Can the West learn from China’s tech instead of decoupling?

Recently, the European Commission has been considering forcing Chinese companies to transfer intellectual property (IP) to European businesses in return for EU subsidies.

The Financial Times reported that the scheme is expected to be introduced as part of an announcement in December of a general tender invitation for bids to EU subsidies amounting to 1 billion euros to support the development of batteries in Europe.

In addition, similar demands may be associated with other EU subsidy schemes in sectors where Chinese investors with strong technological competence may have an interest in setting up businesses in Europe.

Although by no means similar in extent and character to the “technology for market access” scheme that China practiced since the 1980s — both informally and with explicit intent for overseas investors to transfer knowledge to China — the background is the same: to ensure that local industry benefits from knowledge transfer.

This Chinese policy became quite notorious among Western observers and businesses, but in hindsight, it definitely appears to have helped Chinese industries step onto the technology capabilities ladder.

China’s ambitions to access advanced overseas scientific and technological knowledge has increasingly been viewed with hostility by businesses and governments in advanced industrialised countries, resulting in a variety of restrictions based on national security, etc. There are calls for “de-risking” or even “decoupling” from China’s science and technology (S&T) system.

Meanwhile, China’s competence for scientific research and technological innovation has raced ahead and by now has reached parity — or even overtaken, as in some green technologies — those of the West. Should the Western countries decouple or should they instead intensify access to Chinese S&T in order to learn from more advanced emerging Chinese S&T? 

With the deterioration of US-China relations and the growing popularity of China hawks in Washington, D.C., the Chinese “technology for market access” policy became part of the American “Chinese theft of technology” discourse, together with Chinese intellectual property (IP) theft, cyber espionage, attempts to smuggle controlled items from the US to China, and the like. 

Notwithstanding the 224 reported instances of Chinese espionage directed at the US, and the more than 1200 cases of intellectual property theft lawsuits brought by US companies against Chinese entities since 2000, the vast majority of Chinese acquisitions of knowledge from the US have actually been legal, such as licensing IP and paying reasonable amounts of royalties for the purchase. In fact, Chinese royalty payments for the use of US IP grew from less than US$1 billion annually in 1999 to over US$8 billion in 2017, outpacing the rate of growth for China’s GDP. 

There is no doubt that Chinese enterprises utilised a wide range of knowledge sources — open source as well as access to protected IP — in order to upgrade their own technology. Indeed, support for “re-innovation” (再创新 zaichuangxin) of foreign technology has been the explicit ambition of the Chinese government since the launch of the Medium and Long-Term Plan for S&T (MLP) in 2006.

The efforts to incrementally modify new technology, scale up production and lower costs have been the hallmark of the increased competitiveness of Chinese enterprises, and the successes that they have achieved in such “re-innovation” (often resulting in innovations and IP) have frequently come as a surprise for overseas observers.   

For many Chinese industries, the spillover effects of activities by multinational firms have been an important source of new knowledge. The beneficiaries of such spillovers were subsidiaries of joint venture partners, Chinese firms in the value chains established by the multinational firms, and frequently, Chinese domestic competitors in the sector.

One academic paper has estimated that, without multinational production and knowledge spillovers, the idea stock owned by China would drop by 27%. These spillovers often happen when local staff from multinational firms, or their joint venture partners, are employed by domestic suppliers or competitors. 

Indeed, knowledge transfer through the migration of human resources has been a leading factor in the development of China’s scientific research competence, technological upgrading and improved innovation capabilities.

The most prominent way that migration of human resources has helped China was initiated when Deng Xiaoping, in 1978, decided to send 3000 of China’s best students and scholars abroad for further education. By 2008, it was estimated that over 800,000 Chinese students had received advanced training overseas. According to UNESCO statistical data, 1,021,303 Chinese students were studying abroad in 2023.

Over the years, many students with foreign graduate degrees returned to China, contributing to research at Chinese top universities or setting up entrepreneurial high-tech firms. However, many remained employed overseas and were reluctant to return.

