US sanctions boost China’s R&D investment and output in some hi-tech fields: Chinese study
- But the cost of innovation also increased significantly in China because of tech bans imposed by the US government
- Researchers examined how US government sanctions affected nearly 1,000 Chinese companies between 2010 and 2020
A team of science policy researchers led by Professor Liu Lanjian, of Changan University in Xian, Shaanxi province, examined how US government sanctions affected nearly 1,000 Chinese hi-tech companies from 2010 to 2020.
The number of patent applications by the Chinese companies rose an average 57.6 per cent as a result of these sanctions, they found.
“Under the [US] technology control policy, the number of patent applications and R&D funding of hi-tech enterprises has increased significantly [in China],” said Liu and his colleagues in a paper published in the Forum on Science and Technology in China, a peer-reviewed journal run by the Chinese Academy of Science and Technology Development in Beijing.
“But the cost of technological innovation has increased significantly as well, making innovative activities more difficult and less efficient,” they said.
The scientific community’s opinions are split on the effects of the US tech bans.
Some researchers believed the US sanctions would affect technology transfer, reduce Chinese scientists’ exchanges with top researchers in the West and keep Chinese industries at the low-value end of the production chain.
Others argued the bans would accelerate China’s innovation, prompt the Chinese government to come up with new incentive policies or force Chinese companies to rely less on foreign partners.
But few previous studies measured the real-life impact of the US sanctions in concrete numbers, Liu’s team said.
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The impact varied significantly between industries, according to the study.
“China is a latecomer country in the field of cutting-edge technology and there are still weak links in some key technology fields. Substitute products are not yet fully mature and available, and some key links in the supply chain are missing,” Liu’s team said.
“At present, developed countries have further strengthened the control of hi-tech. [China’s] hi-tech enterprises represented by Huawei are emerging forces actively integrating into the global economy, and they are facing huge risks brought about by technology control.”
But the US sanctions had less effect on some other sectors.
In the new material industry, for instance, the US sanctions cut the innovation cost for Chinese firms by more than 5 per cent over the past decade, according to the study.
The researchers said this phenomenon usually occurred in some capital-intensive industries where technological innovation relied more on capital investment.
“In the case of a relatively harsh external environment, these sectors can overcome short-term difficulties by increasing capital investment, making them more resistant to regulatory policies,” they said.
China leads the world in all 12 technological sectors related to advanced materials and manufacturing, according to a recent report – the “Critical Technology Tracker” – by the Australian Strategic Policy Institute (ASPI).
In total, China has the edge over the US in 37 out of 44 key technologies, including many in artificial intelligence, energy, biotechnology and defence, ASPI said.
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The US would gain some short-term benefits with its sanction policies but lose the long-term battle against China because it would force Chinese companies to develop their own technology, the Centre for Strategic and International Studies, a Washington-based think tank, said in a report last year.
Microsoft founder Bill Gates said in a recent interview with the Financial Times that the US sanctions would not work as expected.
“I don’t think the US will ever be successful at preventing China from having great chips. You know, we are going to force them to spend time and a bunch of money to make their own chips, but given five to 10 years and they take money out of their poverty programme,” Gates was quoted by the FT as saying.
“We’re saying make your own jet engines, your own software, your own chips … Given that they’re at scale to catch up fairly quickly and I don’t see how that’s some gigantic benefit.”