China has become a master at slight-of- hand tricks, diverting our attention one way while they do something else to their benefit and our detriment. For example, they recently put teeth behind an internal anti-monopoly policy that seeks to stem price collusion and predatory pricing among Chinese manufacturers. In fact a law recently enacted attempts to stop manufacturers from setting “unfairly low prices” in the Chinese marketplace.

While this gets positive world attention, behind the scenes China erects no such policies when it comes to their exports to the United States. The manipulation of their currency, the Yuan, gives them a tremendous advantage over US produced goods. In every way this helps China establish “unfairly low prices” which has become a pillar of their global trade policies.

They also conveniently ignore the theft of US intellectual property. For example the Business Software Alliance (BSA) estimates that seventy-nine percent of PC software installed in China in 2009 was pirated. The commercial value of stolen software in China last year was $7.6 billion, double the value of software stolen in China just four years ago. According to the US Department of Commerce China is responsible for more than $300 billion of intellectual property theft each year from the US. The sad thing is much of their theft is directly against American small businesses and entrepreneurs who are the least capable to defend themselves. China is content to remain silent on this.

Then while they try to appease the US by putting some half-hearted pressure on North Korea, at the same time they have started production of a stealth-jet fighter plane that signals a significant build-up of their military. They announced this just days before US Secretary of Defense Robert Gates was scheduled to meet with Chinese officials about military cooperation. China doesn’t appear to be too worried or concerned about our reaction to this ratcheting up of competition leading to possible confrontation.

I think we all agree that having good relations with China is important, but we have to hold them to a behavior that conforms with sound international trade and security policies. We have to keep our eyes on the shells as they move them about or we will lose much more than a shell game.