Illustration: Andrew Dyson Credit:Andrew Dyson Few outside the industries themselves have ever heard about this; it was China's headstart to global manufacturing dominance in one sector after another. And it was done with factories that Western countries wanted to get rid of. For 30 years or more, Chinese firms have bought cast-off factories from Australia, the US, Japan, Germany, Britain and other developed countries and taken them home. "It was the first step and the essential foundation for all the other policies they adopted later," says an Australian expert, a former Rio Tinto executive who's written a major new report on the subject, Michael Komesaroff. "If they had not stolen technology, they still would have got there" to become globally dominant, he tells me. "The stolen technology was the icing on the cake."

When China began modernising, it made 4 per cent of the world's steel. Today it makes more than all the other countries of the world combined. Credit:AP The story of how China bought the cake itself is a revealing look at Chinese ambition and strategy, told in Komesaroff's report titled: "Make the Foreign Serve China," published by the Washington-based Centre for Strategic and International Studies. The title is a quote from the founder of modern China, Mao Zedong. When China began modernising, it made 4 per cent of the world's steel. Today it makes more than all the other countries of the world combined. It got its start with smelters it bought from abroad, and then kept upgrading with newer offcasts. So when the leading German steelmaker ThyssenKrupp decided to shutter one of its plants in 2001 because of rising labour and environmental costs, the Chinese snapped it up in under a month. China's Shagang Group bought the Dortmund-Höorde steel plant for the bargain price of $US24 million. That was less than its value as scrap.

Shagang sent 1000 workers to Germany; it took them a year to painstakingly dismantle and pack the plant for its 10,000 kilometre journey. It was the biggest such transplant yet: "It included a complete steel mill with blast furnaces," the report notes. "The dismantled plant comprised 250,000 tons of equipment and 40 tons of documents that explained the intricacies of the reassembly process." If Trump wants an example of how China legally bought industrial advantage from America, he could look at how China clinched its global dominance in rare earths. These are essential components in many high-tech products, military and civilian. General Motors built a state-of-the-art rare earth plant in the US state of Indiana, with the generous support of the American taxpayer. The Magnequench business, as it was known, had unique know-how for making magnets that retain magnetic strength at high temperature. This makes them valuable for civilian uses like airbags and mechanical sensors, but also for military ones in "smart bombs" and guided missiles. GM sold the plant in 1995 because it said it wanted to divest its "non-core" businesses.

A Chinese consortium bought the plant after promising to keep it running in Indiana for five years. The new Chinese owners, including two state-owned enterprises, shut the plant in 2002, the day after the five years were up. They shipped it to China. "Not only did the US lose its rare earth elements production capability," reports Komesaroff, "but it also abdicated its technological lead." China's share of the global output of rare earths today? Ninety-five per cent. Surely Australia wouldn't be so foolish? We wouldn't allow a cutting-edge, taxpayer-subsidised manufacturing plant to be sold and shipped off, bolt by bolt, to China? Oh yes we would. Rio Tinto spent 20 years and a billion dollars developing a revolutionary iron ore smelting technique, HIsmelt.

Australian taxpayers contributed $125 million to help Rio build its pioneering demonstration plant at Kwinana, south of Perth. The WA government gave an additional $30 million. The new technology was exciting – it offered commercial and environmental advantages over the traditional smelting process. "But when the financial crisis hit in 2008, the company decided to abandon the development of HIsmelt," writes Komesaroff in his report. The plant was sold to a Chinese firm for an undisclosed sum, dismantled and shipped off to Shandong. It's been reassembled by Molong Petroleum Machinery Co Ltd, which is doubling its size. It's going to use it to make high-quality, specialised pipe to sell to the global oil and gas industry. This deal didn't get a lot of attention in Australia. "Rio didn't put out a press release saying 'We had millions of dollars from the Australian taxpayer, we're now selling to the Chinese'," explains Komesaroff. "People don't like to advertise their failures." These are just a few of the many examples of how China caught up, on the cheap and at light-speed, with the West. Most, but not all, were purchased by state-owned enterprises.

Surely Trump is right – it must be past time to claw back some of this advantage? Komesaroff likens this thinking to generals planning to win the last war. The world has moved on. The Chinese bought – and stole – Western techniques, much as the US did as it was establishing industrial dominance more than a century ago. But they then improved on them. Chinese firms are now forging new high-tech frontiers. They are now declaring obsolete some manufacturing technologies that are still considered standard in the West. "Although trade remedies [restraints or tariffs] may be appropriate in some circumstances," Komesaroff concludes, "more generally Western industry should focus on their evolving technological comparative advantages and co-operating with Chinese producers." Don't waste time getting angry, in other words, get active.

Peter Hartcher is international editor.