Earlier this week, I posted a piece on Chinese R&D spending. OECD’s latest R&D outlook showed China as the number two spender – now ahead of Japan. This morning I got an email from the Council on Foreign Relations that reads as follows:
China has just overtaken Japan as the world’s second-largest spender on research and development, the Organization for Economic Cooperation and Development reports — and its efforts are furrowing brows abroad. Yet spending alone might not be enough to overcome China’s deep structural problems in this area. As George Gilboy pointed out in Foreign Affairs two years ago, China has traditionally imported technological processes wholesale, without investing in long-term capabilities of its own, and it has yet to develop a domestic R&D network linking innovative local firms, universities, and research centers. In other words, China is extremely dependent on technology from industrialized states and that could limit the country’s growth down the road.
My problem is that I’m not sure the editors of Foreign Affairs get it. Things are moving very quickly in China. As I quoted in my earlier posting, according to Dirk Pilat, Head of the OECD’s Science and Technology Policy division:
some multinationals were beginning to move genuine research to China because of the high numbers of skilled scientists they could recruit in Shanghai or Beijing. “There are some signs that they are starting to do fundamental or breakthrough work in China,” he said.
Other indicators confirm the same message: China is rapidly ramping up their indigenous technological capabilities. The same can be said for their design and product development activities. [Plug: Athena Alliance will be co-sponsoring a conference next spring with the National Academies, the Wilson Center and others on the globalized R&D in China and India. More on this later.]
This is not to say that China is immediately going to become a technological superpower. But they are certainly on the path to a higher level of development – sooner rather than later. And I certainly can not agree with the statement in that essay of two years ago – Foreign Affairs – The Myth Behind China’s Miracle – George J. Gilboy that:
China’s own choices along the road to global economic integration have reinforced trends that favor the continued industrial and technological preeminence of the United States and other advanced industrialized democracies.
I fail to see how China’s push for a higher level of economic development reinforces the current technological preeminence of the developed countries. The notion that some have of a world of “invent here – make there and we collect the royalties” is a chimera. The China of the future will be as one of those preeminent technological and industrial nations. They are not destined to be simply the contract manufacturer of cheap consumer goods. How the global economic system adapts to that reality in a manner which benefits everyone is the key issue in international economics today.
The essay makes a number of good points about the weaknesses of the Chinese economy and about the differences between Chinese companies and multinationals operating in China. Whether or not it is out of date and whether the essay’s conclusion about China’s future is correct, I ‘m skeptical. Those are questions that everyone who reads it can decide for themselves. I do know that many things are moving quickly in China, so yesterday’s thinking may not be applicable to tomorrow.
This is one of those areas where the cliché is appropriate: stay tuned.