Chinese purchase of Complete Genomics requires scrutiny

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Reposted from Mercury News

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Chinese purchase of Complete Genomics requires scrutiny

Michael Wessel and Larry Wortzel | December 12, 2012 | MercuryNews.com

China, with its enormous foreign currency reserves, is soon to launch a shopping spree for U.S. companies. A goal: Capture the most critical emerging technologies with potential military or security impact.

As part of this effort, Beijing Genomics Institute, of Shenzhen, is trying to buy Mountain View-based Complete Genomics, a leading genome and biotechnology firm. Research in this field may yield miraculous cures but may also be the building blocks of 21st-century bioweapons. The Committee on Foreign Investment in the U.S. must review this proposed purchase with the strictest scrutiny.

How Washington and states deal with the coming tsunami of similar Chinese investment will have enormous repercussions. The bulk of these investments will be made by Chinese state-owned and -controlled companies seeking to harness foreign companies to advance the aims of the government and the ruling Communist Party. Biotechnology is one of the “strategic emerging industries” identified in China’s recent 12th Five-Year Plan for state favoritism. China is reportedly investing $1.5 trillion in industries identified in this plan.

Complete Genomics is a leading U.S. company in this field, and its technology and market position would enhance China’s capabilities. Genomic research, the key to the development of new pharmaceuticals, will unlock the genetic codes to address common and not-so-common maladies. As the U.S. economy continues to seek its footing and create the jobs for the future, Washington should consider the economic impact of any transaction that transfers technology to our competitors. BGI’s proposed acquisition of Complete Genomics demands scrutiny under this economic test.

Many in Washington and around the states want to welcome Chinese investment with open arms. Indeed, some foreign investment has had a positive impact on job creation in many sectors. But judicious screening of Chinese investment is appropriate, since the impact of investment by state-controlled companies isn’t yet clear. Will this be another cash and carry investment where China buys the assets and technological know-how, only to pack it up and take it home? Or will it continue to operate Complete Genomics’ operations here in the U.S. and allow the fruits of any developments to create opportunity here at home?

The transaction raises very serious national security issues as well. Targeted genomic weapons are still somewhat hypothetical. But advances in genome and synthetic biotechnology could allow for bioweapons to be targeted at specific populations, groups or, indeed, individuals. The November Atlantic warned that:

“BGI hires thousands of bright young researchers each year. The training is great, but the wages are reportedly low. This means that many of its talented synthetic biologists may well be searching for better pay and greener pastures each year, too. Some of these jobs will undoubtedly appear in countries not yet on the (synthetic biology) radar. Iran, North Korea and Syria will almost certainly be hiring.”

Syria, Iran and North Korea’s military ambitions have advanced with China’s help. Bioweapons and genetic warfare may be next.

Certain genetic disorders, such as Tay-Sachs, are known to inordinately arise among certain groups. Such groups could be targeted as their genetic code is unlocked. The Atlantic article identified the potential for a bioweapon targeted specifically at the U.S. president. Unlikely, yes. Impossible, probably not.

As the wave of Chinese investment begins, we must not ignore the risks. Scrutinizing Chinese investments — especially those involving next-generation technologies and capabilities — is just plain common sense. This sale may not be an innocuous investment in science.

Michael Wessel and Larry Wortzel are congressionally appointed members of the U.S.-China Economic and Security Review Commission. They wrote this for this newspaper.

7 Responses to “Chinese purchase of Complete Genomics requires scrutiny”

  1. Tom T. says:

    It seems communist China has a lot in common with the corporate world here in the U.S. Oligarchs in both countries will use foreign trade to ratchet down their costs and make more profit. Much of this comes at the cost of the general welfare in favor of the oligarchs running these operations.

    When manufactured goods are allowed to enter the U.S. without the labor or environmental costs of those operating in the U.S., they can have a competitive advantage to U.S. products that have to cover these costs. Walmart has used this economic reality to capture a large portion of the U.S. retail market as wages ratchet down. The loss of demand for labor by manufacturing increased this real wage decrease.

    It is no wonder that China and Walmart have a cozy relationship. They are using each other to capture the economic value in both countries. It is the rule of the oligarchs via a type of fascism…….

    “Corporatism should more accurately be called fascism as it is the merging of state and corporate interests”—-Benito Mussolini

  2. Will Wilkin says:

    Actually China’s “extractive elites” are doing a much better job than ours at developing their productive economy and raising the standard of living of their people:

    http://www.theamericanconservative.com/articles/chinas-rise-americas-fall/

    EXCERPT:

    During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010. In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.

    Furthermore, the vast majority of China’s newly created economic wealth has flowed to ordinary Chinese workers, who have moved from oxen and bicycles to the verge of automobiles in just a single generation. While median American incomes have been stagnant for almost forty years, those in China have nearly doubled every decade, with the real wages of workers outside the farm-sector rising about 150 percent over the last ten years alone. The Chinese of 1980 were desperately poor compared to Pakistanis, Nigerians, or Kenyans; but today, they are several times wealthier, representing more than a tenfold shift in relative income….

