SERIES, "CHINA: POWER AND

PROSPERITY," CONTINUES TONIGHT

WITH ONE OF THE MOST CRITICAL

ISSUES RANKLING U.S./CHINA

RELATIONS: TRADE.

THE TWO NATIONS' DISPUTE HAS

LARGELY PLAYED OUT AS A TARIFF

WAR, BUT THERE ARE UNDERLYING

ISSUES AND ARGUMENTS ON BOTH

SIDES.

SO, IN PARTNERSHIP WITH THE

PULITZER CENTER, WE TELL THIS

STORY WITH TWO CORRESPONDENTS,

NICK SCHIFRIN AND KATRINA YU.

THEY BEGIN IN CHINA'S SILICON

VALLEY, SHENZHEN.

>> Yu: IN SHENZHEN'S

SEG-E-MARKET, YOU CAN BUY

ANYTHING ELECTRONIC.

THERE ARE TEN FLOORS OF CIRCUIT

BOARDS, BATTERY-POWERED

CHILDREN'S TOYS, DIGITAL

WATCHES, WIRELESS HEADPHONES,

EVEN BITCOIN-MINING COMPUTERS.

>> Schifrin: AND ALL OF THIS IS

SOLD ALL OVER THE WORLD BECAUSE

INTERNATIONAL COMPANIES HAVE

LONG TAPPED INTO CHINA'S MASSIVE

MARKET AND HUGE SUPPLY OF

RELIABLE LABOR.

>> Yu: IF YOU HAVE AN ELECTRONIC

PRODUCT THAT'S LABELED "MADE IN

CHINA," THE CHANCES ARE ITS

PARTS COME FROM HERE AND END UP

ALL OVER THE WORLD, INCLUDING

THE U.S.

>> Schifrin: FOR DECADES, THE

WORLD'S TWO LARGEST ECONOMIES,

THE U.S. AND CHINA, HAVE BEEN

INTEGRATED.

BUT NOW, THE TRUMP

ADMINISTRATION IS TRYING TO

CHANGE THAT, AND THE TRADE WAR

IS NOT ONLY GOING TO AFFECT

AMERICAN BUSINESSES AND

CONSUMERS.

>> Yu: BUT ALSO BUSINESSES AND

CONSUMERS HERE IN CHINA.

SEG-E-MARKET HAS BEEN CALLED THE

BAROMETER OF CHINA'S ELECTRONICS

INDUSTRY.

COMPONENTS AND FINISHED PRODUCTS

ARE SOURCED FROM SUPER-FACTORIES

ALL OVER SHENZHEN.

MORE THAN 60,000 BUSINESSES HAVE

SET UP SHOP HERE.

WHILE THEY MAY SELL EVERYWHERE,

THIS YEAR, ALL EYES ARE ON THE

U.S.

>> ( translated ): I HOPE THE

TRADE WAR DOESN'T CONTINUE TO

GET WORSE.

LET'S KEEP A PEACEFUL

RELATIONSHIP.

DON'T RAISE TARIFFS BECAUSE NO

ONE WINS.

>> Yu: ALL THE VENDORS THAT WE

SPOKE TO BLAME PRESIDENT TRUMP

FOR THE TRADE WAR, AND SOME SAY

TRUMP FEELS THREATENED BY

CHINA'S SUCCESS...

>> ( translated ): CHINA'S

ELECTRONICS INDUSTRY IS PRETTY

GOOD.

NOW, TRUMP IS JUST TRYING TO

SUPPRESS CHINA'S DEVELOPMENT.

>> Yu: ...THOUGH SOME FREELY

ADMIT TO SELLING COPIES OF U.S.

PRODUCTS.

I ASK HER IF THIS IS A GO-PRO.

>> ( translated ): NO, IT'S

NOT A GO-PRO.

GO-PRO IS MADE ABROAD, AND IT'S

VERY EXPENSIVE.

BUT THIS ONE IS CHEAP, AND IT'S

SIMILAR.

>> Yu: HOW SIMILAR, NICK?

>> Schifrin: WELL, VERY SIMILAR.

THE CHINESE SPORTSCAM LOOKS

EXACTLY LIKE THE AMERICAN

GO-PRO.

AT THIS CHINESE NEW BARLUN

STORE, TAKE A LOOK AT THE WORDS.

THE SNEAKERS AND THE WRITING

LOOK AN AWFUL LOT LIKE AMERICAN

NEW BALANCE.

THAT'S JUST TWO EXAMPLES OF

CHINESE COPYCATTING THAT THE

U.S. SAYS TURNED INTO THEFT ON

AN INDUSTRIALIZED SCALE.

THE U.S. HAS INDICTED HACKERS

CONNECTED TO THE CHINESE

MILITARY FOR STEALING SPECS OF

AN AMERICAN POWER PLANT SIMILAR

TO THIS MODEL, AND NAVIGATION

SATELLITE TECHNOLOGY.

