China's technology strategy of "market in exchange for technology"


Journal of Technology Management in China

ISSN: 1746-8779

Article publication date: 25 September 2009


Li-Hua, R. and Sun, W. (2009), "China's technology strategy of "market in exchange for technology"", Journal of Technology Management in China, Vol. 4 No. 3.



Emerald Group Publishing Limited

Copyright © 2009, Emerald Group Publishing Limited

China's technology strategy of "market in exchange for technology"

Article Type: Guest editorial From: Journal of Technology Management in China, Volume 4, Issue 3

From the credit crunch to the collapse of the banking giants in Wall Street in October, 2008, the economic downturn started from America and struck the whole world. However, China demonstrates its outstanding position in the current economic recession because of its market economy with Chinese characteristics. Professor Lin Yifu, the Senior Vice President and Chief Economist of the World Bank expressed recently that China will be the first country to recover from the current recession.

It is no doubt that the performance of the Chinese economy has been phenomenal, China has currently become second only to the US in GDP as expressed in purchasing power parity (PPP). Undoubtedly it is the great success of Chinese economic reform and open-up, but the development of Chinese economy was dependent on international trade, FDI and foreign technology. In many industries, such as traditional car manufacturing industry, almost all advanced cars are made in China, but they are foreign brands. Local enterprises have not developed their advanced technology yet. Indeed, many local Chinese enterprises, such as, Lenovo, Haier, TCL and Huawei have become world famous brands in recent years, but they are cases of success in business, not in technology.

Many indicators and statistics, such as, number of science and engineering papers that Chinese researchers publish in international journals, the amount of investments made in research and development (R&D), and the number of patents, indicate that China’s science and technology capacities have been developing quickly. And there have been rising policy initiatives gearing towards the development of science and technology (S&T). China’s science and technology prowess is expanding, which is underpinned by the national network of S&T research of 5,400 national governmental institutions, 3,400 university-affiliated research institutions, 13,000 research institutions operated by large state enterprises, and 41,000 non-governmental research-oriented enterprises. In addition, Chinese government plans to further increase R&D budget substantially, which will account for 2 percent of GDP by 2010, compared to 1.34 percent in 2005. The figure will be increased to 2.5 percent of GDP by 2020. If the plan was achieved successfully, China would be positioned on a same level with several countries of the Organization of Economic Cooperation and Development (OECD) (Jakobson, 2007) and surpass the European Union in R&D investment intensity. In the meanwhile, China’s research environment has often been criticized as detrimental to individual creativity, corrupt and too politically charged. Science and technology policy makers have been regarded as overbearing and researchers in China face numerous hurdles.

Strategic management of technology and innovation will be pivotal in creating wealth and prosperity and sustainability. So it is necessary to rethink China’s “Market in Exchange for Technology” profoundly. With examination of appropriateness and effectiveness of technology transfer in China in the context of obtaining technology by sacrificing its market; how to provoke strategic thinking in technology and innovation; and how to create sustainability, there are arguably a number of crucial issues on technology and innovation to take into consideration. And as “real core technologies can not be purchased but can only be achieved by self-innovation”, there is a growing need to consolidate the technological capacity building through developing an appropriate strategy of technology innovation.

Since the National People’s Congress of the People’s Republic of China had promulgated Law on Joint Ventures with Chinese and Foreign Investment on July 1, 1979, China has started the course of attracting FDI, and one of important purposes is obtaining foreign technology. In 1992, China revised The Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures, which allows the foreign side to hold the controlling share and takes up as board chairman. This was the sign that China began to execute a “marketing in exchange for technology” strategy. It is based on the logic of acquiring new technology by technology transfer or FDI, then digesting and assimilating this introduced technology by technology learning, imitation and other means to improve technology capability, and at last innovating independently. And it needed to build and optimize an effective technology and innovation policy system.

In this issue, the first paper “Evolution and performance of Chinese technology policy: an empirical study based on “market in exchange for technology” strategy” by Sun et al. develops a method of technology policy quantification to analyze the evolution of the Chinese technology policy and builds econometric models to assess its technological and economic performance from the visual angle of “market in exchange for technology” strategy. The results show the blunder of “market in exchange for technology” strategy from policy formulation and execution. “Harmony or conflict? The coordination of Chinese technology policy (1978-2006)” by Peng et al. develops a method to assess the coordination of technology policy based on the quantification of policy. The analyses of the evolution of Chinese technology policy coordination and its contribution to technology progress and economy development shows Chinese technology policy is on the way to optimization step by step.

An enterprise’s knowledge stock and cognitive structure affects its ability to dispose of, develop and use resources and to innovate. Knowledge management plays a crucial role in strategic management of technology and innovation. “Knowledge management audit framework and methodology based on processes” by Wang et al. constructs the framework of knowledge management audit from the view of operation flow, based on a cognition summary of knowledge management audit proposed by many scholars and organizations, and puts forward some references for effective implementation of an organization knowledge management project.

All players, including policy makers, policy executors, and enterprises are interrelated and interact with each other in the market, “Market, regulation and technology regime: implication for China mobile phones industry” by Sun et al. builds a general model to analyze the choice of technology and transition of technology regime under the co-evolution of market demands, government regulation and technology change. Although it is a little far from “market in exchange for technology” strategy, the relationship among market demands, regulation and technology choice can strongly influence technology and innovation strategy, such as technology forecasting, technology introduction, innovation and business, etc. The opinions and the implications for China’s mobile phones industry in this paper may benefit enterprises in the systemic view of market, regulation and technology.

China’s leaders have made “indigenous innovation” a cornerstone of the country’s future development. It must lead to the fundamental change of technology innovation policy and enterprises’ technology innovation strategy. We argue that the study of technology policy and “market in exchange for technology” strategy, especially the evolution and coordination mechanism of technology policy, the interaction of market demands, regulation and technology choice in the above papers can give some help in the optimization of an “indigenous innovation” policy. Of course, strategic management of technology and innovation in China remains a challenge, as appropriate mechanisms and structures have yet to be established though enormous efforts been made as previously established. We also need more effort to understand the interaction of policy makers, policy executors and enterprises during the co-evolution of technology innovation policy and technology innovation strategy.

Richard Li-Hua, Wenxiang Sun


Jakobson, L. (2007), Innovation with Chinese Characteristics, Palgrave Macmillan, New York, NY