Over more than three decades, Chinese scientists educated abroad have been encouraged to return to China after graduation through various policies emphasising incentives for talented scholars, including the Hundred Talent Program launched by the Chinese Academy of Sciences in 1994, and the Ten Thousand Talent Program initiated by the Central Leading Group for the Coordination of Talent Work in 2012.

The influx of knowledge from talented individuals into China’s scientific establishment and high-tech industries significantly influences its position in the global scientific system and advances its industrial sectors today. Returned scientists were publishing more high-quality articles in top journals than the people who had not received overseas training, while technology entrepreneurs generated industries that became key Chinese export successes.

A good example is the “three returnees of China’s photovoltaic” Huaijin Yang, Zhengrong Shi and Jianhua Zhao, who had studied photovoltaic technology in Australia in the 1990s and then returned to China with advanced technology and foreign capital to start firms.

Finally, international research cooperation has been a key source of Chinese access to advanced knowledge and technology in advanced industrialised countries.

According to an official Chinese statement, China had signed 114 intergovernmental Science and Technology Agreements and had established cooperative ties with 161 countries and regions related to aspects of S&T by 2020. They have thus been an essential component of China’s science diplomacy and have provided a framework for much bilateral research teamwork and organisations.

Nevertheless, scientific cooperation between Chinese and overseas researchers has gone beyond the scope of bilateral agreements, supported by major funding initiatives like the EU Framework Programmes for Research and Innovation, the US National Institutes of Health, and, of course, China’s talent policies and generous incentives mentioned above.

For decades, research collaboration between the US and China was bolstered by both political and business interests, until relations soured in the late 2010s. As David Zweig highlights in his first-rate analysis in The War for Chinese Talent in America, a 2013 declaration by Chinese President Xi Jinping urging Chinese scientists overseas to “play a useful role” for China raised concerns in the US.

Furthermore, when the management of the Chinese diaspora was transferred to the Chinese Communist Party organisation handling “united front work”, the move was interpreted as involving the party directly in the flow of knowledge and technology to China — posing a security risk to the US. 

American national security concerns about China’s efforts to leverage overseas research cooperation for its own scientific and technological development set the stage for the “China Initiative” launched by the US Department of Justice in November 2018, aimed at preventing industrial espionage.

In reality, the program targeted hundreds of the most prominent Chinese-American academics and scientists, with the result that many returned to work in China while others cut existing cooperation with Chinese scientists and universities. 

Although it can be argued that the China Initiative was a “success” in terms of effectively reducing research cooperation between the US and China — and not just by Chinese-American scientists — it is also likely to have deprived the country of some of its most highly cited and productive scientists.

The China Initiative thus calls to mind how America in 1955 deported a leading propulsion expert, Qian Xuesen, who subsequently became the father of China’s missile and space programme. Is this the best way to strengthen science in the US — or is it the best way to strengthen science and technology in China? Has anything been learned?

The EU’s new demand for Chinese firms to transfer intellectual property signals evolving geopolitical realities: China’s advancement in its science and technology system has led to Chinese capabilities reaching the forefront of global scientific research and innovative technologies in certain areas and sectors, as documented in a report by the US Information Technology and Innovation Foundation.

For many years, the Chinese have been eagerly learning from advanced industrialised countries in a variety of ways, but perhaps the time has arrived when it may benefit these countries to learn selectively from Chinese progress in S&T. As Richard McGregor of the Lowy Institute has jokingly argued: “Western countries such as Australia have long complained that China steals their technology, which raises the obvious question: why can’t we steal theirs?” 

I would argue that, even considering security risks, we should be prepared to intensify our research cooperation with Chinese scientific institutions to benefit from present and future discoveries. Perhaps as Dan Murphy, executive director of the Mossavar-Rahmani Center for Business and Government, points out, one should cooperate even more with Chinese universities known as the “seven sons of national defence”, if their research is at the forefront of global science.

Related: Can basic science save China? | Can China’s centralised reform strategy transform research and innovation?