2011 report to congress - U.S.-China Economic and Security Review ...

dkrause on DSKHT7XVN1PROD with $$_JOB94Four of these industries (biopharmaceuticals, high-end equipmentmanufacturing, new materials, and next-generation informationtechnology) were previously identified as target industries inthe 11th Five-Year Plan. Three of these industries align with sustainablegrowth (alternative energy, clean energy vehicles, andclean energy technology), and four industries align with moving upthe value chain (biotechnology, new materials, next-generation informationtechnology, and high-end manufacturing). 341 There isalso overlap between the SEIs and industries the Chinese governmentpreviously identified as strategic or heavyweight, includinginformation technology and automobiles. (For more information,see chap. 1, sec. 2, of this Report.)Technology Development and Transfers to ChinaUpgrading Manufacturing and Industrial PolicyOver the past several decades, Chinese exports to the UnitedStates have primarily been low-value, labor-intensive products suchas toys and games, footwear, textiles, and apparel. However, sinceChina entered the World Trade Organization (WTO) in 2001, an increasingproportion of U.S. imports from China have been moretechnologically advanced. 342 By far the largest growth sector inChinese exports to the U.S. market since 2000 has been computerand electronic products, exploding from $24.7 billion in 2000 tonearly $132.8 billion in 2010. 343 (See chap.1, sec. 1, of this Reportfor more on China’s exports of advanced technology products.)But China’s evident success in increasing exports of advancedtechnology does not tell the whole story. To some degree, China hasbecome the assembler of parts produced throughout much of Asia.Assembly operations typically do not pay high wages nor do theyrepresent the majority of the value added to a product along theline from research, design, parts supply, assembly, marketing, advertising,shipping, distribution, financing, retail sales, and servicing.There is a perception in China that opening the country toforeign investment has not led to improvement of domestic capabilitiesand that foreign technologies continue to dominate, withChina ‘‘relegated to low value-added labor intensive roles.’’ 344The Chinese government desires to become competitive in technology-intensiveareas and has adopted a set of policies to achievethis. In October 2005, the Chinese Communist Party Central Committeemet and elevated the importance of China’s ‘‘indigenous innovationto a strategic level equal to Deng Xiaoping’s ‘reform andopening’ policy,’’ according to a comprehensive study of the evolutionof the program. 345 The National Medium- and Long-TermPlan for the Development of Science and Technology followed in2006 with the goal to ‘‘increase investments in research and developmentto 2.5 percent of GDP and reduce reliance on foreign technologyby 9 percent by 2020.’’ 346 At the time, China’s reliance onforeign technology was estimated at 60 percent. 347The term ‘‘indigenous innovation’’ appears in both the 11th and12th Five-Year Plans. In the 11th Five-Year Plan, strengthening‘‘indigenous innovation’’ is listed as a ‘‘national strategy,’’ and inthe 12th Five-Year Plan it is included as a primary objective. Accordingto Jia Qinglin, chairman of the Chinese People’s PoliticalVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00106 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464