This Week in Asia

ZTE row shows China still needs international tech to shine -- bravado only fuels Western worries

The recent US decision to impose a seven-year ban on the sale of American technologies - hardware and software - on China's second-largest tech company ZTE has inevitably triggered a flurry of reactions and reflections in China.

The move has not only thrown the very survival of the major telecom equipment manufacturer into question and threatened the jobs of tens of thousands of people, but it has also focused popular attention on the hard truth about the fragility and bottlenecks of China's much-touted technological prowess.

It came as Beijing and Washington were positioning themselves for a potential trade war and followed explicit statements from top US officials that Washington would seek specifically to curb Beijing's technological advances and thus its overall economic rise.

Harry Shum, Microsoft executive vice-president of technology and research, demonstrates Microsoft's HoloLens device to Chinese President Xi Jinping in Redmond, Washington. Photo: Reuters

Over the past week, the state media has taken a break from its fiery patriotic tone and displayed a rare reflective mood. It has highlighted how ZTE and other Chinese tech companies have largely relied upon imported American chips - the key components for computers and mobile phones - and reflected on the sore need to develop China's own core technologies.

Meanwhile, President Xi Jinping, without directly referring to the US move, has twice emphasised the need for China to devote more resources to developing high-end technology critical to the country's development, Xinhua reported.

One Xinhua commentary last week cited Xi's metaphor of comparing China's lack of core information technologies to building houses on other people's foundations. "No matter how grand and beautiful, [those houses] may not withstand storms and may collapse at the first blow."

Interestingly, China's reflective mood has come amid mixed reports about whether the authorities tried subtle ways to damp down the propaganda fervour praising China's technological advances under Xi's leadership over the past five years.

Reports emerged over the past week that propaganda officials had ordered internet companies to disable downloads of a patriotic documentary film, Amazing China, which showcases stunning visuals of the country's engineering feats, from deep-water ports to bridges to satellites to submarines to passenger aeroplanes.

A quick search for the film on the country's most popular internet platforms fails to produce the link to the whole film, only a link to the trailer.

Some analysts speculated that the authorities might want to dial down the patriotic rhetoric after the ZTE case came to light as it contradicted the main theme of the documentary at a time when the US was considering more moves to restrict China's tech investments and purchases of US technologies.

Whatever the causes, authorities have good reason to ease off blowing their own horns too loudly as this can be counterproductive.

Chinese students work on the Ares, a humanoid bipedal robot designed by them with funding from a Shanghai investment company, displayed during the World Robot Conference in Beijing. Photo: AP

Until recent years, China had followed the principles of "hiding one's capacities and biding one's time" prescribed by the late paramount leader Deng Xiaoping, to focus on developing the economy.

When in power, Jiang Zemin, a former president, liked to preach an even folksier saying of "getting rich quietly" without raising unnecessary attention on the international arena.

Those philosophies have underpinned China's phenomenal rise from a backward agricultural country in the late 1970s to the world's second-largest economy and the largest trading nation in a mere 40 years.

In the early years of China's reforms, senior leaders often described China as a primary pupil when compared to Western economies, and declared a willingness to pay the necessary fees to learn and grow up.

For many years, Chinese officials freely acknowledged that China opened up its markets to foreign companies in exchange for their technologies, largely through joint ventures. Eyeing the huge market potential, the foreign companies largely acquiesced. If they had any grievances about the forced transfer of technologies, they kept them private.

Now the pupil who once professed to become "the world's factory" has grown up and wants to become the world's leader in technology. That is a frightening prospect for America, which has stepped up rhetoric about China's forced technological transfers and theft of intellectual property.

Adding further context to the trade frictions between the two countries, US Commerce Secretary Wilbur Ross reportedly said last week that China was using the trade surplus with the US to finance its research into high-end and cutting-edge industries to upend US dominance.

Like other US officials, he particularly referred to Made in China 2025, a plan which outlines Beijing's ambition to dominate the high-end industries from robotics to automated cars.

The US worries are mounting because China has made no bones about its intention to become a world power in the next 30 years. Last October, Xi declared China had entered a new era and unveiled an ambitious blueprint to make China a basically modern country by 2035 and a world power by 2050.

A dome is installed at the Fuqing Nuclear Power Plant in Fuqing, southeast China's Fujian Province. Key components required to build the Hualong One plants are imported. Photo: Xinhua

As part of efforts to create a personality cult around Xi and stir up patriotic pride, the state media has seized every opportunity to praise his leadership skills, with China's technological advances often cited as major proof.

That effort is exemplified by the heavy promotion of the Amazing China documentary which gives the impression China is already somewhat of a world leader in technology, among other achievements. This has now become less convincing after the reality check provided by the ZTE case.

Miao Wei, the Chinese minister of Industry and Information Technology, is one of the few senior officials who have been outspoken about the enormous obstacles China faces in making technological advances.

He has openly admitted Chinese manufacturing would need at least 30 years just to catch up with the US. He has categorised the world's high-end manufacturing nations into four tiers, with the US leading the first tier in terms of global technological innovation, followed by a second tier in high-end manufacturing that includes Japan and the European Union countries. China belongs to a third-tier group of emerging economies focusing on medium and low-end industries.

One of China's biggest challenges is that key components and technologies used in many of China's much trumpeted technological feats come from overseas.

For instance, China has claimed credit for mastering the independent design and manufacturing of third-generation nuclear facilities using its own Hualong One technology. Although 85 per cent of the nuclear facilities are domestically sourced, about 15 per cent of key components are imported.

China's first modern passenger jet completed its maiden test flight, giving wings to President Xi Jinping's ambition of turning China into an advanced economy, but only half of the jet's parts are made in China. Photo: Bloomberg

Another example is China's first passenger jetliner, which made its first public test flight last year. The C919, domestically designed and built, has been hailed as another symbol of China's industrial might and its aviation ambitions. But only 50 per cent of the parts for the plane are domestically manufactured; critical components such as its engines and electronic systems are imported wholly or manufactured through joint ventures with largely American or European companies.

China could have used these imported technologies and components as concrete proof to back up its claim as the champion of global trade.

Instead, that info is largely absent from the over-the-top propaganda that exaggerates China's technological levels and aggravates Western fears, prompting the US and other nations to focus unusual attention on those issues at a time when China's technological advances very much need foreign input and are far from leading the world.

This article originally appeared on the South China Morning Post (SCMP).

Copyright (c) 2018. South China Morning Post Publishers Ltd. All rights reserved.

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