy later, and whatever other investment goals you have. Visit Our Websites: - [StockInvestor.com]( - [DividendInvestor.com]( - [DayTradeSPY.com]( - [CoveredCall]( - [MarkSkousen.com]( - [GilderReport.com]( - [BryanPerryInvesting.com]( - [JimWoodsInvesting.com]( - [InvestmentHouse.com]( - [RetirementWatch.com]( - [SeniorResource.com]( - [GenerationalWealthStrategies.com]( - [InvestInFiveStarGems.com]( - [[YouTube] Visit our YouTube Channel - Eagle Investing Network]( To ensure future delivery of Eagle Financial Publications emails please add financial@info2.eaglefinancialpublications.com to your address book or contact list. View this email in your [web browser](. This email was sent to {EMAIL} because you are subscribed to George Gilder's Guideposts. To unsubscribe please click [here](. If you have questions, please send them to [Customer Service](mailto:customerservice@eaglefinancialpublications.com). Legal Disclaimer: Any and all communications from Eagle Products, LLC. employees should not be considered advice on finances. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized advice on finances. Eagle Financial Publications - Eagle Products, LLC. - a Salem Communications Holding Company 122 C Street NW, Suite 515 | Washington, D.C. 20001 [Link](