LETTER FROM CHINA: Beijing has little choice but to improve quality
by Kobus van der Wath,
2014-01-29 05:26:20.0
ON DECEMBER 14 China’s Chang’e 3 spacecraft successfully performed the country’s first soft landing on the moon — and the world’s first in 37 years, after the US and Russia.
Chang’e, named after the Chinese goddess of the moon, and the accompanying robotic rover Jade Rabbit (the goddess’s companion) landed on the Bay of Rainbows, a plain of basaltic lava on the moon’s northern hemisphere. Both are being controlled by their handlers at the Beijing Aerospace Control Centre and have begun exploring.
The moon landing is, however, only a midterm goal within the Chinese lunar exploration programme launched in 2007.
China’s space programme, which encapsulates the lunar programme, has been progressing by leaps and bounds technologically, according to many in the space community.
As I mentioned in a previous article, the space programme is linked to, and even broadly synonymous with, China moving up the value chain as the world’s factory. No longer can it rely on cheap labour to manufacture a wide variety of products. Instead, as wages rise and become less competitive than those of developing countries, China is left with little choice but to improve the quality and technological advancement of its products.
Research and development (R&D) investment lies at the heart of this equation, and the space programme is the pinnacle in the transformation of China’s manufacturing complex.
At present, China competitively manufactures most products that have a low to medium level of complexity (as is determined by the availability of resources such as skilled labour, advanced technology and abundant capital). By comparison, the US, Japan and Germany, to name a few, will competitively manufacture products that range from a medium to high level of complexity. This is a result of their leading-edge resources attained from previous investments in R&D and the diffusion of related technologies in the past few decades.
China is now playing the game, but faster. The transfer of newly developed technology is happening through many channels. State-sanctioned projects such as the space programme will be at the cutting edge of the country’s domestic technological advancement, which, according to some in the space community, is rapidly closing in on that of leading nations.
State-owned enterprises, which follow directives from government policies (such as the 12th five-year plan that focuses heavily on R&D investment) are under less pressure to produce short-term financial results than their private counterparts and can therefore heavily invest in R&D. Private Chinese companies also receive favourable tax treatment and other benefits for their investments in R&D.
All these benefits will have different spillover effects. While it may take years for the discoveries made in the space programme to filter into the civilian sector, the process will be shorter with state-owned and private companies. The added advantage of Beijing setting up clusters for specific industries mapped throughout China is that they facilitate the transfer and even sharing of technology. Foreign companies, too, have a role to play and the Chinese government is fully aware of this fact.
While the Chinese consumer market is large enough for many companies to achieve economies of scale through domestic manufacturing (to avoid paying import taxes), a wide pool of increasingly skilled but relatively inexpensive labour — more than 600,000 engineers graduate a year — and favourable government policies stand out as reasons for foreign companies to open R&D centres in China.
Due to these benefits, the Middle Kingdom is now home to a growing number of regional and global R&D centres belonging to some of the largest foreign companies in their sectors. BASF, for example, the world’s largest chemical company, has more than a dozen R&D centres in China; Intel, Toyota and Sandvik have similarly invested in China. With a steady stream of foreign-owned R&D centres joining the thousands already in China, Beijing’s framework for technology transfers from foreign companies seems to be unfolding positively.
As China sends more spacecraft and astronauts into space, the success stories of innovation and R&D investment will continue to inspire citizens and companies. However, sound policies that are business friendly and an increasingly educated and innovative pool of talent will remain key to sustained improvements in R&D across the country for decades to come. Although space travel is at least partially a matter of national pride, Beijing, it seems, has got the message regarding its contribution to China’s technological advancement.
• Van der Wath is group MD of The Beijing Axis. He can be reached at [email protected]
ON DECEMBER 14 China’s Chang’e 3 spacecraft successfully performed the country’s first soft landing on the moon — and the world’s first in 37 years, after the US and Russia.
Chang’e, named after the Chinese goddess of the moon, and the accompanying robotic rover Jade Rabbit (the goddess’s companion) landed on the Bay of Rainbows, a plain of basaltic lava on the moon’s northern hemisphere. Both are being controlled by their handlers at the Beijing Aerospace Control Centre and have begun exploring.
The moon landing is, however, only a midterm goal within the Chinese lunar exploration programme launched in 2007.
China’s space programme, which encapsulates the lunar programme, has been progressing by leaps and bounds technologically, according to many in the space community.
As I mentioned in a previous article, the space programme is linked to, and even broadly synonymous with, China moving up the value chain as the world’s factory. No longer can it rely on cheap labour to manufacture a wide variety of products. Instead, as wages rise and become less competitive than those of developing countries, China is left with little choice but to improve the quality and technological advancement of its products.
Research and development (R&D) investment lies at the heart of this equation, and the space programme is the pinnacle in the transformation of China’s manufacturing complex.
At present, China competitively manufactures most products that have a low to medium level of complexity (as is determined by the availability of resources such as skilled labour, advanced technology and abundant capital). By comparison, the US, Japan and Germany, to name a few, will competitively manufacture products that range from a medium to high level of complexity. This is a result of their leading-edge resources attained from previous investments in R&D and the diffusion of related technologies in the past few decades.
China is now playing the game, but faster. The transfer of newly developed technology is happening through many channels. State-sanctioned projects such as the space programme will be at the cutting edge of the country’s domestic technological advancement, which, according to some in the space community, is rapidly closing in on that of leading nations.
State-owned enterprises, which follow directives from government policies (such as the 12th five-year plan that focuses heavily on R&D investment) are under less pressure to produce short-term financial results than their private counterparts and can therefore heavily invest in R&D. Private Chinese companies also receive favourable tax treatment and other benefits for their investments in R&D.
All these benefits will have different spillover effects. While it may take years for the discoveries made in the space programme to filter into the civilian sector, the process will be shorter with state-owned and private companies. The added advantage of Beijing setting up clusters for specific industries mapped throughout China is that they facilitate the transfer and even sharing of technology. Foreign companies, too, have a role to play and the Chinese government is fully aware of this fact.
While the Chinese consumer market is large enough for many companies to achieve economies of scale through domestic manufacturing (to avoid paying import taxes), a wide pool of increasingly skilled but relatively inexpensive labour — more than 600,000 engineers graduate a year — and favourable government policies stand out as reasons for foreign companies to open R&D centres in China.
Due to these benefits, the Middle Kingdom is now home to a growing number of regional and global R&D centres belonging to some of the largest foreign companies in their sectors. BASF, for example, the world’s largest chemical company, has more than a dozen R&D centres in China; Intel, Toyota and Sandvik have similarly invested in China. With a steady stream of foreign-owned R&D centres joining the thousands already in China, Beijing’s framework for technology transfers from foreign companies seems to be unfolding positively.
As China sends more spacecraft and astronauts into space, the success stories of innovation and R&D investment will continue to inspire citizens and companies. However, sound policies that are business friendly and an increasingly educated and innovative pool of talent will remain key to sustained improvements in R&D across the country for decades to come. Although space travel is at least partially a matter of national pride, Beijing, it seems, has got the message regarding its contribution to China’s technological advancement.
• Van der Wath is group MD of The Beijing Axis. He can be reached at [email protected]
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