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.

1. A
presenta*on
based
on
the
HBR
ar*cle
by
Thomas
M.
Hout
&
Pankaj
Ghemawat
(December
2010)

2. The Cold War

4. 1. Drivers of China’s Discontent
2. China’s Plan to Win the Tech Wars
3. Three Examples (High Speed Rail,Wind Energy,
Software)
4. Is Conflict Inevitable?
5. Succeeding in the New China
6. Summary & Discussion
Overview

5. The Drivers of
China’s Discontent

6. August. 16, 2010

7. Despite China’s huge trade
surpluses with US & W Europe
the greatest profits have
been reaped by foreign
companies rather than
Chinese companies.
These foreign companies dominate China’s
high-tech industries, accounting for 85% of
the high-tech exports in 2008.

8. To keep its economy growing at 9% and
provide jobs for the next generation of
better-educated workers and boost
income levels.
China needed a plan…
China would see a shift to countries such as
With the inevitable
appreciation of the
that would eventually render China’s
low-tech exports uncompetitive.

9. China’s Plans for
Winning the Tech War

10. Since 2006 the Chinese government
has been implementing new policies
that seek to appropriate technology
from foreign multinationals in several
key industries.

11. Air Transportation

12. Water Purification

13. Nuclear Power

14. Satellites

15. Electric Cars

16. 1. Limit investment by foreign companies.
2. Require a high degree of local content in
equipment produced in China.
3. Force the transfer of proprietary technologies from
foreign companies to their joint ventures with
China’s state-owned enterprises.
Three-pronged plan to contain foreign companies
and enable Chinese companies to create advanced
technologies:

17. China’s Plans for Winning the Tech War:
• Increase R&D spending from 1.5% of GDP in 2006 to
2.5% by 2020.
• Reduce dependence on imported technology by 30%.
• Become one of the world’s top 5 economies according
to patents granted and scientific papers published.
CHINA’S GROWING R&D

18. 1. Offer tax incentives.
2. Increased spending in research institutions and
funding support for the development of domestic
technologies.
3. Tailored policies to favor domestic technologies.
4. Enforced Joint Ventures.
The Chinese government is using 4 mechanisms to
achieve these goals:

19. R&D
UNITED STATES VS CHINA

20. The State’s
Strategies

21. Example #1
High Speed Rail

22. High Speed Rail

23. Example #2
Wind Energy

24. Power Generation

25. Example #3
Software

26. Information Technology

27. Is Conflict
Inevitable?

28. It depends…
- US and China appear to be
pragmatic and unlikely to
commit self-destructive
policies
- Structurally prone to
conflict. They differ
radically in beliefs,
expectations, and objectives
- Both nations have common
interests: developing clean
energy, protecting the
environment, and reining in
rogue states

29. Succeeding in the
New China

30. Teaming up with Chinese companies is becoming
essential to compete in emerging markets.

31. China vs The World
Discussion
& Summary

32. • The Chinese government is determined that China
maintains its position as one of the world’s leading
economies.
• Over the past 4 years China has quietly shifted
from a successful low- and middle-tech
manufacturing economy to a high-tech one.
• Since 2006 the Chinese government has been
implementing new policies to increase R&D and
appropriate technology from multinationals.
Summary

33. • Does the global realignment of business represent
more threat or challenge to Western corporations?
• Is there any option for global institutions to play a
larger role?
• Is China’s rise simply ‘history repeating itself’?
Another ‘America’ for the 21st Century…?
Discussion Topics

34. THANK
YOU!