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China as the World's Technology Leader by Naubahar Sharif


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In this talk, Prof. Naubahar Sharif argues that China is positioning itself to assume global leadership in technology within the coming few decades. Find out more about the talk at

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China as the World's Technology Leader by Naubahar Sharif

  1. 1. HKUST  Ins*tute  for  Emerging  Market  Studies  (IEMS)   China  as  the  World’s  Technology   Leader   Naubahar  Sharif   Associate  Professor,  Division  of  Social  Science,  HKUST,     and  Faculty  Associate  
  2. 2. China’s  Economic  Ascent   •  Rapid  economic  growth  from  1979  onwards   •  Obvious  compe**ve  advantages  (i.e.   popula*on)   •  Has  now  developed  into  a  leading  economic   (poli*cal?,  military?)  superpower   •  Story  of  China’s  economic  ascent  has  been   widely  told,  heard  and  understood     – .  .  .  But  how  about  the  story  of  China  as  a   technological  superpower?   1  
  3. 3. How  to  Measure  Leadership?   •  Four  factors  comprise  ‘technology  leadership’   – Research  and  development  (R&D)  intensity   – R&D  personnel   – Number  of  scien*fic  publica*ons   – Number  of  patent  applica*ons   2/50  
  4. 4. A  Snapshot  Look  at  the  Strength  of   China’s  Innova*on  System  (1/3)   •  Rate  of  spending  on  R&D  outpaces  overall   economic  growth   – In  2012,  China  spent  US$163  billion,  or  1.98%  of   its  growing  GDP  on  R&D   •  Placing  it  2nd  in  the  world,  only  to  the  United  States     •  With  3.2  million  R&D  personnel  in  2012,  China   now  turns  out  the  largest  number  of   undergraduate,  postgraduate,  and  doctoral   students  in  science  and  engineering  in  the   world   3/50  
  5. 5. A  Snapshot  Look  at  the  Strength  of   China’s  Innova*on  System  (2/3)   •  Over  the  period  2001-­‐2011,  China  ranked  2nd  in   the  world  in  research  output  as  measured  by  the   number  of  papers  published  by  Chinese  scien*sts   in  research  journals   •  Ranked  7th—but  rising—in  terms  of  cita*ons  for   papers  authored  by  Chinese  scien*sts   •  In  2012,  China  trailed  only  the  United  States,   Japan  and  Germany  in  patent  filings  under  the   Patent  Coopera*on  Treaty  (PCT)  administered  by   the  World  Intellectual  Property  Office  (WIPO)   4/50  
  6. 6. A  Snapshot  Look  at  the  Strength  of   China’s  Innova*on  System  (3/3)   – In  2012,  two  large  telecommunica*ons  equipment   manufacturers,  ZTE  and  Huawei  ranked  1st  and  3rd   in  worldwide  ranking  of  top  PCT  applicants   – At  the  U.S.  Patent  and  Trademark  Office  (USPTO),   the  number  of  patent  applica*ons  origina*ng  in   China  grew  18%  from  2009  to  2010  alone   •  A  rate  matched  by  no  other  country   5/50  
  7. 7. China’s  Technological  Ascent  Widely   Ques*oned  (1/3)   •  Despite  these  indicators,  there  exists   considerable  skep*cism  over  China’s  capacity   to  alain  global  technological  leadership   – George  Gilboy,  a  research  affiliate  at  MIT   •  Wrote  in  Foreign  Affairs,  in  2004,  that  ‘Chinese  firms  .  .  .   forgo  investment  in  long-­‐term  technology   development.  .  .  [and]  rely  heavily  on  imported  foreign   technology  and  components’   6/50  
