The evidence is clear, China declared economic war on the rest of the world even as the Clinton, Bush, and Obama administrations all sought engagement and dialogue with China’s leaders. For decades, U. S. policy-makers believed and hoped that this would lead the Chinese government to retreat from its mercantilist path. However, it is now abundantly clear to objective analysts that this approach has failed. Rather than reform, China has doubled-down on its so-called “innovation-mercantilist strategies.” And, despite the claims of some apologists for Chinese behavior, the end-game is clear: Chinese-owned companies across a range of advanced industries are gaining significant global market share at the expense of American, European, Japanese, and Korean competitors.

In a landmark report, the Information and Innovation Foundation (or ITIF) argues that a far more proactive, broad-based response, in tight-partnership with our allies, is needed to ensure that Chinese “innovation mercantilism” is contained and rolled back. Our goal must be to restore the genuine market-based and rules-based global trading system envisioned when the WTO was established.

To understand how we got here, and why so few policy-makers have understood it, consider the recent history of China.

In 2015, Chinese President Xi Jinping unabashedly trumpeted his goal of making China the “master of its own technologies.” By this he meant that Chinese firms, operating in China, would produce virtually all technology goods and services for Chinese consumers. China’s arrival at such a point resulted from the evolution of Chinese economic policy over the past two decades. Up until the mid-2000s, Chinese economic-development strategy sought principally to attract foreign direct investment (or FDI) and induce foreign multinational corporations to shift production to China. That production was mostly in more traditional manufacturing. Even then, China used an array of unfair tactics to achieve that goal, including systemic currency manipulation, massive subsidies to firms, limits on imports, and requirements for forced local production by firms wishing to sell products in China.

That strategy changed in 2006, as China shifted to a so-called “China Inc.” development model of indigenous innovation. This focused on enabling Chinese firms, particularly those in advanced, innovation-based industries, at the expense of foreign firms.

China’s “National Medium-Term and Long-Term Program for Science and Technology Development (2006-2020),” is referred to as the “MLP.” The MLP essentially announced that modern Chinese economic strategy sought absolute advantage across virtually all advanced industries...

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