    …But over the last couple of years, the government has taken major steps to reduce this problem by establishing a national healthcare insurance system whose coverage now extends to 95 percent or so of the total population, a far better ratio than is found in wealthy America and at a tiny fraction of the cost. Once again, competent leaders with access to growing national wealth can effectively solve these sorts of major social problems.

    END EXCERPT

  3. Tom T. says:

    Great article, Will. The unfortunate fact is that as Dr. Goldberg continually points out, as well as others, is that the U.S. labor force is being dragged down with a substantially lower competitor (Chinese standard of living way below that of the U.S.).

    I appreciate the fact that the article you posted compares the “extractive” elites of the two countries and for the U.S. elites, the relative scorecard is much lower than the Chinese scorecard.

    The point is well taken, but the differences in the societies are so stark that this matters little to the average person in the U.S. labor force.

    Our political elites are so focused on their self interests that they have put in peril our national interests and have helped fund the military buildup of China against our national defense.

    The oligarchs have been the winners in both countries. The article compared the value of the Chinese worker compared to the U.S. worker but oligarch to oligarch as measured in wealth or political power, I bet the Chinese have at least matched the growth of the U.S. oligarchs if not strongly out paced them.

    Again, good article. The state of our country is easily blamed on others but the real blame belongs to extractive elite and their puppets in government who have created such destructive policies for the average person. It doesn’t seem that the right to vote has had that much of a difference in this situation as we don’t hold politicians accountable and instead are “forced” to vote for choice a) or choice b), both of which seem to be controlled by the extractive elite.

    Tom T.

  4. Mo says:

    As the US keeps creating money out of thin air to police the world, fund military conflicts, wars etc., other countries like China will continue to accumulate dollars to buy up US assets and resources. Additionally, the inflation from the wasteful spending will continue to push up US domestic prices causing manufacturing inputs to increase thus making US manufacturers less competitive and will widen the trade deficit as the price of imports increase in dollars.

    Countries like China, Japan and Germany have high savings which is what enables them to maintain a stable manufacturing sector. In the US, savings is much lower due to inflation financing wasteful spending. The inflation results in people being able to buy less goods with their money unless with credit that leads to more inflation and causes people to save less as prices of staple goods increase.

    • Tom T. says:

      Mo, normally increases in the money supply can increase inflation but that has not been happening. One of the reasons is that the increase in the money supply has not been going to working people who then spend that money on U.S. manufactured goods that, after the productivity gains are considered, can translate into inflation. We haven’t been seeing that kind of inflation, mainly due to the velocity (economic activity) decreasing. We have super low interest rates and the fed’s easing or QE by buying U.S. mortgages in the amount of 40 billion per month is just saving the investors (and banks) and that money is not flowing into the economy creating demand. That has already been counted when the capitalization of those assets occurred and their ripples already passed into the economy.

      I totally agree with your main points, however. The “savings” in the U.S. seem to be by the corporations who are under no pressure to reinsert those earnings back into the economy and many use accounting rules to keep it tax sheltered off shore. If corporate earnings are not translated into actual earnings by people who work for a living and who need to spend that money to get by, then the corporate hold ‘em strategy may not be enough to lift the economy appreciably or to the extent that earnings would.

      Tom T.

  5. mo says:

    Tom there has been inflation. Look at commodites, bond market, stock market and the CPI. They all have risen since the financial crisis. The CPI if calculated the old way based on pure price like it was in the early 1980s would show inflation of 5-10% per year. Check out shadowstats.com to see how the CPI index has changed over the last 3 decades.

  6. Tom T. says:

    Mo, I am not going to argue your point on inflation because I do believe there is more inflation as shadowstats claims.

    I am saying that it is not consumer driven because consumer’s earnings in the market place have not kept up with inflation. Inflation can come from many areas. It can come from the Quantitative Easing that works itself into the economy through more economic output and higher wages. So far, that has not trickled through to the labor markets, in part, because demand for labor here in the U.S. has been replaced by labor in other countries (hence the huge trade deficit).

    The fiscal stimulus given by the Obama administration found much of itself going to China’s economy because they captured it instead of having the multiplier effect wanted in this country.

    Commodity prices in agriculture have gone up largely because corn is now a substitute for energy via ethanol and so its value is based as much on ethanol value as it is demand for feed. This is a good thing because in prior decades, the overproduction of corn used primarily for feed meant that the price was so depressed, the economics of production signaled to stop producing (the industry structure is one where individual producers are price takers and can only improve their situation with efficiency which also means more production). Corn was valued in the 2 to 3 dollar range and the losses were heavily subsidized by the USDA (taxpayers). Now, with the price being based on energy, the USDA is not needed to keep farmers afloat.

    I do agree with shadowstats that unemployment is understated. It is one of the reasons wage prices have not come up. We shot ourselves in the foot economically by going to low wage countries instead of manufacturing here at home. It was hidden during the Bush years with individuals mining the equity out of their homes during the housing bubble to keep up their standard of living. Real wages did not go up in relative terms.

    Tom T.

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