Chinese Government generously endows Chinese tech firms with Land.

US-born freestyler Eileen Gu became the darling of the Chinese public during the Winter Olympics in Beijing. China itself has produced many champions of its thanks to the ” jugum ” (i.e., “whole country”) sports training regimen. Today, China is adopting “jugum” approaches – directing large resources towards achieving a strategic goal or building national prestige – to achieve world-class technological development.

China is pursuing its technological goals with a fervor not seen since Chairman Mao Zedong pledged to develop nuclear weapons sixty years ago. The motivation is quite obvious. Under President Donald Trump, America launched a campaign against Chinese tech firms, most notably Huawei and ZTE, that has resulted in their access to US-controlled key technologies (such as semiconductors) being restricted. This campaign has continued under President Joe Biden, and now many other Chinese firms face the same fate if America puts them on its “black list” (the so-called Entity List ).

For China

America’s actions have been a wake-up call. Instead of remaining vulnerable to the whims of the US, it now needs to become a technologically self-sufficient country.

This is where market forces can help. Companies have to turn to domestic sources for advanced equipment and technology, so the demand for Chinese technology has increased. This will probably speed up their development.

However, President Xi Jinping did not leave China’s technological fate in the hands of the market. Technological progress has become a central element of the national policy outlined in the 14th Five Year Plan. And if in the past one of the government ministers were responsible for managing these processes, now they are directly led by Xi.

As part of this initiative, the government is generously endowing Chinese technology firms with land, money, and contracts. It creates an innovation ecosystem modeled on the Manhattan Project and NASA’s Apollo program. A fully integrated incubation network linking national laboratories, universities, and high-tech ” science parks “.

The Chinese government plans to build ten national research laboratories, each with its line of work. Including an artificial intelligence lab in Shanghai and a quantum computing lab in Hefei. They will be directly overseen by a member of the Politburo Standing Committee. The highest governing body of the Communist Party of China. In addition, the authorities plan to set up 100 new technology centers and 100 additional high-tech industrial parks across the country. And they have launched a fast-track IPO through the new Shanghai Stock Exchange Scientific and Technological Innovation Council (also called STAR Market).

Local authorities

They also have an extremely important role to play in this process. Many of them are already demonstrating innovative approaches by supporting the development of new technologies. Local governments, including those in Shanghai, Chengdu, Hefei, and Chongqing. Have set up “funds of funds” and are taking large stakes in venture capital firms. Shanghai authorities have developed cooperation with Tesla, and Anhui province authorities have received a stake in the Chinese electric car company Nio.

By incentivizing venture capitalists to attract potential “unicorns” to their regions, local authorities seek to gain praise for the results achieved – GDP growth, new jobs, innovation. China has already attracted thousands of talented people from around the world to fill R&D vacancies.

Yes, over the past two years. China’s central government has taken decisive action to regulate and rein in tech giants in the interests of antitrust, social equality, and data protection. But contrary to popular notions, this campaign does not contradict (and certainly does not harm) the goal of achieving global technological superiority. In the long term, proper regulation will pave the way for the strong growth of high-tech companies on a level playing field.

Technology

The target of the regulators’ attack was Internet companies focused on consumers, such as Alibaba, Didi, and JD.com. None of them are working in cutting-edge fields such as biotechnology, quantum computing, artificial intelligence, and semiconductors. Where China hopes to catch up with the US. Curbing the growth of these companies will not only help increase competition in the industries in which they operate. But will also free up resources that can be redirected to the cutting edge of technology.

In any case, the jugum system means that it is possible to mobilize and allocate national resources without counting costs. Thanks to this, the equivalent of billions (and maybe trillions) of dollars will go to subsidize innovation – from supporting basic research to building science parks. This work will inevitably lead to the loss of some resources. But the Chinese leadership is confident that in the long run, it will all pay off.

This mentality is the main advantage of a state-led strategy. Innovation is a process full of uncertainty and risk. Left unattended, private firms often prioritize short-term benefits over a potential investment in innovation and core competencies.

Meanwhile, the Chinese government has the tools, patience, and determination to make long-term changes without regard to short-term costs. The state will pay by throwing the net wide for a big catch.

Technology development

Such a strategy could help China accelerate its pursuit of superiority in high-tech products. However, to make real technological breakthroughs, the country needs a much more open education system. In addition, it needs to organize innovation processes in such a way that people are motivated by both market rewards and a natural desire to expand knowledge. China’s old investment strategy of “short, small, and fast” projects that worked for sports and infrastructure must give way to a new technology development pattern that will be used by a patient country with a patient people and a patient capital.

One thing is clear: judging by China’s response to US pressure on Chinese tech giants. Further restrictions will only strengthen the country’s resolve to pursue technological self-sufficiency and, eventually, global supremacy. This should be food for thought for the Biden administration as it considers its next steps.

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