China vs the World: Whose Technology Is It?

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A presentation based on the HBR article by Thomas M. Hout & Pankaj Ghemawat (December 2010). …

A presentation based on the HBR article by Thomas M. Hout & Pankaj Ghemawat (December 2010).

No longer content with being the world’s factory for low-value products, China has quietly opened a new front in its campaign to regain its place as the globe’s most powerful economy: The country is on a quest for high-tech dominance.

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  • Nick1. Tax breaks on returns from capital investments in technology-based start-ups and accelerated depreciation of investments in R&D2.3. On a national, provincial, and municipal level in cities like Beijing, Shanghai, and Guangzhou.4. Forcing multinationals to transfer their newest technologies to joint ventures with Chinese companies.
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  • Gordon$30 billion market49% maximum stake in Joint Ventures70% minimum systems locally produced IJV partners become competitors outside of China –China Daily article CSR China South Locomotive & Rolling Stock Corporation Limitedand CNR China Northern Locomotive & Rolling Stock Industry Limitedmain players (China CNR Corp. and CSR Corp., the nation’s largest trainmakers, jumped in Shanghai trading after a report that the government is planning to spend as much as 4 trillion yuan ($600 billion) expanding rail networks, 2010)
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  • GordonUnderline as a strategic industry – position to be world leaderOffer large subsidies and incentivesIncrease local content requirementIncrease tariffs on imported componentsSinovel and Goldwind – Currently 17%, set to grow significantly
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  • GordonTax rebates to local companiesAttempted source code disclosure act, later rescindedProduct standards & specifications particular to China (WAPI & TD-SCDMA)Massive R&D Expense to lead world technologyMicrosoft has a good presence, convincing local regulators to mandate official copies & within administration. All these case studies are underpinned by the global demand model, basically the corporate champions exist wherever the market of greatest demand lies, in most industries in the future that will be China, China is graduating from importer of tech to developer of new tech.
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  • NickThe state is paying less attention than it once did to consumer product giants….But the government has fundamentally changed the game for technology-rich companies.The government’s new policies will for force companies to bring cutting-edge R&D into China earlier than they might of planned or on different terms than they would have liked.
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Transcript

  • 1. A  presenta*on  based  on  the  HBR  ar*cle  by  Thomas  M.  Hout  &  Pankaj  Ghemawat  (December  2010)  
  • 2. The Cold War
  • 3. 1.  Drivers of China’s Discontent2.  China’s Plan to Win the Tech Wars3.  Three Examples (High Speed Rail,Wind Energy,Software)4.  Is Conflict Inevitable?5.  Succeeding in the New China6.  Summary & DiscussionOverview  
  • 4. The Drivers ofChina’s Discontent
  • 5. August. 16, 2010
  • 6. Despite China’s huge tradesurpluses with US & W Europethe greatest profits havebeen reaped by foreigncompanies rather thanChinese companies.These foreign companies dominate China’shigh-tech industries, accounting for 85% ofthe high-tech exports in 2008.
  • 7. To keep its economy growing at 9% andprovide jobs for the next generation ofbetter-educated workers and boostincome levels.China needed a plan…China would see a shift to countries such as  With the inevitableappreciation of thethat would eventually render China’slow-tech exports uncompetitive.  
  • 8. China’s Plans forWinning the Tech War
  • 9. Since 2006 the Chinese governmenthas been implementing new policiesthat seek to appropriate technologyfrom foreign multinationals in severalkey industries.
  • 10. Air Transportation
  • 11. Water Purification
  • 12. Nuclear Power
  • 13. Satellites
  • 14. Electric Cars
  • 15. 1.  Limit investment by foreign companies.2.  Require a high degree of local content inequipment produced in China.3.  Force the transfer of proprietary technologies fromforeign companies to their joint ventures withChina’s state-owned enterprises.Three-pronged plan to contain foreign companiesand enable Chinese companies to create advancedtechnologies:  
  • 16. China’s Plans for Winning the Tech War:•  Increase R&D spending from 1.5% of GDP in 2006 to2.5% by 2020.•  Reduce dependence on imported technology by 30%.•  Become one of the world’s top 5 economies accordingto patents granted and scientific papers published.CHINA’S GROWING R&D
  • 17. 1.  Offer tax incentives.2.  Increased spending in research institutions andfunding support for the development of domestictechnologies.3.  Tailored policies to favor domestic technologies.4.  Enforced Joint Ventures.The Chinese government is using 4 mechanisms toachieve these goals:  
  • 18. R&DUNITED STATES VS CHINA
  • 19. The State’sStrategies
  • 20. Example #1High Speed Rail
  • 21. High Speed Rail
  • 22. Example #2Wind Energy
  • 23. Power Generation
  • 24. Example #3Software
  • 25. Information Technology
  • 26. Is ConflictInevitable?
  • 27. It depends…- US and China appear to bepragmatic and unlikely tocommit self-destructivepolicies- Structurally prone toconflict. They differradically in beliefs,expectations, and objectives- Both nations have commoninterests: developing cleanenergy, protecting theenvironment, and reining inrogue states
  • 28. Succeeding in theNew China
  • 29. Teaming up with Chinese companies is becomingessential to compete in emerging markets.
  • 30. China vs The WorldDiscussion& Summary
  • 31. •  The Chinese government is determined that Chinamaintains its position as one of the world’s leadingeconomies.•  Over the past 4 years China has quietly shiftedfrom a successful low- and middle-techmanufacturing economy to a high-tech one.•  Since 2006 the Chinese government has beenimplementing new policies to increase R&D andappropriate technology from multinationals.Summary  
  • 32. •  Does the global realignment of business representmore threat or challenge to Western corporations?•  Is there any option for global institutions to play alarger role?•  Is China’s rise simply ‘history repeating itself’?Another ‘America’ for the 21st Century…?Discussion Topics  
  • 33. THANKYOU!