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James Flanigan

China's Technological Ambitions Take Flight

October 19, 2003|James Flanigan

Everyone knows China is a low-wage, low-cost manufacturing juggernaut. But the world had better watch out: It is also on its way to becoming a high-tech behemoth.

That was underscored last week when China sent a man into space. At the same time, to much less fanfare, Chinese doctors made their own leap, taking the nucleus of an ovary from one woman and implanting it in the ovary of another, allowing her possibly to conceive a child. And such achievements are becoming increasingly common.

"China is going to be a technological powerhouse," says Paul Saffo, director of the Institute for the Future in Menlo Park, Calif. "They are being very strategic -- making sure that they gain technological knowledge as part of their manufacturing activities."

China's technological drive may come as a surprise to those accustomed to viewing it as simply a low-wage workshop, exporting shoes and T-shirts and all sorts of paraphernalia and roiling other economies in the process. But manufacturing is only one stage in China's economic development. In fact, what's most significant about China today is not the growth of its assembly lines but that of its graduating classes.

Rob Koepp, a scholar at the Milken Institute in Santa Monica, points out a statistic. "China graduates 450,000 engineers each year -- as many as the United States." He adds that the country's aim isn't "merely to catch up with the West" but to "bring about fundamentally innovative technology over time" that will set standards for the whole world.

In many ways, China's technological ambitions can't help but influence global industry. For example, it is deploying an extremely advanced system for cellular telephones, called third generation. And because there are 200 million Chinese cellphone users, more than any other country, China's system inevitably will be become a leading global standard.

In software, China is pushing for a new standard that would allow the Internet to accommodate more users. China's software industry is still relatively small -- less than one-third the size of India's -- but it's growing exponentially, like so much else there. So if it starts using an advanced Internet protocol, the rest of the world could be forced to adopt it too.

It's true that in telecommunications, space flight, biomedicine and elsewhere, China is largely building on innovations that originated in the U.S. and other countries. And China's total research spending right now is less than 1% of its annual gross domestic product of $1.4 trillion.

But that GDP is growing at an annual rate of 8%. Research and development spending is expanding. Beijing is setting up high-tech centers around the country to come up with the next big thing in electronics, biotechnology and nanotechnology. The Ministry of Science and Industry has hired Koepp of the Milken Institute to advise it on how Silicon Valley and other centers of high-tech development came about in this country.

Even now, in technology, China poses "a competitiveness challenge," says Dwight W. Decker, chairman and chief executive of Conexant Systems Inc. in Newport Beach, a maker of semiconductor chip sets.

Just this month, Conexant entered an agreement with Huawei Technologies Inc. of Shenzhen, China, which makes network switches and routers for Internet traffic. Huawei, a huge $2.4-billion firm, will use Conexant's chip sets to allow giant China Telecom to give its customers broadband Internet connections.

Conexant won the contract because of the excellence of its technology. But Decker has no illusions. He knows his researchers and chip designers will have to work hard to develop the next technological wrinkle in chip sets, and the next after that, to stay in the game -- because China is trying to develop original chip-set software.

"They want to be a leader, in software, in wireless technology, in TV," Decker says, and the list goes on.

Andrew S. Grove, the chairman of Intel Corp., warned in a recent speech that America was risking its lead in technology and its living standards, because research and development funding was declining here and "university enrollment in science and engineering has been trending downward over the last decade."

Meanwhile, China is a country coming alive. Shoucheng Zhang, a physics professor at Stanford University who also teaches at Tsing-hua University in Beijing, can't help but notice it when he returns to his native land. "I love to see the young people changing the world, hanging China," he says.

Zhang knows that to develop truly original technology, China's Communist government must have the "political will" to protect intellectual property as the West does, with patent and copyright laws. And he believes such change is inevitable.

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