“One need not be obsessed with the merits of the Chinese to recognise that their empire is the best that the world has ever seen.” So said Voltaire in 1764. Only a few decades later the empire in question would receive a trade embassy from the British. Famously, the Emperor Qianlong showed disdain when shown that nation’s manufactured products: the fruits of an industrial revolution whose consequences he could hardly fathom from his Dragon Throne.
Voltaire’s earlier superlative serves in pinpointing a high tide in Chinese history. The China he praised was about to begin two centuries of decline – and face economic stagnation versus the West.
The Chinese take their history seriously. One thing the country’s modern rulers have learned from the fall of the Qing Dynasty is that they cannot afford to fall behind in technology.
If the first two decades of the reform-and-opening period were about building factories that could make things cheaply (often funded with foreign capital), the last decade has seen a gradual but perceptible shift to a more ambitious economic model: technological leapfrogging.
In recent years Chinese leaders have been assiduously promoting technology standards, greater registration of domestically-owned patents and the return of some of their smartest scientists and engineers from abroad (the so called ‘sea turtles’).
There has been symbolism, too, in the launching of a manned space rocket, and probes to the moon.
But the most discussed example of Chinese efforts to climb the value-curve this year is more terrestial: high-speed trains.
China now has 86,000km of rail track and plans to add 42,000km more – of which 18,000km will be high speed. Such vast endeavours have – in short-order – created a new industry in railway expertise. China has been helped by its economies of scale (being continental-sized) but also by an industrial policy that has sought to learn rapidly from foreign trainmakers.
Japan’s Kawasaki Heavy Industries signed one of the first deals with local trainmaker CSR in 2004, with its shinkansen technology then transferred to a JV. The Japanese firm hoped to cash in on a high-speed boom (see WiC70). It has been disappointed – not many of the new trains’ parts are being sourced from Japan, reports the Financial Times. And thanks to the technology trasnfer, the Chinese train manufacturers are now competitors internationally – offering to build high-speed lines at a significant discount to the Japanese.
Nor is it just the Japanese. The Chinese have been learning from other foreign partners such as Siemens, Alstom and Bombardier.
They also claim to have gone one step further, in improving on the technologies on offer. According to the Railway Ministry, that means “re-innovating” to produce trains faster than those of their original partners. The newest train – which will cruise between Shanghai and Beijing next year – is the CRH380A, capable of a top speed of 236 miles an hour (the fastest trains running in Europe and Japan travel at 199 miles an hour, according to Wall Street Journal).
Chinese firms have since been touting ‘their’ technology as far afield as Turkey and Argentina, signing deals to build lines. Outgoing California governor, Arnold Schwarzenegger also paid a visit to a Chinese factory in September in which he said he hoped Chinese firms would bid on California’s proposed high speed rail links.
Can we expect to see Chinese trains racing through the Los Angeles suburbs? The foreign JV partners say that much of the Chinese technology needs to operate consistently before it is fully proven. And in private moments (they still want to win China business, after all) they gripe about the claims that the technology is sufficiently ‘new’ to merit standalone status. That may not be much of an issue for sales in China itself. But antagonised rivals may launch lawsuits in overseas markets. Kawasaki certainly disagrees with the Chinese view that they have exclusive rights to the IP resulting from the original JV, reports the Wall Street Journal. The Japanese also insist that their technology transfer agreements apply only for use in China itself – not train exports.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.