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February 24, 2011 |  2 comments |  Print  Your Opinion  

China's Perceived Threat to Transatlantic Security

Mei Gechlik: Hi-tech firms in the US and EU have expressed concerns about China’s indigenous innovation policy. Intellectual property rights and restricted access to the Chinese market for foreign firms are causing friction. The implications of this policy for transatlantic security have so far gained little attention.

China's indigenous innovation policy originates from its National Medium- and Long-Term Program for Science and Technology Development (2006-2020). Identified as a guiding principle for China’s “great renaissance”, “indigenous innovation” is defined as “enhancing original innovation, integrated innovation, and re-innovation based on assimilation and absorption of imported technology” to improve China’s national innovation capability.

Since the adoption of the Program, China has promulgated legislation to give accredited “national independent innovation products” priority in government procurement. In theory, all Chinese legal persons, which include such foreign-invested enterprises (FIEs) as Chinese-foreign joint ventures and wholly foreign owned enterprises, are qualified to apply for the accreditation of their products. In practice, however, few FIEs have obtained such accreditation. For example, of the 523 products listed in Shanghai’s indigenous innovation procurement catalogue, only two are reportedly produced by FIEs.

Another requirement for getting the accreditation of an independent innovation product is that the intellectual property of the product must be held by a Chinese legal person. A draft rule being considered further requires indigenous innovation products “to not have any disputes or controversies with another product’s intellectual property.” These requirements could be burdensome for foreign firms. Due to China’s inadequate protection of intellectual property, foreign firms are often reluctant to transfer the rights to their Chinese subsidiaries.

Because of these legal requirements, foreign companies face two difficult choices:

Option 1: Do not transfer technology to China but give up China’s huge government procurement market, which amounts to $88 billion per year at the central government level and much more at local levels.

Option 2: Transfer technology to the Chinese partner, through which the product is accredited as a national independent innovation product, but risk technology theft.

Last December, a group of US hi-tech and intellectual property-dependent companies told the US International Trade Commission that they cannot abandon the huge Chinese market primarily because their shorter-term interest in maximizing profits often outweighs their longer-term concerns about intellectual property infringement. In addition, they fear that if they leave the Chinese market, their competitors will fill the gap. Based on these considerations, these firms often choose Option (2), despite the risk of losing the technologies. James McGregor, former head of the American Chamber of Commerce in China, suggested that China’s indigenous innovation policy is “a blueprint for technology theft” on an unprecedented scale.

A US-China joint statement issued during President Hu Jintao’s January visit to the US seems to suggest that foreign companies’ concerns about the indigenous innovation policy will be addressed. In the statement, China agreed to eliminate the discriminatory indigenous innovation policy. Nevertheless, it remains unclear whether these commitments will be effectively implemented. Before this happens, it is highly likely that many hi-tech firms in the US and EU will choose Option (2). The atlantic community will naturally wonder whether this move might put at risk not only the firms’ technologies but also transatlantic security if those technologies are security-related.

To alleviate such concerns, China should, apart from eliminating the discriminatory innovation policy immediately, step up its efforts in improving protection of intellectual property and increasing transparency in government procurement. Improvements on these fronts also benefit China. Local Chinese companies play increasingly important roles as innovators and they need strong intellectual property protection to stay innovative and competitive. Government procurement easily allows governments to pick their favored bidders. Transparency in this process would help combat corruption, which is a major cause of unrest in Chinese society.

China’s goal to advance its innovation capability is admirable and understandable. But achieving this goal at the risk of undermining China’s relations with US and EU is shortsighted and unwise.

Dr. Mei Gechlik is visiting Fellow at the Hoover Institution and is a Lecturer-in-Law at Stanford Law School.

 

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March 2, 2011

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Preparation of Succession in China

Historically, Chinese emperors prepared the successors primarily on two fronts, namely on domestic issues and external affairs. The general description of these would be creating or extending a state of "Wn Zh Wǔ Gōng, Gē Wǔ Shēng Png" i.e. internally, the country will be ruled orderly, externally, the neighboring countries are made gingerly and tenderly subordinating to the Sky dynasty - China, and people are living without the fear of lacks and in a state of calmness and satisfaction.

That perhaps has never changed in China until now, albeit the coming succession of Chinese leaders may just be the last succession of emperors in China, as Japanese emperor mentioned to the one Chinese leader when visiting Japan.

It is clear that China is making reforms internally, evidenced by its effort to break the much and most criticized elite graft system formed by some communist party members, some government members and their selected business community, or the ecological symbiosis of the communist China, which has to answer to the general public now, along with those communist party members and government members who have a clear conscience. That is a first step toward a democratic society, inevitably, and in which majority of the people will be the winners.

Externally, China had recently attempted to make subordinates of neighboring countries, albeit in vain, however, with China's current economic might and growing military muscles, attempts will probably continue. And that worries advanced nations, somewhat, about what the middle kingdom's motives really are, or is it trying to become a full sized kingdom well and far beyond its borders ?

Currently, China is placing improvement of people's living on top of its agenda, and that's the third leg of succession tripod, along with the other two legs mentioned above.

With the understanding of the Chinese history, it's perhaps easier to understand current Chinese behaviors, and thus, project it into the future.
 
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The above was originally published on Transpacific Think Tanks blog,

http://transpacificthinktanks.blogspot.com/2011/03/preparation-of-s...

for reference.
 

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