How China acquires high technology

Catching up on high technologies developed by others almost a century ago can probably not take place via conventional, “civilized” manner; and especially so because the countries you are trying to catch up with are not stagnant. This dilemma requires innovation of its own, if not brazen cheekiness. It is also well known that when it comes to frontier technologies, developing countries like China, India, or Nigeria, have no real “friends.” The developed countries would rather have you buy their end products than helping you to build yours and compete with them. Sadly, this makes some sense!

There is a popular statement attributed to Ronald Reagan, a former president of the US, who appeared to promote very racist agendas.  (He died on 5 June 2004.) Who can forget his remarks in October 1971 when African nations voted en masse at the United Nations to support the recognition of The People’s Republic of China, and not Taiwan; an event to which the people of Tanzania celebrated, to the disgust of Ronald Reagan. This is what Reagan, then governor of California state in the US, said to Richard Nixon, a disgraced former president of the US: “To see those, those monkeys from those African countries-damn them, they’re still uncomfortable wearing shoes!”

However, the statement attributed to the same Reagan in regards to helping developing countries succeed has to do with the aids that the US gives to African nations. Reagan was basically saying that the US was not giving aids to Africa so that it could develop as America, but so that Africans would not all die of hunger. Perhaps, this is another way of saying “carry your own cross!” Again, sadly, this makes some sense, as no country should expect other countries to develop them.

I think China got the message very clearly a few decades ago, and set out to develop the country. The rest is history, as they say. China has certainly left India, and certainly, Nigeria, behind, and has leveraged its huge population (over 1.3 billion) to become the world’s second largest economy. But how did China do it? To be sure, it has not been easy, as there are still a few hiccups here and there – as expected. Keith Bradsher wrote an article on this subject in the 15 January 2020 issue of The New York Times.

The by-hook-or-crook approach reportedly used by China includes hacking and outright theft of high tech secrets, as documented by numerous articles. (China has consistently denied any wrongdoing.) China has also required foreign companies to form joint ventures with local (Chinese) companies in order for the foreign companies to do business in China. There is also a stipulated percentage of a product’s value that has to be manufactured in China. This has happened to wind turbine, car manufacturing, solar cells, and to Internet-based businesses. For example, according to Bradsher, Apple and Amazon have reportedly set up joint business outfits in China with local partners.

The renewable energy sector is one in which China has reportedly fully exercised its power, according to Bradsher: “Gamesa of Spain was the wind turbine market leader in China when Beijing mandated in 2005 that 70 percent of each wind turbine installed in China had to be manufactured inside the country. The company trained more than 500 suppliers in China to manufacture practically every part in its turbines. It set up a plant to assemble them in the city of Tianjin.” The same tactics were also reportedly applied to solar energy technology: “A somewhat similar industrial evolution occurred soon after in solar energy. China required that its first big municipal solar project only use solar panels that were at least 80 percent made in China. Companies rushed to produce in China and share technology.”

There is also the apparent intimidation factor, in the sense that many companies are afraid of accusing Chinese partners of thievery for fear of punishment by the Chinese government. It is generally believed that the China state regularly applies pressure on foreign companies to make sensitive technology accessible to the Chinese partners. Based on similar tactics, China is reportedly now the world’s largest car market. “But except for a few luxury models, practically all of the cars sold in China are made there. Steep Chinese tariffs on imported cars and car parts have also played a role.” (Interestingly, I am not aware of an indigenous Chinese car brand, the way you have Kia and Hyundai from Korea, and Toyota and Honda from Japan.)

Does the Chinese approach provide a good roadmap for other developing countries? Is the Chinese heavy protectionist approach the best for developing a country technologically and economically? Perhaps the answer is Yes and No. Obviously, no pilferage; but some level of protectionism may not be that bad for emerging economies. Although allowing the private sector to develop according to global economic forces is good, the government needs to encourage the availability of credit to this sector. In a country like Nigeria, the cost of borrowing money is so high you can understand why the private sector drags. Regarding catching up with the best in technology, perhaps the consolation for starters is the opportunity provided by leap-frogging.