Image courtesy of Vichaya Kiatying-Angsulee at FreeDigitalPhotos.net

If you found it unnerving to watch U.S. factory jobs vanish in the last few decades as an overwhelming tide of consumer products were emblazoned with “Made in China,” then now would be an appropriate time to panic again, because China is trying to do the same thing with the kinds of cutting-edge technologies that drive the digital economy.

From semiconductors to e-commerce, Chinese President Xi Jinping has unabashedly trumpeted the goal of making China the “master of its own technologies”—and, to do so, the Chinese government is pursuing an aggressive by-hook-or-by-crook strategy that involves serially manipulating the marketplace and wantonly stealing and coercing transfer of American knowhow.

The United States can no longer afford to stand idly by as China carries out these plans. The Obama Administration and Congress should push back with a robust policy of constructive confrontation that marshals all the resources of government to make clear there will be severe consequences for China’s brand of innovation mercantilism.

The most recent signs of trouble have come in the last few weeks, as China has bought its way into a leading U.S. semiconductor company, Western Digital WDC +0.00%, while surreptitiously testing the backdoor locks of many others.

The semiconductor value chain

In fact, the Western Digital deal was the latest in a string of 17 other acquisitions that Chinese firms have attempted along the semiconductor value chain. Notably, China’s Tsinghua Unigroup—a state-owned enterprise once headed by the son of former Chinese President Hu Jintao—bid $23 billion this summer for the Idaho-based Micron Technologies. That deal fell apart after U.S. Senators Orrin Hatch and Chuck Schumer raised national security concerns. So Unigroup pivoted, working through its Unisplendour subsidiary to acquire a 15% stake in Western Digital.

In a clear sign this was a coerced marriage, China’s Ministry of Commerce then suddenly approved Western Digital’s 2012 acquisition of Hitatchi, Ltd.’s hard drive business—a deal that competition authorities in the United States, Europe, Australia and Japan all had studied and approved, but China had slow walked, thereby preventing Western Digital from achieving $400 million in savings. Western Digital is now the third global information technology company to accept investments from Chinese state-owned corporations in order to win such a blessing.

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