AND THE U.S. SAYS THE MOST

EXPENSIVE WEAPONS SYSTEM EVER,

THE AMERICAN F-35, LOOKS JUST

LIKE THE CHINESE J-31 BECAUSE

CHINESE HACKERS STOLE THE

DESIGNS.

THE U.S. SAYS, IN JUST A FEW

DECADES, THEFT HELPED CHINA MAKE

ITS MILITARY WORLD-CLASS; AND

ITS COMPANIES, TECHNOLOGY

LEADERS.

>> THAT KIND OF TECHNOLOGICAL

ADVANCEMENT DOESN'T HAPPEN

ORGANICALLY.

>> Schifrin: JAKE PARKER HAS

LIVED IN BEIJING FOR A DECADE.

HE'S THE VICE PRESIDENT OF THE

U.S./CHINA BUSINESS COUNCIL,

WHICH ADVOCATES FOR AMERICAN

BUSINESSES IN CHINA.

>> CHINA'S SYSTEM IS SET UP IN

SUCH A WAY THAT THE STATE HAS

ACCESS TO INFORMATION THAT

COMPANIES WOULD CONSIDER TO BE

TRADE SECRETS.

THE AMOUNT OF INFORMATION THAT'S

TRANSFERRED TO THE CHINESE

GOVERNMENT GOES FAR BEYOND WHAT

WOULD BE EXPECTED IN ANOTHER

MARKET.

>> Schifrin: AS BUSINESSMAN...

>> YOU HANDLE IT, THEN.

>> Schifrin: ...AND

PRESIDENTIAL CANDIDATE, DONALD

TRUMP HAS ACCUSED CHINA OF

PURSUING DECADES OF PREDATORY

TRADE PRACTICES.

>> WE CAN'T CONTINUE TO ALLOW

CHINA TO RAPE OUR COUNTRY, AND

THAT'S WHAT THEY'RE DOING.

IT'S THE GREATEST THEFT IN THE

HISTORY OF THE WORLD.

WHEN YOU SEE CHINA, THESE ARE

FIERCE PEOPLE IN TERMS OF

NEGOTIATION.

THEY WANT TO TAKE YOUR THROAT

OUT.

THEY WANT TO CUT YOU APART.

>> Schifrin: THE TRUMP

ADMINISTRATION HAS INCREASED

U.S. DEMANDS THAT CHINA STOP

INTELLECTUAL PROPERTY THEFT AND

WHAT THE U.S. CALLS OTHER UNFAIR

TRADE PRACTICES.

THE ADMINISTRATION HAS RELEASED

TWO MAJOR INVESTIGATIONS INTO

CHINESE CORPORATE THEFT AND

LABELED CHINESE COMPUTER,

TELECOM, AND TECHNOLOGY

COMPANIES RISKS TO AMERICAN

NATIONAL SECURITY.

>> PRESIDENT TRUMP HAS RAISED

ISSUES THAT HAVE BEEN AN

IRRITANT IN THE RELATIONSHIP FOR

A VERY, VERY LONG TIME...

>> YOU KNOW, WE'RE THE PIGGY

BANK THAT EVERYBODY STEALS FROM,

INCLUDING CHINA.

>> ...THAT HAVE NOT BEEN

ADEQUATELY ADDRESSED BY THE

CHINESE SIDE.

AND FRANKLY, THOSE ISSUES GO TO

THE CORE OF HOW CHINA'S ECONOMIC

SYSTEM OPERATES, ITS STATE-OWNED

ENTERPRISE REFORM, ITS

INDUSTRIAL POLICY, ITS

SUBSIDIES, ITS OVERCAPACITY.

THESE ARE NOT GOING TO BE EASY

SOLUTIONS THAT CHINA'S GOING TO

BE ABLE TO IMPLEMENT

IMMEDIATELY.

>> Yu: THAT'S BECAUSE THOSE

PROTECTIONIST MEASURES AND

STATE-SPONSORED BUSINESS

DEVELOPMENT HAVE FUELED CHINA'S

RAPID ECONOMIC RISE.

NOWHERE IS THAT MORE OBVIOUS

THAN CHINA'S ARTIFICIAL

INTELLIGENCE, OR A.I., INDUSTRY.

IN CHINA'S NORTHEASTERN LIAONING

PROVINCE, EX-ROBOT IS WORKING ON

HUMAN-LIKE A.I. ROBOTS.

CHINA WANTS TO BE THE GLOBAL

CENTER FOR A.I. BY 2030, AND

SOME IN THE TRUMP ADMINISTRATION

BELIEVE CHINA IS FAST CLOSING

THE GAP ON THE U.S.' DOMINANCE

OF A.I.

THEY CAN MIMIC FACIAL

EXPRESSIONS, RESPOND TO

QUESTIONS...