  8. 8. China’s  Technological  Ascent  Widely   Ques*oned  (2/3)   – David  Shambaugh  of  George  Washington   University     •  In  2012  iden*fied  ten  weaknesses  in  corporate  and   human  resources  management  to  explain  why  Chinese   companies  are  s*ll  taking  baby  steps  towards  parity  in   global  business   – Dan  Breznitz  and  Michael  Murphee,  professors  at   the  Georgia  Ins*tute  of  Technology   •  Argued  in  2011  that  China  has  selled  on  merely   keeping  pace  with  technological  advances  elsewhere,   pursuing  innova*on  only  in  later  !  in  less   consequen*al  stages  of  the  produc*on  process   7/50  
  9. 9. China’s  Technological  Ascent  Widely   Ques*oned  (3/3)   – Thomas  Friedman  (journalist,  columnist,  author)     •  Argued,  in  Sep  2012,  that  driving  economic  growth   through  entrepreneurship  and  innova*on  depends  on  a   culture  of  trust  !  observing  that  ‘China  has  a  huge   trust  deficit’,  a  lingering  remnant  of  Maoism   •  Aforemen*oned  skep*cism  overlooks  several   important  factors  that  have  posi*oned  China   to  compete  for  global  technological  leadership   8/50  
  10. 10. China’s  Sources  of  Technological   Advantage     •  Three  dis*nct  sources  of  compe**ve   advantage  that  China  will  leverage  in   developing  its  capacity  for  technological   innova*on   1.  Rapidly  growing,  large  domes*c  market   2.  Autocra*c  system  of  governance   3.  Globaliza*on   9/50  
  11. 11. A  Brief  Look  at  Tech  Leadership   Throughout  History  (1/6)   •  Considering  the  period  from  the  Bri*sh  industrial   revolu*on  onwards  .  .  .     •  .  .  .  Technology  has  been  leveraged  to  alain   compe**veness,  as  well  as  economic  and  military   leadership   •  Over  the  70-­‐year  period  of  the  Bri*sh  industrial   revolu*on,  there  were  advances  made  in  the   iron,  colon  and  steel  industries   –  These  advances  acted  as  catalysts  for  further   technological  change  in  associated  industries       10  
  12. 12. A  Brief  Look  at  Tech  Leadership   Throughout  History  (2/6)   –  Technological  changes  led  to  social,  economic,   poli*cal  and  social  changes  (and  vice  versa)   •  By  the  end  of  the  industrial  revolu*on,  Britain   had  developed  a  considerable  technological  lead   over  na*ons   –  Accomplishments  demonstrated  at  the  First  World’s   Fair  in  London  (Crystal  Palace)  in  1851     •  Aqer  Britain,  Germany  began  to  industrialize  in   Europe,  and  then  also  France   –  Technology  transfer  played  an  important  role   11  
  13. 13. A  Brief  Look  at  Tech  Leadership   Throughout  History  (3/6)   •  From  the  turn  of  the  19th  century  the  torch  of   global  technological  leadership  shiqed  from   Europe  to  USA   •  America  is  the  global  technological  leader  today     –  !  But  being  threatened  by  China!   •  By  the  First  World  War  America  firms—especially   in  chemical  and  electronic  industries—had   established  first-­‐class  industrial  R&D  labs   –  These  labs  were  insulated  from  more  immediate   corporate  pressures  to  solve  shop-­‐floor  problems   •  Allowed  them  to  dedicate  more  *me  to  inven*on   12/50  
  14. 14. A  Brief  Look  at  Tech  Leadership   Throughout  History  (4/6)   •  Post  World  War  II  American  dominance  was  due   to  advanced  technology   –  Rise  of  large  US  corpora*ons  noteworthy  as  they   pioneered  mass  produc*on  techniques,  the  assembly   line,  standardized  product  and  long  produc*on  run   •  From  mid-­‐1900s  onwards,  large  US  corpora*ons  had   developed  a  clear  technological  edge  in  global  produc*on   and  trade     •  US  viewed  as  ‘leader’  and  other  countries  as   ‘followers’  in  the  “catching-­‐up  hypothesis”   13/50  
