In 2006, China’s leaders began emphasizing what they are calling “indigenous innovation”. This is a set of policies which indicate rules for creating a national list of products containing indigenous innovation. The policy, also furnished with recent revisions to patent legislation, should make it easier for Chinese companies to use domestic patents to block foreign competitors. It also contains a standard-setting process that is tilted toward domestic products.
This policy emerged as a major issue and caused concerns for foreign companies and governments throughout the business environment in China. Foreign companies like Siements AG, General Electric Co., and Microsoft Corp. feared this set of policies would shut them out of tens of billions of dollars in government procurement contracts. Executives and officials have raised particular complaints about indigenous innovation policies that they fear are designed to discriminate against foreign companies or to force them to transfer their intellectual property to China.
China’s most recent push to develop a homegrown passenger jet through a state-owned companies which then contract with major U.S. firms, raised concerns with many. Most were concerned that once their key technologies have been transferred to China, the foreign aerospace firms may find themselves sidelined and competing globally against the Chinese companies now being formed in China.
To address the multiple issues arising from China’s innovation drive, the U.S. has started a broader dialogue with China on the issue. John Holdren, director of the White House Office of Science and Technology Policy, met with China’s Minister of Science and Technology Wan Gang and other officials last week in Washington to open those talks. U.S. officials also raised their concerns about the innovation policies at talks in Beijing in May.
What is worrisome for the business community is that these indigenous innovation industrial policies are headed toward triggering contentious trade disputes and inflamed political rhetoric. Moreover, China is becoming increasingly aggressive in using its vast market to push foreign companies to transfer leading-edge technologies. That tactic is forcing foreign technology companies to anguish over balancing today’s profits with tomorrow’s survival.
Given China’s rapidly aging population and the erosion of its low labor-cost advantage, the pursuit of a high-tech economy and genuine homegrown science and technology breakthroughs is understandable and laudable. But the aspects of the policy are increasingly perceived as anti-foreign and regressive. As a result, the 2006 document that initiated the indigenous innovation policy is considered by many international technology companies to be a blueprint for technology theft on a scale the world has never seen before.
Thus, “Indigenous innovation is a massive and complicated plan to turn the Chinese economy into a technology powerhouse by 2020 and a global leader by 2050.” said in the report released this week, which was commissioned by the U.S. Chamber of Commerce and written by James McGregor, a longtime journalist and executive in China who is now senior counselor for APCO Worldwide.
In Baltimore, this is Jeremy Ford for the SOH Network. Thank you for listening and tuning in to http://www.sohnetwork.com. Until next time… signing off.