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US-China tech war
OpinionComment
Chaoping Zhu
Chaoping Zhu

How China can be more self-sufficient in tech development

  • Beijing needs to adapt its investment system to achieve greater efficiency and less waste, with more public-private cooperation and smarter fiscal support
  • As long as the investment system remains on track, there are good reasons to be optimistic about China’s domestic technology development

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Employees work in an electronics factory in Qinhuangdao, north China’s Hebei Province, on August 1. Technological development and self-reliance are among the core concerns in China’s latest five-year plan. Photo: Xinhua
Chaoping Zhu
The key pillars of China’s 14th five-year plan were unveiled this week. One of the most eye-catching components is technological development and self-reliance, which has been elevated to a national strategic pillar.
Although the development of cutting-edge technologies was highlighted in previous five-year plans, new tech priorities in the latest plan have attracted renewed attention against the backdrop of escalating China-US tensions. Facing the risk of widening restrictions, it is increasingly critical for China to develop domestic capacity and reduce its dependence on foreign technology.

Despite strong commitments from Beijing, it is unclear whether China can achieve self-reliance in a variety of areas, with semiconductor chips top of the list. Given the large gap between China and the United States in the semiconductor industry, China will have to make gigantic investments over a long period to catch up.

The recent policies suggest China is resorting to its unique “whole-nation system” to finance technology development, even though the efficiency and effectiveness of this system remains under debate.

China is well positioned to develop high-end technologies and improve its self-reliance. Economies of scale provide a considerable advantage in technology competition. For advanced technologies, such as semiconductor chips, high front-end investment is required to establish research and production facilities while marginal production costs will decline quickly after the supply chain reaches a certain scale.

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As the world’s largest single market in terms of population and GDP measured by purchasing power parity, China’s domestic demand should be sufficient to support technology firms in reaching economies of scale.

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