The Chinese R&D Juggernaut

Don’t look now, but Blair House has a rather important guest staying there now. That’s “Blair House” – 1651 Pennsylvania Ave. – namely the official guest house for the President of the United States, and it is currently hosting a delegation from the People’s Republic of China headed by no less than President Hu Jintao. His four-day visit to the US presumably means important face-to-face discussions with President Obama and other US business and political leaders on such topics as East Asian security, the valuation of the Renminbi, and maybe even human rights in China (and possibly in the US, too).

In the background to all this, though, is China’s growing economic power and influence. You might be surprised, but much of that actually stems from a growing Chinese superiority in certain key modern technologies, and in R&D generally, if we are to believe the “MONEY editor” of the German newsmagazine Focus, Christian Bieker, who today offers a quite informative three (Internet-)page article entitled From Dwarf to Giant. Check out the lede:

From workshop to technology mecca: China is about to have a development-leap – and is already at the top in solar energy, electric autos, and mobile telecommunications.

Keep in mind that US Defense Secretary Bill Gates actually was in China just last week, obviously on a sort of preparatory visit there, and much was made of the Chinese military using the occasion to launch the first test-flight of their latest “stealth” technology fighter, the J-20. That provided a suitable foretaste of China’s growing technical skill, but things really go much further than that. As Bieker goes on to mention:

  • China is now – from the turn of the year 2010/11 – actually a net exporter of R&D to the EU;
  • One-eighth of all the world’s R&D spending takes place there;
  • In 2010 it overtook the US in number of patents awarded. (This raises the question of how that relates to the Middle Kingdom’s notorious laxness when it comes to observing patents and copyrights issued from the outside!)
To be frank, much of the article has a Eurocentric bent in that it discusses the remarkable Chinese progress in certain technological areas where Europe has long thought itself to be #1 and the US, by contrast, has barely been in the running. These mainly have to do with renewable energy technologies. Take wind, for example: China is now said to be the world’s largest market for wind energy, having doubled its generation capacity merely from 2008 to 2009. It’s no surprise that it is also now considered the most attractive market for such investment, so that nowadays at least every other wind-turbine put into operation anywhere is in China. Or take solar: Right now half of all “crystalline solar modules” come from Europe, but by 2012 that will be only 23% as Chinese producers flood the market. Keep in mind in particular the name “Ja Solar” – it might sound uneasily German, but in reality that is a leading Chinese solar panel producer angling to increase its European market-share drastically.

Chinese industry is coming to a similarly dominating position when it comes to electric vehicles, especially via its global dominance of all-important battery technology. (See in particular the leading company BYD – “Build Your Dreams” – in which Warren Buffett has taken a stake.) And the same with telecoms, meaning here primarily networks (where Chinese firms compete with the likes of Ericsson and Alcatel, and have a world market-share of 47.2%) rather than handsets, although the Chinese apparently have ambitious plans in that area as well (“no later than 2015 to belong to the top three in the branch”).

R&D Superman?

And that’s where any reasonably well-informed reader has to stop short. What is leading mobile telephone progress these days is of course smartphones: the iPhone, Android, the Blackberry, Symbian. It stands to reason that success in this field could turn out to require a bit more than simply ironclad determination to achieve it on the part of the political and business establishment of the major Asian power. What, are the Chinese going to buy Apple, Google, RIM? (Perhaps the last-named is the likeliest possibility.) Can we really believe that they could come up with a strong smartphone contender from their own resources, even in the four years to 2015, given the very real language and cultural barriers? Hey – smartphones enable people to get information much more easily, where and how they want it – including political information!

For that matter, another look is also due to that “stealth” fighter that the Chinese authorities so ostentatiously launched into the sky as the Secretary of Defense was visiting. Yes, it has that boxy look which suggests that it doesn’t show up very well on radar, but the well-informed should not have difficulty in finding explanations (like here and here) for how that “J-20” airplane demonstrated mainly how far China still has to go toward developing truly advanced technology of that sort. (All you spies out there – get busy!!)

From all the facts and figures Bieker gathers for his piece, Chinese R&D might well seem formidable. But we also have to remember that in the current international negotiating environment it does suit China to appear as the 10-foot tall economic colossus ready to sweep all competitors before it. Japan seemed an unbeatable economic juggernaut back in the late 1980s, when it appeared to be accumulating enough money to buy up most of the US. What ensued instead, of course, was that country’s two “lost decades” of economic stagnation from which it still has not emerged. Let’s trust that the American intelligence establishment – with its 20 different agencies and megabillion-dollar budgets – has a somewhat more realistic view of the current Chinese negotiating hand, and so won’t let President Obama be overawed during this week’s key meetings.

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