I wrote around to some contacts yesterday including a link to this article by Thomas M. Hout and Pankaj Ghemawat in the current issue of Harvard Business Review.
China vs the World: Whose Technology Is It? – Harvard Business Review 
Emon Wang, a partner at Spirea Capital, wrote back with some insight of his own:
“Interesting and impressive… maybe the best English article on this topic I read this year.
However, as a native Chinese who works in cross-border deals in cleantech from Europe I`d like to add some words:
– The relationship between Beijing and local governments are very complicated and subtle. For foreign players, knowing how to play with both side is critical. Tip for beginners: it`s practical to make friend first with local governments.
– Instead of complaining, in order to maintain competitive power, foreigners might spend more time and money on R&D at home, to ensure a leading position and be one step head of China and other emerging powers. Without continuous innovation, being caught up on is only a matter of time. VW shared its technology with China for so many years and is still the No.1 seller in the country, a hell of money they have made and I don`t think they lose any of their core technology strength. IMHO, if your stuff can be easily copied, then it makes theoretically no sense to over-protect it and increase the cost of simple technology artificially.
– What China lacks is exactly the ground of technology innovation and R&D competence. Not the available technology itself. Consider the growing number of high-educated Chinese both domestically and oversea, the next generation needs the infrastructure. The government is now building this up.
– Technology in exchange for market is a fair trade. No one is forced to share his technology (take Google for example, you can quit if you want). On the micro level it`s about greed. On the political level it`s about p/l and jobs at these multinational corporations. And it`s about negotiation. If you did your homework badly and made too many enemies, you can`t expect a good deal.
– All in all, if you really understand the Chinese history, you will understand why own technology competence is so important in the culture. It`s not about taking profit from the foreign corporation or about a technology war whatsoever.”
Tim Giesecke, author of the forthcoming EcoCommerce 101, made the following comment and asked for some clarification from me on Emon’s last paragraph.
Tim’s comment: “Perhaps the timeline is the most telling – China becomes the #1 economy in 500 AD – looses the title in 1850AD – poised to regain it soon. We Americans will need to recognize asap that we can sit and be entertained, but not all the time.”
Tim’s question: “If you can help me tie the ends of the last paragraph – technology competence is so important in the culture…is it to prevent themselves of becoming vulnerable to market forces, negoiations?”
My attempt at clarification: “There’s a tactical level that has to do with negotiations (Sun Tzu’s Art of War and all that) but it is mostly a culturally-patterned value deeply embedded in Chinese (read ’embedded in the Han majority’ comprising 95% of the Chinese population) as a result of centuries of real and perceived humiliation on the global stage after centuries of preeminence. They don’t want to ever go back to that historical place of weakness and technology is their ladder out.”
______Assessing China / The TEA Collaborative______ 
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December 27, 2010 at 5:34 am
David Hunt
An excellent article. Some companies would be well advised to learn from this and consider keeping their best technology to themselves, even if that means limited access to China. They would have to be prepared to sacrifice easy growth prospects to maintain the value of their technology for the long term. Yet others are better off working with the Chinese even if they do give away today’s technology, providing they have a sound plan for extending their franchise through new technology or other means.
It seems to me that the next step for China would be to buy foreign companies with strategic capabilities, such as Lenovo’s purchase of IBM’s computer business. Most of the technology they want is in the hands of public companies, and the barriers to acquiring them are not as insurmountable as they seem. Other than that transaction, it looks like China has focused on acquiring companies supplying commodities for import to China, not technology companies. It would be interesting to see an analysis of Chinese foreign investment that looks at efforts to purchase technology companies.
The “us” versus ‘them” point of view of the article seems misplaced. Consider some of the strategic concerns driving China. China has an aging population, and thus the percentage of the population that consists of productive workers will shrink. Those workers will have to support the demands of all consumers who will expect a rise in their standard of living. Labor shortages are already driving up wages and costs. In addition, China is now forced to import more and more commodities to maintain its economic growth. China must also deal with the environmental aspects of rapid economic growth, creating increasing demands to channel resources to environmental protection at the cost of delaying what may look like more immediate goals.
It will be in the interest of the rest of the world to help China meet these challenges – this is not an “us” versus “them” competition. Chin’a failure to meet these challenges could destabilize the world economy and cause increasing environmental impacts far beyond its borders, not to mention the risk of a change in government policies and an aggressive military posture. We have welcomed them to join the world economy and we are now mutually dependent, with the potential for a positive outcome, or a negative one.
Consider the impact of the massive transfer of wealth to China. Chinese products reduce the cost of buying what we need and want, thus increasing our standard of living and reducing inflation. Compare it to the impact of the similar transfer of wealth to oil producing countries. That transfer may have limited costs by increasing supply, but it came with a high price since it reduced the incentive to become more fuel efficient, increasing the global human environmental impact.
On the last point, let me note one factor that was not discussed. China does not need to spent a large percentage of GDP on national defense. China no longer faces a threat of invasion along any of its borders. It is now clear that China’s economic position alone can provide an effective defense against countries with the ability to otherwise harm China. The ongoing choice of the US and other countries to spend freely to project military force far beyond their borders is a drag on their economies China does not face. Like post-war Japan, China can use its human and economic resources to foster its economic interests.
Where would the US be if it had stopped draining its resources to fight wars, and then spending even more to on “nation building” at the end of the 20th Century? What if the US had focused the resources used in our last two wars on education, energy efficiency, health care, and other pressing needs at home?
David Hunt