  15. 15. A  Brief  Look  at  Tech  Leadership   Throughout  History  (5/6)   •  American  technological  leadership  has  not  remained   uniformly  strong  throughout  the  20th  century   •  Was  threatened  in  the  1980s  by  Japan   •  Japan’s  focus  on  innova*on  and    technological  advance  propelled      Japan  into  the  leadership  posi*on  within  the  Asian   region   •  Ini*al  explana*ons  to  describe  Japan’s  ascent  focused   simplis*cally  on  copying,  imita*ng,  and  impor*ng   foreign  technology   –  With  passage  of  *me  this  explana*on  was  no  longer   adequate     14/50  
  16. 16. A  Brief  Look  at  Tech  Leadership   Throughout  History  (6/6)   –  Gradually  became  clear  that  the  correct  explanatory   factors  were:  higher  technological  sophis*ca*on  of   new  products  and  processes,  shorter  lead  *mes,  rapid   diffusion  of  new  technologies,  and  integra*on  of  R&D,   produc*on,  and  technology  imports  at  firm  level   •  Aqer  Japan,  smaller  countries  have  focused  their   alempts  on  taking  a  ‘slice’  of  the  technological   leadership  pie  (i.e.  Israel,  Sweden,  Denmark,   Finland,  Korea,  Taiwan,  Singapore)     15/50  
  17. 17. China’s  Three  Compe**ve  Advantages   •  In  order  to  alain  technological  leadership,   China  has  three  dis*nct  sources  of  compe**ve   advantage  (each  discussed  individually):   – Market  size   – Governmental  power   – Globaliza*on   16/50  
  18. 18. Growing  Large  Domes*c  Market  (1/6)   •  Market  size  is  an  important  determinant  of   innova*on  ac*vi*es   –  Greater  the  demand,  greater  the  revenue   –  More  efficient  the  produc*on  process,  greater  the   aggregate  cost  savings     •  Implies  a  growing  market  with  growing  demand   will  lead  to  increasing  returns  from  investment   innova*on   –  Companies  incen*vized  to  introduce  new  products  to   reap  increasing  returns   17/50  
  19. 19. Growing  Large  Domes*c  Market  (2/6)   •  Following  World  War  II,  US  companies  also   benefited  from  selling  to  the  world’s  largest   domes*c  market  (the  US)   –  These  US  firms  led  the  world  in  developing  and   implemen*ng  leading-­‐edge  technologies,  and  claimed   largest  worldwide  share  in  many  export  goods    !  These  developments  reflected  longstanding   American  dominance  in  mass  produc*on  industries  –   a  dominance  that  resulted  from  ready  access  to   natural  resources  and  the  world’s  largest  domes*c   market   18/50  
  20. 20. Growing  Large  Domes*c  Market  (3/6)   – Resource  and  capital  intensive  American   manufacturing  firms  operated  on  a  much  larger   scale  than  their  counterparts  elsewhere    !  Due  to  economies  of  scale  American  firms   enjoyed,  innova*ons  from  Europe  were  developed   and  brought  to  market  in  the  US   -­‐  Similar  dynamics  will  play  out  in  the  massive   Chinese  market  !  China  has  strengths  in  mass   produc*on  (‘workshop  of  the  world’)  able  to   adapt  Western  techniques  to  Chinese  condi*ons   19/50  
  21. 21. Growing  Large  Domes*c  Market  (4/6)   •  China’s  emergence  as  a  rapidly  growing  major   market  offers  it  a  unique  advantage  for   technological  advancement   – The  likes  of  which  no  na*on  other  than  the  US  has   hitherto  enjoyed   •  Local  Chinese  firms  are  best  situated  to  sa*sfy   the  singular  tastes  of  the  Chinese  market   – In  terms  of  Chinese  consumers  expecta*ons   regarding  price,  quality,  and  product  features   20/50  
