Golden Spoon Investor

Chapter 567 567: CH568

Zhongnanhai, Beijing.

Once the imperial garden west of the Forbidden City during the Qing Dynasty, it is now the heart of the Chinese government, housing the offices of the president, the premier, and several other core power institutions.

As befitted the residence of the nation's top leadership, heavily armed soldiers stood guard around the clock, layered across the vast grounds and controlling every point of entry.

After a heavy snowfall from early morning, a thick layer of snow covered the frozen surface of the enormous artificial lake. Against that wintry backdrop, an elderly man with a gentle face and black-rimmed glasses sat on a sofa.

Listening to the soft crackle of firewood burning in the large fireplace, he sipped a cup of premium pu-erh tea. This man was Zhang Zhenzhong, the president of China and the country's most powerful figure.

As he silently watched the flames flicker in the fireplace, his secretary approached quietly and spoke.

"Minister Liu Fengwei from the Ministry of Commerce has arrived."

"Let him in."

"Yes, sir."

The secretary stepped out with a brief reply and soon returned, guiding in Minister Liu Fengwei, who was dressed in a gray suit.

Liu Fengwei, of medium height with a square jaw, had been a close aide to Zhang Zhenzhong since the president's days as mayor of Shanghai.

After watching Liu bend at the waist in greeting and straighten again, Zhang Zhenzhong motioned with his chin toward the sofa across from him.

"Have a seat."

He opened a lacquered wooden case, took out a cigarette, and held it between his lips. Liu Fengwei sat for only a moment before quickly rising again to light it for him.

Sinking comfortably into the plush leather sofa, Zhang Zhenzhong drew in the thick white smoke, then exhaled slowly as he asked:

"How did it go?"

Sitting upright again, Liu Fengwei answered in a firm, steady voice.

"At first I thought it was only because we're approaching a change in administration, but the fact that even the working-level talks related to WTO accession have suddenly been halted suggests the situation is more serious than it appears."

Zhang Zhenzhong frowned.

"So this isn't just an empty threat."

"I'm afraid not."

"Tch. Just a few more years and we could have secured full dominance over rare earths, yet now we're being grabbed by the scruff of the neck at the final moment."

Sensing the irritation in the president's tone, Vice Minister Liu Fengwei responded carefully.

"Even if the United States has only now realized the danger, most of the world's rare earth production facilities have already moved to China over the past twenty years, drawn by our low labor costs and lenient environmental standards. It won't be easy for them to reverse course."

"Of course. The moment you mention building a rare earth processing plant, which emits hazardous pollutants during refining, the local residents and environmental groups in their country will take to the streets with signs."

"That is correct."

For this reason, developed nations had effectively dumped their processing technologies and facilities on China, treating the matter much like paying poorer countries to take their trash—allowing them to enjoy cheap, rare-earth production without worrying about environmental damage at home.

Only a few years later, this would prove to be a noose they had tied around their own necks. Their arrogance, their assumption that China would never be capable enough to catch up no matter how hard it tried, had led them to hand over the rare earth industry simply.

"If we're forced to contend with American pressure before we fully secure control of the rare earth market, we may end up stuck in a half-finished, unstable position."

When President Zhang pointed this out sharply with a sour expression, Vice Minister Liu could only remain silent. He shared the same concern.

Zhang Zhenzhong exhaled another puff of white smoke, then tapped his cigarette over the crystal ashtray on the table.

"They can't seriously be thinking about reviving their own rare earth industry after it has lost all competitiveness. So what is it that the U.S. government—no, what is it that President-elect George truly wants?"

Receiving his gaze, Liu Fengwei hesitated before answering carefully.

"First, he wants the neodymium magnet plant in Indiana to remain in place and not be relocated."

Seeing that the president wanted him to continue, cigarette still between his lips, Liu Fengwei paused briefly before speaking again.

"And they're demanding that all of Magnequench's technology patents be sold to a designated company."

Zhang Zhenzhong's face twisted instantly, and he raised his voice in anger.

"What? That's no different from telling us to hand the company back over!"

As expected, Liu Fengwei responded with an uncomfortable expression.

"They warned that if these conditions are not met, discussions on our WTO accession will be postponed indefinitely."

"Tch."

With his cigarette held between his fingers, Zhang clicked his tongue.

Liu lowered himself even further, doing everything he could not to provoke the president's irritation.

"It is an unreasonable demand, but we have no alternatives. Perhaps we should consider giving them what they want."

"You're telling me to accept such a humiliating demand?"

Liu instinctively hunched his shoulders at the sharp glare, but he continued his attempt to persuade him.

"It is humiliating, as you said, but our top priority right now is securing U.S. approval for entry into the WTO."

Zhang didn't look pleased, but the fact that he didn't immediately lash out encouraged Liu to lean forward and go on.

"To make the reforms and opening-up policy succeed—the policy the Party is pushing with all its strength—we need more foreign investment. And the factories built with that capital must be able to export their products overseas. To make that possible, joining the WTO must come first. I'm certain you understand this."

"Mm."

After running into the limits of an inefficient communist-style planned economy, China had undergone fierce internal debate. In 1978, at the Third Plenary Session of the Eleventh Central Committee, former President Deng Xiaoping declared the need for reform and opening to accelerate economic growth, and the policy was pushed forward aggressively.

Special economic zones were established in Shenzhen and Zhuhai, attracting foreign companies and leading to the rapid construction of new factories. In a short time, the results were impressive.

But soon, they hit a major obstacle.