>> ( SPEAKING IN CHINESE )

>> ( SPEAKING IN CHINESE )

>> ( SPEAKING IN CHINESE )

>> Yu: ...AND EVEN HOST A TV

SHOW.

>> ( SPEAKING IN CHINESE )

>> Yu: EX-ROBOT PRESIDENT YANG

DONGYUE SAYS HIS COMPANY WILL BE

ONE OF THE FIRST IN THE WORLD

WHOSE ROBOTS CAN REPLACE SERVICE

EMPLOYEES.

>> ( translated ): THEIR MAIN

FUNCTION IS TO COMMUNICATE WITH

PEOPLE, SO A GOOD APPEARANCE IS

A MUST.

IF THE ROBOT IS VERY GOOD-

LOOKING, LIKE A PRETTY LADY OR A

HANDSOME MAN, PEOPLE WILL FEEL

MORE PLEASANT WHEN TALKING WITH

THEM.

>> Yu: BEIJING HAS BEEN SO

DETERMINED TO CATCH UP AND

SURPASS THE U.S. IN A.I.

TECHNOLOGY, IT'S COMMITTED

$150 BILLION TO ITS DEVELOPMENT.

EX-ROBOT ACKNOWLEDGES THAT IT

RECEIVES GOVERNMENT SUBSIDIES

BUT REFUSES TO DISCLOSE HOW

MUCH.

MEANWHILE, CHINA ACCUSES THE

U.S. OF INVESTING BILLIONS ON

ITS OWN A.I. TECHNOLOGY, LIKE

THIS ROBOTIC PACK MULE THAT'S

BEING FUNDED BY PENTAGON

RESEARCH.

>> Schifrin: BUT KATRINA, THE

U.S. DENIES THAT PENTAGON

SPENDING IS A SUBSIDY AND

COMPLAINS CHINA'S SUBSIDIES ARE

INTO PRIVATE COMPANIES AND

CONCEALED IN EVERY INDUSTRY,

TILTING THE GLOBAL PLAYING FIELD

IN CHINA'S FAVOR AND VIOLATING

INTERNATIONAL TRADE RULES.

>> THE CHINESE COMMUNIST PARTY

HAS USED AN ARSENAL OF POLICIES

INCONSISTENT WITH FREE AND FAIR

TRADE.

THESE POLICIES HAVE BUILT

BEIJING'S MANUFACTURING BASE AT

THE EXPENSE OF ITS COMPETITORS,

ESPECIALLY THE UNITED STATES OF

AMERICA.

>> Yu: CHINA HAS BUILT ITS OWN

MANUFACTURING BASE THAT PROVIDES

CHEAP AND EFFICIENT LABOR, AND

MANY U.S. BUSINESSES USE IT TO

MAXIMIZE PROFITS.

SHANGHAI GENERAL SPORTS IS ONE

OF THE BIGGEST BICYCLE

MANUFACTURERS IN CHINA.

THE COMPANY PRODUCES MORE THAN

THREE MILLION BIKES EVERY YEAR.

C.E.O. LEI GE ATTRIBUTES THE

COMPANY'S SUCCESS TO BUILDING

CLOSE RELATIONSHIPS WITH HIS

PARTNERS ABROAD, PARTICULARLY IN

THE U.S.

>> WE WORK WITH OUR PARTNERS IN

THE STATES AS A FAMILY.

THAT'S WHY WE CAN BECOME SO

CLOSE.

>> Yu: THAT SUPPLY CHAIN

INTEGRATION HAS BUILT UP OVER 30

YEARS, AND IT MEANS THE TRADE

WAR HAS HIT SHANGHAI GENERAL

SPORTS AND MANY COMPANIES IN

CHINA THAT SELL TO THE U.S.

LEI HAS HAD TO LET GO ABOUT 30%

OF HIS STAFF.

IT DOESN'T HELP THAT CHINA'S

ECONOMIC GROWTH HAS SLUMPED TO

ITS LOWEST LEVEL IN NEARLY THREE

DECADES.

>> OH, WE HATE THIS.

IT'S JUST MORE DIFFICULT THAN

EVER.

OF COURSE, WE FEEL DISAPPOINTED,

AND WE FEEL UPSET, BUT THERE'S

NOTHING WE CAN DO.

>> Yu: THIS FACTORY PRODUCES UP

TO 13,000 BICYCLES EVERYDAY.

THEY'RE SENT TO COUNTRIES SUCH

AS AUSTRALIA, CANADA, AND JAPAN.

BUT 80% OF THEM ARE MADE FOR THE

UNITED STATES.

>> Schifrin: AND ARRIVE IN THIS

SOUTH CAROLINA FACTORY.

>> WE'RE PRODUCING THIS YEAR

ABOUT 300,000 BICYCLES.

>> Schifrin: ARNOLD KAMLER IS

ONE OF THE PRIMARY BUYERS OF

SHANGHAI GENERAL SPORTS' PARTS.