Detroit News is out with a report about a car manufacturer in China that has copied the popular Ford F-150 pick-up truck design right down to Ford’s iconic blue oval logo.

As the article points out,

Legally, Ford may have a difficult time winning any damages against the state-owned carmaker, experts say.

“Suing in China is a rather daunting procedure,” said Jim Hall of 2953 Analytics LLP. “It’s difficult to say what’s going to happen when talking about copyright problems.”

Ford would likely have to file a lawsuit against the Chinese government, which may or may not hear the case, Hall said.

Whether government-owned or private, Chinese automakers employ thousands of workers and serve as economic anchors within their communities, said Ken Duck, U.S. partner for Boss & Young, a Shanghai-based law practice. Duck specializes in cross-border transactional work. “Social stability within the local government or the loss of social stability is a huge concern in terms of employment and housing issues,” said Duck, whose office is based in Troy. “It’s really a macro issue. Anything potentially destabilizing to the community would be a factor in (a judge’s) thinking.”

So, when is our government going to stand up for our workers?

The next time you buy an Apple product, know that they COULD do something about work place conditions in the manufacturers in China. Manufacturers that have huge employee suicide numbers and what some have called inhumane working conditions. But Apple has chosen to play Pontius Pilate and wash their hands. Here, law professor Bill Black explicitly points out the actions available to Apple to stop this but Apple doesn’t.
What to do about Apple and Fraud Friendly Manufacturing in China?

Henry Blodgett is out with a summary of the labor practices of the Chinese company that builds Apple iPhones and iPads. what would be illegal labor practices if done in the US are the standard in China. And Apple either knows this or chooses not to know it but the truth is the truth. Iphones and iPads are neat but what truly is the cost to this country. We should not dumb down our labor standards to the lowest common denominator. But then we buy products from Apple which is doing it to us anyway.

ABC News is out with a report that for over a year military sources in China had hacked into the computers of the US Chamber of Commerce, a business-oriented trade association.

 “The Chinese have attacked every major U.S. company, every government agency, and NGO’s. Their attacking the Chamber of Commerce is part of a pattern of their attacking everything in the US. If you’re working on U.S.-China relations with an NGO, government agency, you can be sure the Chinese are reading your emails and on your computer,” Richard Clarke, former White House counter-terrorism adviser, told ABC News.

“You stack all of that up and I think there’s a case to be made that this may be the greatest transfer of wealth through theft and piracy in the history of the world and we are on the losing end of it,” said Sen. Sheldon Whitehouse of Rhode Island.

This IS the new cold war. The Chinese appeared to be focused on Asian-oriented trade policy information within the Chamber’s internal communications and files. That is was the military means it was government directed.

Bloomberg is out with a report China-Based Hacking of 760 Companies Shows Cyber Cold War that shows China is going after more than natural targets for industrial espionage but all possibilities. China has been in the technology theft business for decade(s) because they have trouble naturally creating/innovating. Its against their culture. What ‘free market’ advocates have go to recognize/acknowledge is that the market is not fair let alone free.

The money quote:

“They are stealing everything that isn’t bolted down, and it’s getting exponentially worse,” said Representative Mike Rogers, a Michigan Republican who is chairman of the Permanent Select Committee on Intelligence.

Remember – Rogers is a former FBI agent. He knows something about criminal activity.

The report goes on:

 China has made industrial espionage an integral part of its economic policy, stealing company secrets to help it leapfrog over U.S. and other foreign competitors to further its goal of becoming the world’s largest economy, U.S. intelligence officials have concluded in a report released last month.

This is warfare. It does not involve physical bodies but is just as targeted.

The signs are becoming more obvious to the outside world which means the actual situation is worse or has been festering longer than outside observers have realized (and inside observers wanted to deny). From the report,

A short drive from the city of Yan’an, a 100-yard elevated section of that highway stands dormant with nothing on either side.