  22. 22. Growing  Large  Domes*c  Market  (5/6)   •  Integra*on  of  mass  produc*on  strength  with   the  world’s  second  largest  economy  has  led   forecasters  at  Goldman  Sachs,  Standard   Chartered  Bank,  the  Economist  to  predict  that   the  Chinese  economy  will  be  twice  as  large  as   the  US  economy  by  2030   – Jus*n  Yifu  Lin  (former  chief  economist  of  the   World  Bank)  predicted  that  by  2030,  100-­‐150  of   the  largest  Fortune  500  companies  in  the  world   will  be  Chinese  firms   21/50  
  23. 23. Growing  Large  Domes*c  Market  (6/6)   •  If  these  forecasts  prove  true,  capacity  of   Chinese  firms  to  con*nuously  leverage   advantage  of  their  large  home  market  to   enhance  their  technological  compe**veness   will  be  a  major  success  factor   22/50  
  24. 24. China’s  Three  Compe**ve  Advantages   – Governmental  power   23/50  
  25. 25. Autocra*c  System  of  Governance  (1/9)   •  On  the  way  to  becoming  global  technological   leaders,  Chinese  companies  have  benefiled   significantly  from  the  Chinese  government’s   industrial  policy   •  Chinese  government’s  industrial  policy  is   unmatched  in  scale  and  strength  by  Western   standards   •  In  fact,  China  has  adopted  the  US  model  to  boost   their  own  state-­‐backed  R&D  investments   24/50  
  26. 26. Autocra*c  System  of  Governance  (2/9)   •  Success  of  high-­‐tech  industries  in  the  US  in  the   postwar  era  reflected  massive  private  and  public   investments  in  R&D  and  scien*fic  and  technical   educa*on  (made  aqer  World  War  II)   •  Given  the  Chinese  autocra*c  system  of   governance,  China  is  able  to  steer  Chinese  (state-­‐ owned)  and  private  companies  to  increase  their   R&D  investments   –  This  has  been  reflected  in  the  amount  of  money  spent   on  R&D  in  China     25/50  
  27. 27. Autocra*c  System  of  Governance  (3/9)   •  Use  of  industrial  policy  to  help  domes*c   companies  upgrade  technological  capability  have   their  roots  in  Hamiltonian  economic  philosophy   !  Holds  that  a  big  country  needs  big  organiza*ons    to  succeed  and  that  the  federal  government    should  partner  with  private  enterprise  to    finance   scien*fic  research  and  provide      resources  and   infrastructure  that  businesses  lack   •  Under  this  Hamiltonian  approach,  American   government  sponsored  projects  such  as  the  Erie   Canal,  transcon*nental  railroad,  land-­‐grant   universi*es,  network  of  airports   26/50  
  28. 28. Autocra*c  System  of  Governance  (4/9)   – Helped  create  within  the  US  a  huge   interconnected  marketplace     •  Companies  such  as  Standard  Oil,  General  Motors,  US   Steel,  General  Electric  and  Sears  Roebuck  prospered   and  grew   – US  government  and  military  led  the  way  in   financing  innova*on  in  its  early  stages   – Government-­‐financed  research  and  procurement   fueled  industries  that  produced  hybrid  seed,  radar,   synthe*c  rubber,  the  microchip,  GPS,  Internet,  etc.   27/50  
  29. 29. Autocra*c  System  of  Governance  (5/9)   – Helped  create  within  the  US  a  huge   interconnected  marketplace     •  Companies  such  as  Standard  Oil,  General  Motors,  US   Steel,  General  Electric  and  Sears  Roebuck  prospered   and  grew   – US  government  and  military  led  the  way  in   financing  innova*on  in  its  early  stages   – Government-­‐financed  research  and  procurement   fueled  industries  that  produced  hybrid  seed,  radar,   synthe*c  rubber,  the  microchip,  GPS,  Internet,  etc.   28/50  
