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The International Transfer of Manufacturing Technology: Its Contribution to China's Industrial Development
Abstract
Since opening to the outside world in the late 1970s China has become one of the world's largest markets for manufacturing technology. Technology transfer is therefore becoming one of the most effective routes for gaining access to the Chinese market. China's policy of targeting specific sectors, coupled with its encouragement of foreign investment and technology inputs, have shaped the development and structure of priority industries. As a result, there are now wide differences between enterprises in China in terms <>f their capabilities as well as the forms and effects of collaboration with foreign technology suppliers. This paper examines and compares recent trends in the transfer of manufacturing technology to China's machine tool and electronics industries and discusses the influences of recent industrial policy changes. It is based on research carried out over the last five years and draws on various cases of technology transfer in these two sectors as well as data from questionnaire surveys carried out in the UK and China.
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This paper presents the perceptions of British and other foreign companies on the situation in China with regard to technology transfer. It is based mainly on a questionnaire survey conducted by Aston Business School in collaboration with the China-Britain Trade Group, supplemented by selected interviews. The survey represents part of a wider program of research into industrial development and technology transfer under China's economic policy reforms, funded by the British Council, which is being conducted in partnership with the People's University of China. The findings from the survey and interviews shows that the potential for technology transfer to China is well recognized but possible obstacles such as time consuming negotiations, inconvenience of communications, bureaucracy, and vague organizational authority are also identified. Culture differences have become increasingly understood and generally accepted but their influence is also seen to extend to commercial habits and management methods and attitude. In many industries the shortage of managerial know-how, poor quality of currently-used equipment, a lack of good infrastructure support, and the unsatisfactory protection of transferred technology are inadequacies which prevent effective absorption of technology, guaranteed product quality, and willingness to transfer advanced foreign technology. Opinions on the effectiveness of information sources are heavily influenced by each individual company's contacts with, or visits to, China. There are variations in perceptions concerning Chinese economic policy, level of technological development, conditions of equipment, managerial know-how, and skills of the labour force which may suggest an imbalance in Chinese industrial development between different industrial sectors and enterprises.
Since China opened its doors to the outside world in 1979 a particular feature of its development has been a steady inward flow of foreign direct investment (FDI). By far the most common form of FDI into China is via equity or contract joint ventures. These two types together represent 88% of the total foreign investment projects and are therefore vitally important to China's industrial development. This paper reports on research carried out in a number of Sino-foreign joint ventures (JVs) to establish some of the criteria influencing successful operating performance. The research was based on in-depth investigations derived from extended interviews with both sides of joint ventures as well as some participant observation. Two areas are identified as being of significance: the investment environment and the method of technology transfer. Detailed findings relate to such factors as the effect of investment incentives, national and local government support, technical and management training, local manager and expatriate relationships and technology transfer rate.
Evidence from a survey shows that British engineering companies with a business interest in China recognise the potential benefits from technology transfer to China. The major strategic objective in transferring technology to China is to gain access to the Chinese market. British firms have a high opinion of the capability of Chinese enterprises to learn to use new technologies but they give a low rating to their managerial and technological capabilities and quality of existing equipment. Foreign companies appear to have a cautiously favourable view of the economic and political environment but the legal framework for doing business, time consuming negotiations, inconvenience of communications, bureaucracy, and unclear organizational authority are identified as the most difficult problems.
State owned enterprises in China have been given greater autonomy and responsibility, have freer access to foreign technology and are being encouraged to form groups to gain from rationalisation and integration. This article uses case studies to identify the key strategic issues which affect the commercial viability of foreign technology acquisition by state owned enterprises within the context of enterprise reforms. All the case study enterprises used technology transfer to develop new or improved products. Technologies acquired as parts of subcontracting arrangements and well established technologies to produce end-use products are easier to manage and operate profitably. However, the latter type of technology has been imported by numerous enterprises and has led to fierce competition and restructuring of industries. Importing capital intensive and complex technology to produce major components for products such as cars is more difficult and requires closer coordination with customers and suppliers.
The opening up of the Chinese economy and the associated transfer of technology from abroad have been taking place at an accelerating pace. Technology is crucial to China's industrial development. It is a productive resource and has a vital role in the process of economic and social development. This article
provides an overview of technology transfer into China, focusing on recent developments, and examines the macroenvironmental and microenvironmental influences which foreign enterprises must consider when making investments or technology transfer decisions. Cases of companies engaged in international technology transfer are used to illustrate the discussion on the microenvironment. To be successful, foreign investors and suppliers of technology must respond to China's industrial priorities and pursue projects that are compatible with the country's broad policy goals as well as the corporate objectives of Chinese partners. The article concludes by listing a number of points to which attention should be paid before a decision is made to transfer technology to China.