“From April until now, the subcontractors on this road haven’t been paid any money,” says Cui Jinmin, who ran a crew of about 15 workers here. “There’s nothing we can do. The road’s owner [the local government] has no money; we can only wait.”

Mish Shedlock is out with a blog that strings together several threads from vacant amusement park developments to collapsing residential prices in major cities. He discusses the impact on world commodity prices of a bursting property bubble but what he doesn’t get into is why there was a property bubble. Some of it was the same as the US, “Housing prices always go up”, until they don’t – mistake. But another was a locked country where the citizens have limited, only local, opportunities for investment.

First China has no social security net. Kind of amazing for being a communist country but they actually don’t protect the people. Thus folks have to save for the chance of something bad happening or for retirement income protection. This leads to too much individual saving. That sounds like that should not be a problem, although it is. Insurance is one the good financial innovations. It pools risk and thus lowers the cost of protection thus freeing up money for either consumption (which is employment to the provider) or investment in new activities.

Combine the need for saving with limited, only local options,  leads to speculative asset bubbles even faster. One of the control valves in an effective system is allowing exchange of one’s native currency with other countries and to be able to buy investments in other areas. It actually improves local performance because it brings about accountability. Funding flows to the greatest return. Given that this flow is blocked, the savings flow to asset price appreciation. Prices go up, leading ‘investors’ to think they’re richer and that leverage makes sense so they borrow more driving up asset prices further. Wash, rinse, repeat. Until it doesn’t work any more (such as when there’s not enough money/income to pay the debt service). This is economist Hyman Minsky’s work on financial cycles and China is now at the “Ponzi financing” stage or “the end.”

Its not going to play well and we may be getting closer to the endgame than main stream media is covering.

That’s the headline out from Senator Levin, chair of the Senate Armed Services Committee.

From his report:

An investigation by the Senate Armed Services Committee, which Sen. Levin chairs, found nearly 2,000 examples of counterfeit electronic parts in the military supply chain. Most of those parts appear to come from China, where a brazenly open market in counterfeit parts thrives. In a hearing on the investigation, Sen. Levin questioned executives from defense contractors whose systems were found to contain counterfeit parts, called for contractors and the Pentagon to tighten prevention measures, and called on China to end the countefeit parts trade there. “If China will not act promptly, then we should treat all electronic parts from China as suspected counterfeits,” he said.

The staff of the Committee have documented step-by-step supply chain issues with fake parts coming from China into the military supply chain. The real risk we discussed earlier where we don’t know what we don’t know. We only know what we’ve found so far and more importantly we don’t know what’s inside the chips. Are there backdoors? Are there “design to fail” logic steps?

Senator Levin’s opening statement on this to the Armed Services Committee with links to the fraud the Committee found.

Janet Tavikoli: Timing China’s Financial Meltdown

Bloomberg is out with a report on a Pentagon investigation of fake parts on US military aircraft. See China Counterfeit Parts in U.S. Military Boeing, L3 Aircraft.

Lets just look at a couple quotes – unfortunately several paragraphs apart:

China supports the fight against counterfeit goods, Chinese Foreign Ministry spokesman Hong Lei said at a briefing today in Beijing.

“China’s government is actively promoting cooperation in fighting fake or counterfeit goods with relevant authorities in other countries and such efforts are welcome,” Hong said.

followed a little later:

The Senate committee’s (ed.:  Armed Services) investigative staff amassed a database with 1,800 cases of counterfeiting totaling about 1 million parts. It scrutinized 100 cases and found that 70 percent of the suspect parts were traced to Chinese firms, according to the memo.

So on one hand the Chinese government is taking this seriously. On the other hand about a million counterfeit parts have gotten through the supply system into working, deployed aircraft.

The article discusses the Armed Services Committee and the Pentagon’s concern about failure of the counterfeit computer chips. What if more significantly the Chinese have engineered the chips with back-doors that could give them access to our military hardware?