  30. 30. Autocra*c  System  of  Governance  (6/9)   •  Most  of  the  centralized  power  that  enabled  China   to  run  a  planned  economy  remains  in  place   –  Government  is  able  to  play  a  significant  role  in  shaping   increasingly  market-­‐oriented  ac*vi*es   •  Chinese  government  has  more  policy  instruments   at  its  disposal  than  do  its  Western  counterparts   –  Enables  the  government  to  facilitate  technological   learning  on  part  of  indigenous  firms   29/50  
  31. 31. Autocra*c  System  of  Governance  (7/9)   •  With  beneficial  policies,  Chinese  government  has   bolstered  the  wind  turbine  industry,  and   ‘strategic  emerging  technologies’  which  include:   environmental  technology;  telecommunica*ons;   biotechnology;  advanced  manufacturing;   renewable  energy;  advanced  material  and  green   vehicles   –  Beneficial  policies  include  large-­‐scale  government   grants,  tax  concessions,  easy  access  to  bank  loans,   policies  regarding  intellectual  property,   standardiza*on,  etc.   30/50  
  32. 32. Autocra*c  System  of  Governance  (8/9)   •  China  is  the  2nd  largest  performer  of  R&D   globally,  accoun*ng  for  12%  of  global  total   – US  is  the  largest  performer,  with  31%   •  The  pace  of  real  growth  in  China’s  overall  R&D   expenditure  over  the  period  1999-­‐2009  has   been  excep*onally  high,  at  20%  annually   •  In  March  2006,  China  launched  its  ‘Na*onal   Mid-­‐  and  Long-­‐Term  Science  and  Technology   Development  Plan  for  2006-­‐2020’   31/50  
  33. 33. Mid  to  Long-­‐Term  S  &  T  Development   Plan,  2006-­‐2020   •  A  plan  that  demonstrates  remarkable  foresight   for  a  developing  country   •  In  the  Plan,  the  R&D  expenditure  to  GDP  ra*o  is   to  be  raised  to  2.5%  by  2020   –  In  2012,  it  was  1.98%   •  The  Plan  proposes  ‘indigenous  innova*on’   –  Represents  the  Chinese  leadership’s  ambi*on  to   sustain  economic  growth  through  indigenous   innova*on  and  increased  government-­‐led  R&D   investments   32/50  
  34. 34. Autocra*c  System  of  Governance  (9/9)   •  There  is  of  course  concern  in  the  US  and   elsewhere  that  Beijing’s  visible  hand  is  giving   China  an  unfair  advantage  because  China  is   not  playing  fairly,  ‘by  the  rules  of  interna*onal   trade’   – This  too  is  a  symptom  of  the  CCP’s  style  of   governance  (where  a  heavy  hand  combined  with   secrecy  prevails)     33/50  
  35. 35. China’s  Three  Compe**ve  Advantages   – Globaliza9on   34/50  
  36. 36. Intensified  Forces  of  Globaliza*on  (1/9)   •  In  a  globalized  era,  Chinese  companies  need   not  develop  every  cuzng-­‐edge  technology  on   their  own   •  Rather,  they  can  undertake  mergers  and   acquisi*ons  as  a  deliberate  strategy  for   acquiring  advanced  technologies  owned  by   foreign  firms   35/50  
  37. 37. Intensified  Forces  of  Globaliza*on  (2/9)   •  As  early  as  the  Tenth  Five-­‐Year  Plan  (2001-­‐2005),   Chinese  government  unveiled  its  ‘go  global’   strategy  to  encourage  Chinese  companies  to   invest  abroad   •  China’s  outward  foreign  direct  investment  (FDI)   accelerated  aqer  2009   –  In  2010,  China’s  outward  FDI  amounted  to  US$68.6   billion,  ranking  it  5th  in  the  world   •  Goal  of    many  outward  FDI  projects  has  been   acquisi*on  of  advanced  technology  !  some   illustra*ve  examples:   36/50  
