Academic journal article China: An International Journal

China's ICT Industry: Catch-Up Trends, Challenges and Policy Implications

Academic journal article China: An International Journal

China's ICT Industry: Catch-Up Trends, Challenges and Policy Implications

Article excerpt

INTRODUCTION

China has emerged as the world's workshop. Approximately 70 per cent of the world's annual production of microwave ovens and about 50 per cent of the world's colour TVs take place in Chinese factories. However, the technologies adopted in the design and manufacture of these products are already considered mature. In high-tech and more complex manufacturing fields, Chinese companies are just beginning to play an important role. For example, only about 12 per cent of the world's automobiles were produced in China in 2007, and only 6 per cent of thin film transistor liquid crystal display (TFT LCD) products were made in Chinese factories, indicating that Chinese manufacturing has just ventured into international high-end industries.

The emergence and upgrading of Chinese high-tech industries has attracted increasing interest from scholars, with more and more studies made of the high-tech sector at the industrial and national levels. (1) In this new millennium, China's information and communications industry (ICT) has maintained a high growth rate and is beginning to enlarge its market share in the international market. The ICT industry had enjoyed a 28 per cent average annual growth rate in sales from 2001 to 2007, and in 2008 it accounted for 5 per cent of GDP. From 2001 to 2007, the average annual growth rate of exports was 38 per cent. Exports reached USD521.8 billion in 2008, accounting for 36.5 per cent of China's total export volume. From 2008 onwards, due to the financial crisis, product sales from the electronic and information manufacturing industries (telecommunications equipment, computer, chips and integrated circuits [IC]) increased by only 0.1 per cent along with a 12.4-per cent decline in exports in 2009. Exports, however, still enjoyed continuous growth post-crisis.

This article analyses the latecomer behaviour in catching up with industries and new technology, and proposes policies for China's ICT industry. Specifically, it explores the characteristics, trends and challenges of China's ICT industry in technological catch-up and the implications of the policies derived to sustain the technological development and solve the existing problems.

We analysed China's ICT industry in three segments, namely IC and related electronic components, equipment and network systems, and devices and applications for end users. The main data source used was the information website of the Development Research Center of the State Council in China (DRCNET) which contains a large volume of economic data for different sectors/industries/regions. (2) This database contains special data sets for the ICT industry and science and technology activities, which include research and development (R&D) as well as market, operation and investment data for about 10 years. The original sources of this data set are the statistical yearbooks such as the China Statistical Yearbook on Science and Technology, China Information Almanac, etc. Other data on specific topics (such as radio-frequency identification (RFID) and Internet of Things (IOT), were collected mainly from industrial and investment reports.

INDUSTRY CATCH-UP TRENDS AND PROBLEMS

Technological catch-up is defined as the path from a weak technological position (imitation, low technological performance or low product quality) to a global technology frontier. (3) For developing countries, due to late entry and rare resources, it is necessary to adopt a range of approaches from imitation to innovation in their technological learning. On the one hand, latecomers can import or imitate first-movers' technologies and save on R&D expenditure and then implement high-efficient production. On the other, they can learn from first-movers and begin to innovate by R&D and launching new products after accumulation of capabilities.

Technological catch-up activities for latecomers involve higher volumes of R&D/ technological activities, (4) whereby R&D expenditure (input) is translated to patents (output), (5) which measures the capability accumulation and technological performance of the catch-up. …

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