The smarter way to exploit China’s technical expertise

Western countries such as Australia have long complained that China steals their technology, which raises the obvious question: why can’t we steal theirs? I’m joking – Australian rules prohibit state espionage for commercial gain, but only just. So let me politely rephrase the question. Instead of stealing Chinese know-how, how can we transfer and absorb it into our industrial systems? Australia’s domestic spy chief, Mike Burgess, set me thinking about this when he called out Chinese theft of Western technology and the like after a meeting of the Anglosphere’s intelligence chiefs. “The Chinese government are engaged in the most sustained, sophisticated and scaled theft of intellectual property and expertise in human history,” the ASIO chief said after the Five Eyes meeting in California late last year. Burgess’s frankness was welcome but, taken alone, his statement gives less than a full picture of the challenges facing Australia in the global battle over technology leadership. Headline-grabbing announcements about Chinese IP theft largely assume that the US, Europe, Japan and the like have a stranglehold on the best technologies. But that is no longer the case. In several fields of endeavour, the Chinese are ahead of Western countries or, at the very least, are peer competitors. We are kidding ourselves if we think China’s dominant position is all down to skulduggery. The Australian Strategic Policy Institute’s team in Canberra benchmarks global leadership in 44 technologies. In its latest iteration, it says China is ahead in 37 of them. Moreover, China is now home to many of the world’s most impactful research institutions. However sceptical you might be about such rankings; those figures don’t capture how far China has come over the past decade. Its secret sauce is not just in any technology but the unsurpassed ability of its businesses (state and private) to use this know-how at scale, and in all manner of high- and low-tech production. Even advanced manufacturing nations such as Germany have been forced to confront this reality. Rather than cutting Beijing off from various technologies, as the US is doing, German automakers are doubling down in the mainland as they see no other way to combat China’s advantage in electric vehicles than to learn by working alongside them. In the words of a European industrialist, the Germans have decided they have to toil in China’s industrial “fitness centres” to learn how to catch up in modern car making. For sure, German car makers have been politically compromised by Chinese pressure, but, as a strategy to beat China, they might be right. The Chinese have moved fast and slow to become technology leaders. The Chinese state, as Burgess says, has sanctioned the large-scale theft of foreign technology. That’s the shortcut to a rapid catch-up with the industrialised world. But Beijing has also moved methodically and slowly in absorbing foreign technologies, by forcing multinationals to transfer them into joint ventures in China and then gradually learning how to match them in output and quality.