  38. 38. Intensified  Forces  of  Globaliza*on  (3/9)   •  Lenovo  Group  struck  two  deals  in  close   succession  in  early  2014   –  Jan:  Bought  IBM’s  low-­‐end  server  business  for  server   business  for  US$2.3  billion   –  Feb:  Bought  Google  Inc’s  Motorola  handset  division   for  US$2.91  billion   •  These  acquisi*ons  further  remodel  Lenovo  as  a   force  in  mobile  devices  in  addi*on  to  data     –  Posi*ons  them  to  challenge  largest  global  tech  firms   such  as  Apple  and  Samsung   37/50  
  39. 39. Intensified  Forces  of  Globaliza*on  (4/9)   •  Beijing  Automo*ve  Industry  Holding  Company   Limited  (BAIC)  acquired  IPRs  affiliated  with  Saab   vehicles  and  engines  (Swedish  car  manufacturer   owned  by  General  Motors),  its  en*re  R&D   facili*es,  quality  management  systems,  and   supplier  development  and  management  systems   in  Dec  2009   –  BAIC’s  objec*ve  in  acquiring  Saab  was  to  integrate   Saab’s  technology  into  its  future  R&D  opera*ons  to   develop  an  indigenous  BAIC  vehicle   •  First  indigenous  BAIC-­‐brand  vehicle  developed  based  on  the   Saab  technology  was  launched  in  Sep  2014   38/50  
  40. 40. Intensified  Forces  of  Globaliza*on  (5/9)   •  Chinese  carmaker  Geely  completed  acquisi*on  of   another  Swedish  automaker,  Volvo,  from  Ford   motors  in  Aug  2010   –  Geely  needed  Volvo’s  technology  in  order  to  improve   quality  of  its  own  brand  of  cars  because  of  increasing   local  compe**on   –  Geely  requires  Volvo  engineers  to  help  it  improve  its   engineering  capabili*es     –  Geely  owns  all  of  Volvo’s  key  technologies  and  IPRs   and  also  has  the  right  to  use  the  IPR   •  IPR  ownership  represents  the  core  value  of  this  acquisi*on   39/50  
  41. 41. Intensified  Forces  of  Globaliza*on  (6/9)   •  In  avia*on,  China  Avia*on  Industry  General   Aircraq  (CAIGA)—largest  general  aircraq   manufacturer  in  China—acquired  US-­‐based   Cirrus  Aircraq  in  Jun  2011   – By  acquiring  Cirrus,  CAIGA  will  complete   development  of  a  new  single-­‐engine  ‘Vision’  jet   40/50  
  42. 42. Intensified  Forces  of  Globaliza*on  (7/9)   •  In  renewable  energy,  R&D  alliance  between   China’s  Sinovel  and  US-­‐based  Windtec  in  2008   allowing  Sinovel  to  produce  five-­‐  and  six-­‐   megawal  turbines  in  2010  and  2011   •  Chinese  company  Goldwind  acquired  70%   ownership  of  German-­‐based  Vensys  Energy  in   2008  allowing  it  access  to  the  world’s  leading   technology  and  professionals  in  area  of   permanent  magnet  direct-­‐drive  wind  turbines   41/50  
  43. 43. Intensified  Forces  of  Globaliza*on  (8/9)   •  In  machinery,  Sany  Group—China’s  largest   construc*on  equipment  manufacturer— acquired  German  company  Putzmeister   (manufacturer  of  high-­‐tech  concrete  pumps)   in  Jan  2012   – For  its  cuzng  edge  technology   42/50  
  44. 44. Intensified  Forces  of  Globaliza*on  (9/9)   •  In  energy,  CNOOC  acquired  Canadian  oil   producer  Nexen  for  US$15  billion  in  Feb  2013   and  Sinopec  purchased  49%  of  the  North  Sea   opera*ons  of  Talisman  Energy  (another   Canadian  oil  company)  in  Jul  2012   – Provides  Chinese  firms  with  advanced  produc*on   technologies  to  draw  oil  and  gas  from   nontradi*onal  areas  such  as  deepwater  fields  and   hardened  rock  forma*ons  more  efficiently   43/50  
