Historically, global ICT standards have been produced by Western countries and their alliances, such as the International Telecommunication Union (ITU), International Organization for Standardization (ISO) and International Electrotechnical Commission (IEC). As a result, the People’s Republic of China developed a strong, unwanted dependency on foreign technology. Besides, Chinese policymakers believe that setting international technology standards could help the country to move from a low labor manufacturing node within global production networks to a more economically sustainable model.
Over the last two decades, the People’s Republic of China has tried to provide an alternative model for ICT. The unique character of this model consists of a blend of different policies and developments originating from the government, as well as state-owned and private companies. The main elements of the model are indigenous standards, knowledge, capital, domestic market, and R&D.
A focus on the development of indigenous standards has been a successful strategy for latecomer countries such as Japan, South Korea, and Singapore, in able to climb up the value chain. However, there should be noted that the Chinese strategy focuses more on an import-led substitution strategy instead of export-led strategy as used by the previously mentioned countries. The low-cost technology developed by China is attractive to countries that can’t afford the premiums. Nowadays, by investing heavily in R&D, China is supplying more and more top-class technology. By entering international alliances, China managed to find a platform to promote its indigenous standards.
To enable China to move up the value chain, it needs knowledge. By sponsoring hundreds of thousands of students to study abroad, top-of-the-notch knowledge was available as nine out of ten students returned home after completing their studies.
Moreover, in exchange for access to the Chinese market, foreign companies entered joint ventures with domestic companies and agreed on transferring their knowledge and capital into China. These joint ventures did also partner up with local suppliers and partners.
Speaking of capital, besides the joint ventures, the Chinese entry to the World Trade Organization in 2001 triggered a strong inflow of foreign direct investments. The economy has delivered astonishing growth rates over the past two decades, which stimulated investment inflows over the years. Foreign investors have criticized China for its market protection, even after the WTO entry.
With the growing economy, large sectors such as agriculture and manufacturing had a strong demand for ICT hardware and software. The consumer market for ICT started to grow strongly as well, stimulated by the rise of e-commerce. With the market protection in place and the unique characteristics of the Chinese market (bottom-of-pyramid and good-enough innovation), domestic companies managed to profit strongly from this development.
China’s policymakers have set the goal of becoming the best research and development capability by 2020. In able to fulfill this goal, enormous amounts of investments have been done. It’s an understatement to say that this is a very ambitious goal. China has had problems with becoming an innovative society for over a decade. But in able to move up the value chain, it’s a necessary step to make.
To conclude, China does provide an alternative model for ICT with which it is providing a way to set international standards for ICT. The acquirement of knowledge and capital, together with the growing domestic market and the participation in international alliances, made it possible to create a domestic demand and push the higher standards abroad. Nevertheless, big steps are still to be made to move up the value chain and to fulfill China’s ambitions. 5G would have been a good chance for China to show its capabilities as an international standard setter. However, the international debate around Huawei and ZTE may take this chance away.
References:
Chen, S. & Wen, P. (2016). The Evolution of China’s Mobile Phone Industry and Good-enough Innovation. China as an Innovation Nation, 261.
Gerth (2010). As China goes, so goes the world: how Chinese consumers are transforming everything.
Grimes, S., & Du, D. (2013). Foreign and indigenous innovation in China: Some evidence from Shanghai. European Planning Studies, 21(9), 1357–1373.
Meng, Qingxuan & Li Mingzhi (2002). New Economy and ICT Development in China. Information Economics and Policy 14.2: 275-295.
Yutao, S. & Grimes, S (2016). China’s Increasing Participation in ICT’s Global Value Chain: A Firm Level Analysis. Telecommunications Policy 40, 210-224.
Wang, P., Kwak, J., & Lee, H. (2014). The latecomer strategy for global ICT standardization: Indigenous innovation and its dilemma. Telecommunications Policy, 38, 933–943
全国人民代表大会 (2016). 中华人民共和国国民经济和社会发展第十三个五年规划纲要. Retrieved from http://www.lawinfochina.com/display.aspx?id=3fe76ec605b256e9bdfb&lib=law
