Academic journal article China: An International Journal

China's Technology Policy Change: How Effective Has It Been?

Academic journal article China: An International Journal

China's Technology Policy Change: How Effective Has It Been?

Article excerpt

INTRODUCTION

The Chinese central government held the 4th National Conference on Science and Technology on 9 January 2006. At this important meeting, President Hu Jintao and Premier Wen Jiabao made their speeches and announced the decision to develop China into an innovative country. On the same day, the State Council announced and issued the "National Guideline on Medium and Long-term Program for Science and Technology Development (2006-2020)". According to the Guideline, by 2020, China's entire investment in research and development (R&D) is expected to reach 2.5 per cent of the country's gross domestic product, while science and technology will contribute to about 60 per cent of the country's economic development. (1)

The decision to develop China into a country of innovation is a big policy change. The policy that facilitates technology transfer from multinational enterprises (MNEs) is believed to be the basic strategy adopted by local firms in developing countries to grow their own technological capability. (2) Since China's economic reform in 1978, technology transfer has been the most important policy guiding local Chinese firms' technology sourcing; it has also been very successful in improving local firms' technological capability and facilitating economic development. On the other hand, China also adopted a policy of opening up the domestic market to international competition, thus making technology transfer policy less and less effective.

Gao Xudong (gaoxudong@sem.tsinghua.edu.cn) is Associate Professor at the Department of Innovation, Entrepreneurship and Strategy and Director of the MBA Programme in the School of Economics and Management at Tsinghua University. He obtained his PhD in Management from the MIT Sloan School of Management. His research interests include competitive strategy, technology strategy and management of technological innovation.

For example, the telecommunications equipment industry was among the first industries that adopted foreign technology through technology transfer and opened themselves up to competition with MNEs. Many Chinese local telecommunications equipment manufacturing firms went bankrupt because they could not compete effectively with MNEs in the domestic market. This created a lot of dissenting voices against this policy and many people argued that the government should promote locally developed technologies and provide at least some protection to local industries. (3)

China's entry into the World Trade Organisation in 2001 had made the technology transfer policy even less effective because of the growing reluctance of MNEs to transfer technology. First, MNEs are concerned that local Chinese firms might pose a threat to their dominant position. Second, MNEs prefer to be in control of using their own technology in an open market in China. More and more local firms that relied mainly on technology transfer began to lose competitiveness because of increased competition from MNEs. (4)

With the increasing problems of the technology transfer policy, the Chinese government, particularly the Ministry of Science and Technology (MOST) and the National Development and Reform Commission (NDRC) began to rethink China's technology policy from the late 1990s. In June 2003, the Chinese central government invited and organized more than 2,000 experts into 20 groups to study China's science and technology policy. This led to the conclusion that China needed to adjust its technology policy and promote indigenous innovation. Specifically, the three approaches to promote indigenous innovation included developing new technologies based on technology transfer, through integration of existing technologies, and developing radically new technologies. It is however necessary to develop new homegrown technologies.

More than 10 years have passed since China's accession to the WTO and its attempt to address the problems of the technology transfer policy through promoting indigenous innovation. …

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