  45. 45. Implica*ons  for  Emerging  Markets  (1/3)   •  There  exist  plen*ful  opportuni*es  for   emerging  market  (EM)  firms  to  partner  with,   or  invest  in  Chinese  firms  and  R&D  facili*es     •  Corporate  execu*ves  in  EM  should  expand   their  horizons  beyond  the  tradi*onal  S&T   superpowers  such  as  the  US,  Japan  and   Germany   44/50  
  46. 46. Implica*ons  for  Emerging  Markets  (2/3)   •  In  China,  opportuni*es  will  abound  in  industry   (and  academia)  for   – Coopera*on  in  S&T  applied  research   – Investment  in  R&D  partnerships   – Sourcing  technologically  sophis*cated   manufacturing  components  and  R&D  resources     •  Not  only  will  EM  firms  find  it  cheaper  to  move   into  China,  since  some  of  them  are  Asian,  they   will  also  find  cultural  affini*es  there   45/50  
  47. 47. Implica*ons  for  Emerging  Markets  (3/3)   •  Knowledge  and  products  that  result  from  such   coopera*on  will  be  closer  to  market  for  domes*c   consump*on  (for  those  located  near  China)   •  EM  firms  that  partner  with  Chinese  firms/ universi*es  to  conduct  R&D  or  manufacturing  in   China  will  be  able  to  take  advantage  of  China’s   growing  and  improving  S&T  infrastructure  and   human  capital   –  And  be  closer  to  what  is  soon  to  be  the  world’s  largest   consumer  market   46/50  
  48. 48. Conclusions  (1/4)   •  Too  few  in  policymaking  and  financial  circles   an*cipate  the  rise  of  Chinese  mul*na*onals  to   posi*ons  of  global  technological  leadership   •  To  be  sure,  some  Chinese  companies  have   benefiled  enormously  from  monopolies   granted  by  Beijing  and  con*nuous   improvement  of  Chinese  firms’  technological   strength  relies  on  poli*cal  stability  in  the   country   47/50  
  49. 49. Conclusions  (2/4)   •  However,  more  of  this  technological  rise   should  be  alributed  to:   – China’s  massive  growing  domes*c  market   – Strong  government  support  aimed  at  turning   China  into  an  ‘innova*on  na*on’   – Intensified  forces  of  globaliza*on   48/50  
  50. 50. Conclusions  (3/4)   •  Combined,  and  individually,  these  factors  help   explain  how  and  why  Chinese  companies  will   move  beyond  their  tradi*onal  reliance  on  low   factor-­‐input  costs  to  scale  the  value-­‐added  chain   –  Thereby  realizing  the  country’s  development  and   strategic  goals  based  on  its  burgeoning  technological   strength   •  M&A  cases  are  par*cularly  insigh|ul  because  they  indicate   the  extent  to  which  technology  transfer  to  China  is  now   taking  place  across  a  broad  swathe  of  industries     49/50  
  51. 51. Conclusions  (4/4)   –  In  the  past,  Chinese  companies  had  to  be  content  with   acquiring  technology  through  license  agreements  or  joint   ventures  with  foreign  partners   •  These  arrangements  limited  use  of  technology  by  Chinese  firms   –  When  a  Chinese  company  acquires  an  overseas   counterpart  outright,  it  owns  the  underlying  technology   •  Can  use  the  technology  is  as  it  wishes  (domes*cally  or   interna*onally)   –  Furthermore,  overseas  acquisi*ons  represent  a  point  of   pride  in  China,  showcasing  its  rising  economic  strength   •  Signaling  both  Chinese  triumph  and  decline  of  its  Western   counterparts   50/50  
  52. 52. HKUST  Ins*tute  for  Emerging  Market  Studies  (IEMS)   •  Provides thought leadership on business and policy challenges in emerging economies •  40+ Faculty Associates •  Founded in 2013 with support from EY POLICY  BRIEFS   SEMINARS  AND     CONFERENCES   WORKING  PAPERS