Beware of Elon Musk’s New Ties to the Chinese Communist Regime

August 3, 2020 Updated: August 3, 2020

Commentary

Elon Musk has been making headlines recently for his massive growth in wealth due to the sharp rise in Tesla stock. Many now note that the South African billionaire has overtaken Warren Buffet on the world’s wealthiest people list.

What many seem to overlook is precisely how he’s obtained this recent success. While it’s well covered that his companies got their start on two decades worth of government subsidies, his latest achievements have come as a result of deepened ties to the Chinese market—ties that may ultimately harm the economic and national security interests of the United States.

Yes, SpaceX, Musk’s space company, continues to face quality control problems and has seemingly relied upon government contracts and creative displays of its finances to private lenders to get by in the past. Still, Tesla’s financial history hasn’t been much steadier. For years, Musk managed to grow Tesla’s image without making a profit through subsidies and clever marketing. But with his American subsidies beginning to phase out, Musk seemingly had no choice but to look to new markets to repeat the same scheme. His biggest target became China.

After years of struggling financially, Musk secured the funding needed to build a Gigafactory in Shanghai, mainly from the backing of long-time friend and China’s Minister of Science and Technology, Wan Gang.

The terms of the deal were relatively generous. Seemingly in return for helping to mitigate the trade imbalance after President Donald Trump’s tariffs and order for businesses to stay out of the country, Musk would maintain full control of his factory, avoid tariffs, and even receive domestic subsidies. In return, China hoped that Tesla could help create the supply chain and consumer base necessary to grow an even more robust electric vehicle (EV) market and perhaps undermine America’s.

It appears that China’s bet has paid off.

With the addition of Tesla, China is gaining research and development facilities that may push their nation to the forefront of autonomous vehicle technology. New suppliers are arising, while more established companies find new revenue sources in the developing supply chain. Like what it did with Apple’s iPhone, China hopes to have domestic rivals appear from the new foreign investment (Nio is a good example). Much like Foxconn, China could push its dominance out into the global market. For now, they’ve simply become the largest automotive market on the planet.

By providing consumers more options, China would hope to avoid the “middle-income trap”—the slowdown of growth when an emerging market reaches its middle-income level. Increasing the number of foreign investments has arguably pushed China ahead of the rest of the word in developing a healthy, growing new energy market. And if it’s anything like Huawei, the results could be dangerous for U.S. national security.

For Tesla, however, the partnership has been a mutually beneficial one.

Musk has had profitable quarters after expanding into the Chinese market. While his sales in the United States have struggled, he’s been able to fend off Chinese competitors and take a quarter of the market. He’s grown many partnerships in the region that have rooted him deeper into the emerging supply chain, like his battery deal with CATL CEO Zeng Yuqun. The result has been a stronger China and a wealthier Musk.

But this hasn’t been helpful to the United States. If anything, it’s been detrimental.

President Trump has been leading a global effort to curtail China’s unethical business practices, its billions of dollars in intellectual property theft, and its growing list of human rights abuses. The Chinese regime has continued to crack down on Hong Kong’s civil libertiesUighurs’ freedom, and neighboring nations’ rights to the sea. Even with President Trump signing his Hong Kong sanctions bill, China is still well positioned to continue its abusive behavior.

Musk’s actions have severely undermined President Trump’s tariff strategy to reduce China’s predatory behavior by weakening the Chinese automobile marketplace and general economic standing. Tesla’s continued presence in the country only helps China to create a more robust economy, further fueling the regime’s conduct. Musk has even praised the country as the future leaders of the globe and spoke admiringly about how it’s advancing venture sectors.

Politicians need to hold domestic companies accountable for their dealings with China that ultimately undermine national security. While the media celebrates Musk’s theatrics, policymakers need to concern themselves with his ventures’ questionable business practices and the effects they have in supporting a known aggressive authoritarian state.

Dave Sussman is a business consultant, economic analyst, and founder and CEO of Valcor Worldwide.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.