They had a domestic market of more than 1.3 billion people, but most of them lived in poverty and lacked the purchasing power to buy what the factories produced.

With a rigid expression, Zhang inhaled deeply and let the smoke drift out.

"To keep those factories running, we need to export their goods. But high tariffs and other restrictions are choking our growth."

Liu seized the moment and continued. "Even if we manufacture goods with cheap labor, the high tariffs placed on our exports prevent us from earning profits proportionate to our efforts."

Since no consumer would willingly pay high prices for low-quality Chinese products, they had no choice but to lower their margins by the amount of the tariff.

"More importantly, for us to continue driving economic development, we need enormous capital to build more factories, ports, and other infrastructure. Joining the WTO is the key that can solve all of this at once."

If China entered the WTO as a developing nation, the tariffs that had long crippled its exports would drop significantly. More than that, it would gain the ability to sell goods freely to developed Western nations like the United States and Europe without facing burdensome procedures.

"I know all this. That's why we've spent the past fourteen years trying every possible method to join the WTO."

"Which is why now, when the United States is showing the most favorable attitude we've ever seen, it is the perfect opportunity. If we miss it, who knows when another chance like this will come?"

Liu Fengwei spoke earnestly.

Zhang Zhenzhong pressed the last bit of his cigarette into the crystal ashtray, exhaling a long, weary breath. His tone was noticeably calmer than before.

"But if we give in to their demands, won't we be handing back the neodymium magnet industry we worked so hard to obtain?"

"Having to hand over all the patent rights is bothersome, yes. But aside from the delay to our original timeline, it won't stop us from taking control of the neodymium magnet market."

"And why is that?"

"Because the twin plant in Tianjin, an exact copy of the Indiana facility, is already being built. And since we've absorbed all the production know-how and technology over the years, we can manufacture the magnets ourselves in China without needing to relocate the equipment."

Zhang narrowed his eyes.

"Even so, wouldn't the patents restrict our ability to export the magnets we produce?"

"That issue can be settled through negotiation. If we insert a clause allowing unlimited use of the patents in exchange for a fixed royalty fee, the problem disappears."

"And if the American plant continues operating, won't that stand in the way of us dominating the neodymium magnet market?"

"That too will resolve itself with time."

When Zhang gave him a puzzled look, Liu answered with confidence.

"Why do you think the United States handed over its rare earth production technology and equipment to us in the first place?"

Zhang immediately understood and smacked his knee, eyes brightening.

"Because even if they keep the plant, strict regulations, lawsuits from environmental groups, and constant protests will prevent it from operating normally."

"Exactly. Even now, the Indiana plant is running at barely fifty percent capacity. And while we intentionally suppressed the operating rate to justify relocating the equipment, even under generous assumptions it's clear they won't be able to keep the plant running in the long term."

Zhang stroked his chin with one hand and nodded slowly.

"That makes sense."

"On top of that, if our domestic companies—benefiting from cheap labor and state subsidies—flood the market with rare earth products at low dumping prices, Western producers, who can't reduce their production costs, won't be able to hold out for long. One by one they'll shut down or sell their businesses to us, and the entire rare earth supply chain will naturally fall under our control."

"Wouldn't the U.S. government shift its stance and try to protect its rare earth industry by offering subsidies the way we do?"

Zhang asked with deliberate caution.

"They could try, but rare earth mining and production are widely seen as dirty industries that destroy the environment. Even the White House would struggle to ease regulations or publicly support such an industry in the face of opposition from environmental groups and local communities."

Unlike China's one-party system, the United States—being a democracy—had no choice but to worry about the voters who held the power to oust them.

"True. No one would welcome a rare earth processing plant near their home, especially one that produces massive amounts of toxic wastewater and radioactive waste."

"Exactly."

Liu replied with confidence and nodded firmly.

After thinking it through one more time, Zhang Zhenzhong made his decision.

"Fine. We'll do as the United States demands."

"Yes, sir."

Liu answered with relief spreading across his face.

It stung their pride to obey such heavy-handed demands, but if joining the WTO, accelerating economic development, and eventually securing China's dominance over the rare earth industry were the goals, then—for now—they had to bow their heads.

This time, they would endure, hiding a blade behind their back.

One day, we'll repay this debt.

When that day came, the world would learn just how sharp a great nation's blade could be.

Sinking deeper into the soft sofa, a sudden thought came to Zhang Zhenzhong, and he asked:

"Which company is President-elect George demanding we transfer the patents to?"

"A company called Tot."

"That's a name I've never heard before."

Liu Fengwei elaborated.

"It turns out to be a patent-focused firm personally owned by Chairman Park Seok-won, who is known as the richest man in the world. He reportedly contributed a massive sum to George's campaign during the election, which is likely how he became involved in this matter."

"I see."

The richest man in the world—yet from a small country on the Korean Peninsula?

He must have gotten lucky and made his fortune by chance. Once China awakens fully, the world's largest companies and its wealthiest people will all belong to us anyway.

Zhang Zhenzhong scoffed inwardly and quickly lost interest.

TL/n -

Jiang Zemin was a Chinese politician who served as general secretary of the Chinese Communist Party from 1989 to 2002, as chairman of the Central Military Commission from 1989 to 2004, and as president of China from 1993 to 2003. Jiang was the fourth paramount leader of China from 1989 to 2002.

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Jiang Zemin — President from 1993 to 2003

Hu Jintao — President from 2003 to 2013

Xi Jinping — President from 2013 to present

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China joined the World Trade Organization (WTO) on 11 December 2001