China Squeezes Juicy Transfers of Technology from the West

By Woellert, Lorraine | The Washington Times (Washington, DC), November 24, 1996 | Go to article overview

China Squeezes Juicy Transfers of Technology from the West


Woellert, Lorraine, The Washington Times (Washington, DC)


The Great Wall is one of China's biggest tourist attractions, and visitors gladly shell out $4 for a close-up look. That is, unless they're Chinese: Then the price of a ticket drops to just a few cents.

"It's our wall," said one Chinese official.

It's also their economy, as Chrysler Corp. discovered earlier this year when it wanted to sell minivans in China.

China needed someone to build vans to replace the tiny and antiquated "bread taxis" - so named because of their loaflike shape - that choke city streets.

But more than new taxis, China wanted the right to own the company's technology. Chrysler said no, so Mercedes Benz got the job.

"It would be dishonest if I said that wasn't frustrating," said Doug Evans, director of China operations for Chrysler in Detroit. "We develop our technology, we are willing and want to use that technology for good business applications. But we have to consider how we use that technology for the benefit of Chrysler."

U.S. officials fear that the Middle Kingdom has elevated its trade exchange demands to an economic art form, and President Clinton will press the Chinese on the issue today in a meeting with Chinese President Jiang Zemin in Manila.

China, circled by corporate suitors pleading for a chance to sell to its 1.2 billion people, makes no apologies for its "requirements."

"The Chinese government would very much like to receive or accommodate companies who are quite willing to transfer advanced technology into China, because we use this advanced technology to develop our own auto industry," said An Min, assistant Chinese minister of foreign trade and economic cooperation, in an interview with The Washington Times in Beijing.

What happened to Chrysler is not unusual. China routinely makes such requirements of companies desiring to enter its market. If you want to do business in China, you have to give China something in return.

The price depends on what China wants. Some companies, such as Intel, Kodak and IBM, are required to manufacture in China and export anywhere from 50 percent to 100 percent of what they produce. Some of their products are even shipped back to China for sale there.

Others can enter the economy only by setting up shop with a Chinese partner, most commonly a monolithic, unprofitable company owned by the central government.

But what has corporations and some economists most alarmed is technology transfer - the requirement that a company hand over to its Chinese corporate partner all its know-how and expertise in a certain field.

"In 10 or 20 years, you will see the Chinese making a whole range of products - computers, automobiles," said economist Greg Mastel of the Economic Strategy Institute in Washington. "It's building up the Chinese industrial base, which will ultimately be used to compete with us."

U.S. companies are teaching the Chinese how to build everything from circuit boards to trucks to jets and - in a new deal with Rockwell International Corp. - global satellite positioning systems. Those companies, in return, get to sell their products in China.

"This is just another form of bribery," said Rob Scott, an economist at the Economic Policy Institute in Washington. "You can no longer get away with just assembling parts in China. The more competition you get in the market, the more power that shifts to the Chinese government."

Performance requirements are part of China's massive effort to shift from its dependence on low-end sectors such as simple manufacturing to high technology. It has pinned its hopes on key sectors that include telecommunications, autos and chemicals.

Such practices are ringing alarm bells in Washington. The implication is that the United States, by allowing China to get away with performance requirements, is creating another Japan - a fearsome economic competitor armed with sopxual. …

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