Chinese Academy of Sciences report highlights the risk of economic stagnation without technological advancements
China’s quest for technological advancement has reached a critical juncture, with the Chinese Academy of Sciences issuing a warning about the potential dangers of falling into a “middle-technology trap.” This trap refers to a scenario where developing countries, like China, benefit from industrial transfers but struggle to catch up with core technologies retained by developed nations. As the United States tightens technology curbs and Chinese manufacturers face challenges in moving up value chains, the need for innovation and technological breakthroughs has become more pressing. This article explores the implications of the “middle-technology trap” and the steps China is taking to avoid it.
The Origins of the “Middle-Technology Trap”
The concept of the “middle-technology trap” was first introduced by Zheng Yongnian, a prominent political scientist at the Chinese University of Hong Kong, Shenzhen, and his research team in March. It gained significant attention following a recent tone-setting meeting in Beijing. The trap describes a situation where developing countries initially benefit from industrial transfers due to their low-cost advantages but face long-term economic stagnation when those advantages diminish. Local firms struggle to catch up with the core technologies retained by developed nations, hindering their progress towards sustainable economic growth through innovation.
The Urgent Need for Technological Innovation
China’s central economic work conference, held in December, emphasized the importance of technological innovation to break free from technological containment and fuel economic growth. The conference statement highlighted the necessity of promoting industrial innovation through scientific and technological advancements, particularly in subversive and cutting-edge technologies. It called for the development of new industries, models, and momentum to drive future growth. This emphasis on innovation comes at a time when China is engaged in an escalating tech war with the United States and is seeking to diversify its global supply chain while gaining an upper hand in the global tech race.
China’s Current Technological Position
According to the Chinese Academy of Sciences report, China’s manufacturing sector contributes nearly 30 percent to the global value chain, rivaling the combined total of the United States, Japan, Germany, South Korea, and India. While China ranks second in research and development spending, its technological strength remains in the third tier globally. The report warns that China’s manufacturing sector is still positioned downstream in the global value chain, making it vulnerable to being hamstrung at the low and mid-end by developed countries such as the United States, Germany, and Japan.
Overcoming the “Middle-Technology Trap”
To overcome the “middle-technology trap” and achieve technological upgrades, China needs to take decisive actions. Zheng Yongnian suggests that China should adopt a wider open-door policy, attracting international talent from Europe, America, Russia, Eastern Europe, India, and other developing countries. Furthermore, he recommends opening up national industrial experimental laboratories to more private enterprises. Zheng also emphasizes the importance of reforming the enterprise system, allowing state-owned firms and large private companies to share resources and expand the supply and industrial chains.
China’s pursuit of technological upgrades faces the challenge of the “middle-technology trap,” where developing countries struggle to catch up with core technologies retained by developed nations. To avoid this trap, China must prioritize technological innovation, open its doors to international talent, and implement sweeping reforms to its enterprise system. The urgency to break free from technological containment and achieve sustainable economic growth through innovation has become even more critical amid the escalating tech war with the United States and the need to diversify the global supply chain. China’s ability to navigate this challenge will determine its position in the global tech race and its future economic growth.