China’s tech still lags behind that of leading Western countries

Top Asian economist says main advances have been made in e-commerce, not core manufacturing innovations

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Despite China’s rapidly developing technology scene, a leading economist visiting Vancouver said the Western world is mistaken in believing the country has leapfrogged the likes of the United States, Japan and South Korea in technological advancement.

Zhang Jun, one of China’s leading economists and dean of the School of Economics at Shanghai’s Fudan University, spoke in Vancouver in July at the Canada-China Economic Forum on Innovation and Entrepreneurship, an event organized by the city’s Fudan Alumni Association.

At the event, Zhang said that while China did digitize about half of its economy, much of the change came in the B2C  (business-to-consumer) sector, which means that the development has been happening mostly on e-commerce transitions of existing economies and not “hard tech” or core manufacturing innovations.

“There are two illusions,” Zhang said. “One, it is widely perceived that China has already climbed up to the technological frontier; and, two, it is highly believed that China’s national industrial policy is the driver in advancing its technologies.… The hard truth is that China’s fast progress in technology has been concentrating on digitalization of the economy. It is driven largely by entrepreneurs in privately owned companies like Alibaba and Tencent.… China has a pretty long way to go to catch up in the development of cutting-edge hard technology.”

Zhang estimated that only about 13% to 15% of China’s total research and development (R&D) efforts go into the new, technology-driven economy, and information and communications technology accounts for only 7.5% of the Chinese GDP.

The senior economist surmised that it might take more than a decade for “hard-tech” R&D efforts to match that of Asian competitors like Japan and South Korea, and maybe even longer for results to materialize.

As an example, he pointed to a major production hub for optical lenses in the province of Jiangsu (adjacent to Shanghai) that is still required to pay a fixed royalty to an American counterpart on certain lenses because the Chinese company lacks the core software to make the product.

Zhang urged Beijing to increase spending on basic research at universities and attracting human capital (from places like B.C.) but also that noted there are no shortcuts to the process.

Iris Zhao, vice-president of the Fudan Alumni Association of Vancouver, said perspectives like Zhang’s are what local Lower Mainland businesses and academics need, adding that she hopes more academic exchanges like the forum would spur more economic opportunities for B.C. enterprises who see a fit in China’s needs.

“The association is here because we want to help alumni adjust to local society wherever we are located, and this event makes sense because it’s something that we wanted to do, something that helps both the locals and Chinese alumni in understanding the current state of China’s economy,” Zhao said. “China’s new economy and how it’s progressing is something that a lot of people – Chinese or not – do not really understand. And it’s important for us Chinese to hear about this, because if you have too much self-pride, you tend to lose yourself.”

Zhao added that the alumni association hopes more events like the forum would attract more Fudan alumni in Western Canada to connect and expand the organization beyond its current – mostly casual and volunteer-based – roots to a more formal mechanism for promoting B.C.-China business interactions.

“I did tell Professor Zhang that – if we do this again – we’ll get him more time to speak,” she said. “The alumni association right now is a little bit casual, like family gatherings. There are a lot of activities throughout the year, but mostly just dinners amongst ourselves. On scholarly discussions, if we can deepen that part of our relationship with Canada, I think it can translate into better international business opportunities, because our alumni network has quite a bit going on in China.”

Alumni association officials said current plans call for an annual forum discussion.