Foreign High-Tech R&D in China: Risks, Rewards, and Implications for U.S.-China Relations

Article excerpt

Kathleen Walsh; The Henry L. Stimson Center, 11 Dupont Circle, NW, Washington, DC 20036: 142 pp. (softcover) PDF available at

This report examines the emergence and evolution of foreign-invested R&D centers in China, with a focus on the computer and telecommunications industries. Based on over 35 interviews conducted in the PRC and Hong Kong in 2002, and supplemented with interviews with experts in the United States, the report finds that over 200 foreign high-tech and R&D centers, programs or labs have been established on the Mainland in the computer and telecommunications sector between 1990 and 2002.

After describing the type of R&D undertaken at these centers and how the nature of this work has changed over time, the report examines the risks and rewards that both sides must consider. It concludes that, although foreign R&D centers are contributing to China's impressive high-tech growth and increasing technological advances, they are contributing as much or more--under newly consolidated WFOEs (wholly foreign-owned enterprises)--to foreign companies' high-tech development and production capabilities and, thus, to the U.S. economy. However, it cautions that while "the rewards from high-tech R&D investments in China appear at present to outweigh the potential risks to U.S. interests, how risky these activities ultimately are depends largely on decisions made by individual corporate executives and R&D enterprise managers.... it is imperative that both U.S. industry executives and policymakers have the data they need to make well-informed decisions on high-tech R&D investments in China.

"At present, this data is sorely lacking (according to one estimate, existing data captures no more than 5-10 percent of all global R&D alliances); even less data is available on R&D activities in developing countries such as China. As long as this situation persists, U. …