This is China! BLOG

The Revolution Will Not Be Televised: China Technology Policy Jerked into Reverse

This past Sunday afternoon on Chinese TV I watched a bit of a debate - if you can call it that - on China’s path to progress in developing global technology competitiveness. The name of the show was Dialogue. The host of the show - who I’ve never liked for the several years I’ve watched (man, that guy talks a lot!) - framed the discussion at the outset of the show in such a politically correct manner (if you are an aparatchik) I thought I was going to gag.

The upshot of the platform he handed the two participants went along the lines of, “Why is China still allowing foreign companies to plunder weaker Chinese technology companies, and what should we do to get the foreigners out so we can develop our own world-beating technologies.”

Now anyone on planet earth who has either a TV or reads a newpaper or news magazine knows that only twenty years ago the hottest automobile on the Chinese market was the Soviet rip-off Red Flag, made back in the 1950s; or that even until five years ago email was a distant dream and the internet all but inaccessible to most Chinese.

Today, foreign and domestic cars clog the streets and highways of east coast China and the penetration of personal computers is very high in the homes of the nearly 150 million newly middle class Chinese, while internet cafes in cities and towns throughout China dot street corners as frequently as Starbucks does in the States.

Now China is home to companies that have established local supply chains that can put entire laptop computers together without ever having to leave the city limits (thank the Taiwanese for that contribution); R&D centers are opening up in the Sichuan, Shanghai and Beijing to develop everything from new microcircuits to software operating systems (think Intel and Microsoft).

And how did this all come about, one might ask our intrepid TV host?

It is because of all the foreign direct investment the Chinese government has been courting to gain a quantum leap in its otherwise depressing history of domestic technological development (remember the Great Leap Forward?). Now, FDI accounts for nearly 30% of China’s economic activity, according to Nicholas Lardy, Chief Economist of the Brookings Institute. That far outstrips the amount of foreign investment Taiwan, South Korea or Japan relied on during or after the major development phases of their economies. Even the American economy, Lardy says, relies on only 20% foreign investment activity to drive economic activity within its borders.

And therein lies the rub, the very reason why the participants in the so-called debate never challenged the host’s proposition: the Chinese central government - not necessarily the local fiefdoms - have become nervous they may be giving away the farm. With greater ease and transparency in Mergers and Acquistions, foreign companies have been simply buying out Chinese businesses, instead of forming joint ventures and transferring technologies to the Chinese side as they had been doing up until about three years ago. The rapid increase in go-it-alone Wholley-Owned Enterprises in China has also cheated the Chinese government of sought-after technology transfers.

One of the participants, a Chinese representing a Chinese chamber of commerce, was at least assertive enough to suggest that the techonology companies that have come to China are training future Chinese engineers and researchers in ways the Chinese universities are not able.

The debate was clearly a scripted affair, presented on national TV for foreign and domestic consumption. It was disappointing to see that there is still a powerful force within the Chinese government that just does not see that in a more inter-related world the quickest way to developing its technology- AND process-capabilities is through embracing - not damning - global interests come to invest in a country in dire need of rapid –albeit balanced – social and economic development.

William Dodson
Suzhou, China
Email Me