Competitiveness, FDI and Technological Activity in East Asia
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Competitiveness, FDI and Technological Activity in East Asia

Edited by Sanjaya Lall and Shujiro Urata

This book addresses this imbalance with new country studies on the interaction between foreign direct investment (FDI) and technological activity in building export competitiveness. The book covers China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand, highlighting different strategic approaches to building capabilities in industrial enterprises. The book also includes a general overview and studies of Japanese multinationals overseas.
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Chapter 9: In search of balance: technological development in China

Yang Yao


Yang Yao1 China is unique among the developing countries in terms of technological development. Its planning legacy left the economy with a solid industrial and technological foundation as well as with distortions. Even though the role of the planning system has been gradually reduced over some 20 years, this legacy still leaves a clear mark as innovation initiatives still come exclusively from the government. This is both a blessing and a curse. It is a blessing in that it allows China to concentrate its limited resources on the development of the key technologies that it needs to promote economic development. China has a well-trained industrial workforce, a relatively complete education system, a capable research system, and a leading edge in technologies like satellite launching, nuclear power and some areas of biotechnology and new materials. It has grown from being an exporter of primary goods to becoming the developing world’s largest exporter of manufactured goods. Yet, the concentration is also a curse. It has resulted in a distorted industrial structure with a relatively highly developed heavy industry and a much less well developed light industry. There is overinvestment in the state-owned sector, leading to moral hazard problems and inefficient use of resources. It has created powerful vested interests that are resistant to market-oriented changes. The 1990s saw tremendous changes in the Chinese economy. The most significant one is perhaps the growth of the non-state sector. Although the state sector is still a significant player, especially in terms of...

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