Reprint: R1012H
No longer content with being the world’s factory for low-value products, China has quietly opened a new front in its campaign to regain its place as the globe’s most powerful economy: The country is on a quest for high-tech dominance.
In pursuit of this goal, the Chinese government has ensured that it will be both buyer and seller in certain key industries by retaining ownership of customers and suppliers alike. It has consolidated several manufacturers in those industries into a few national champions to generate economies of scale and concentrate learning. And it is co-opting, cajoling, and coercing multinational corporations to part with their latest technologies, imposing regulations that put those companies’ CEOs in a terrible bind: They can either comply with the rules and share their technologies with would-be Chinese competitors or refuse and miss out on the world’s fastest-growing market.
China’s actions have provoked several disputes between Beijing and foreign companies and prompted some companies to review their strategies along one or the other of two lines. The first seeks to tackle the issue of how a multinational corporation can minimize competitive and security risks to its technologies. The second asks which innovations a foreign company must develop in China to gain advantage in the global market. Foreign companies doing business in China cannot wait for balancing macroeconomic forces or multilateral solutions; if they wish to survive as global technology leaders, they must bring greater imagination to bear on the problem.
Above all, China’s maneuvers cast into doubt the optimistic premise that engagement and interdependence with the West would cause capitalism and socialism to converge quickly, reducing international tensions. Storm clouds are gathering over China and the U.S. in particular. Can two economies with such radically different structures and objectives peacefully coexist? Most people expect that the systems will eventually become more similar. However, the authors argue, this will happen only when China becomes as rich—and as technologically advanced—as the U.S.
