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Multinational corporations (MNCs) have increasingly located research and development (R&D) in developing countries like China and India since the 1990s. On the one hand, governments in developing countries are eager to attract R&D to their local economies; on the other hand, developed countries are concerned about losing their competitive advantages due to R&D offshoring. At the same time, intellectual property (IP) protection is a growing concern considering the weak IP institutions that developing countries typically have.

Presenting both survey findings in Beijing and several case studies on individual MNC R&D labs, Dr. Quan examines MNC R&D labs' activities in China and puts forward a 'hierarchical modular R&D structure' as means of IP protection in weak IPR regime countries.

Quan has extensive research experience in the areas of technology & innovation management, international business, strategy, entrepreneurship, and regional economic development. Besides her recent publications on the Chinese software industry and on Chinese and Indian immigrant professionals in Silicon Valley (with Saxenian), she also has a number of publications in Chinese academic core journals such as "China Industrial Economy." Quan holds a PhD from the University of California at Berkeley, an M. Econ. degree and a B.S. degree both from Beijing University, China.

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Xiaohong (Iris) Quan Speaker
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As President Bush continues his tour of Asia, Pantech Fellow and San Jose Mercury News columnist Daniel Sneider observes in YaleGlobal that growing regional cooperation threatens U.S. preeminence in East Asia.

On the surface, President Bush's week-long swing through Northeast Asia has been a strong contrast with his recent stormy (and, some say, stumbling) excursion into Latin America.

There was little sign of overt anti-Americanism. And no Asian leader will openly oppose American leadership in the flamboyant manner of Venezuela's Hugo Chavez. Even prickly China swallowed President Bush's barbs about lack of democratic freedom in China, quietly acknowledging the two powers' differences. In contrast to the meeting of leaders from the Americas, the annual summit of the Asia Pacific Economic Cooperation (APEC) forum in Korea will embrace the principles of free trade.

Beneath the polite appearance, however, there is no less a challenge to American leadership in Asia. While Washington fiddled, a powerful momentum has been building up in Asia toward the formation of an East Asian Free Trade Area or, more ambitiously, an East Asian Community, modeled on the European community. Led by China, the East Asian grouping pointedly excludes the United States.

The APEC agenda focuses on an initiative to counter the spread of avian flu and to offer a common push at the WTO meeting in Hong Kong next month to revive the Doha Round of global trade talks. The Bush administration has its own agenda for the APEC meeting: to reposition itself as a leader of economic growth and integration in the region. For this, APEC has the virtue of being a more open organization than those behind the disappointment at the American summit. Its 21 members span the Pacific Rim, bringing together nations from Chile and Mexico to Russia, China and Southeast Asia. But this attention to APEC may be a case of too little, too late. The momentum to give the amorphous APEC an ongoing institutional role, beyond its annual summit meetings, has slowed in recent years. Its pledges for mutual tariff reduction exist almost entirely on paper.

Until this year, the Bush administration barely addressed regional economic issues at APEC. It preferred to use the meetings to promote a post-9/11 security agenda of anti-terrorism. U.S. trade policy has focused more on reaching free trade agreements with a few selected "friends" in that war, such as Singapore and Australia.

Meanwhile a Chinese-sponsored move to hold an East Asian summit offers the most visible expression of a trend of declining American influence in Asia. That meeting will take place in Malaysia in mid-December. The gathering groups the 10-member Association of Southeast Asian Nations, Japan, China, South Korea, India, Australia and New Zealand. Pointedly not invited is the United States.

This meeting is an outgrowth of the ASEAN Plus Three (APT) process - an annual dialogue of ASEAN with China, South Korea and Japan that began in December 1997 in the midst of the Asian financial crisis. The APT has grown into an elaborate mechanism for cooperation in a range of areas from finance and agriculture to information technology. This reflects an underlying economic reality - the growth of regional and bilateral trade agreements and the rapid rise of intra-Asian trade.

Until fairly recently, foreign trade in East Asia was dominated by trans-Pacific trade with the United States. But the share of Asian exports headed to the U.S. has dropped dramatically, while those destined for other Asian nations has risen. In the two decades from 1981 to 2001, according to economist Edward Lincoln, the share of intra-regional exports has risen from 32 percent to 40 percent, and intra-regional imports from 32 percent to 50 percent.

Much of the growth of regional integration is being driven by China, which is generating enormous demand for imports of raw materials as well as for semi-finished goods that are assembled for export. China has not been hesitant to use this role to expand its influence in the region. It has embraced the APT as a road towards creation of an East Asian community. At the ASEAN summit last year, Chinese Premier Wen Jiabao declared that such a community was a "long-term strategic choice in the interests of China's development." China has also outmatched the U.S. in negotiating free trade agreements, both bilateral and regional. The most impressive is an FTA deal between China and ASEAN set to take effect in 2010. Beijing even dreams of an Asian currency, based on the Chinese yuan, to rival the dollar and the euro.

China is not the first nation to try for such East Asian economic unity. Back in the days when Japan was riding high as an economic superpower, it too talked of leading an East Asian bloc, based on a yen currency zone. As late as 1997, in response to the Asian financial crisis, Japan proposed the creation of an Asian Monetary Fund, a kind of alternate regional financial system. More recently, both South Korea and Japan offered their own visions of an East Asian community in 2001. And both countries tried to match China in the APT by offering to form free trade agreements with ASEAN.

Japan, however, was never as successful as China is likely to be. "It would seem that Japan is a natural counterweight to China, but Tokyo is generally perceived as reactive and incapable of outflanking Beijing," Brad Glosserman, director of research at the Pacific Forum of CSIS, wrote recently. "Its economic dynamism is no match for that of China."

The United States has never been friendly toward efforts to create an East Asian economic bloc, viewing them as chipping away at the global trading system and rivaling American leadership. But Asia is arguably only following in American footsteps -- witness the NAFTA deal with Canada and Mexico and the more recent trade pact with Central America.

Many American policymakers believe these developments are partly a product of the failure of the Bush administration to articulate - much less pursue - a strategy to engage East Asia.

"The United States has greater strategic interests in Asia now than it did in Europe before World War I or World War II,'' argued a recent report of the Grand Strategic Choices Working Group, co-chaired by John Hopkin's University's Francis Fukuyama and Princeton's G. John Ikenberry. "Thus," the report continued, "it is unfortunate that part of the problem, in East Asia in particular, is that America's relative lack of interest in tending to the region has caused some allies of the U.S. to doubt our resolve and question the value of resisting unfavorable developments alone."

The report echoes other policymakers in suggesting the U.S. form its own East Asian economic zone with Japan, South Korea and Australia."That's a non-starter,'' says Professor Vinod Aggarwal, director of Berkeley's APEC study center. "Nobody wants to be cut out of the China market."

Privately, Bush administration officials downplay the importance of the East Asian summit in December, pointing to the lack of any concrete agenda. The addition of India, Australia and New Zealand to the invitation list, along with Japan, should effectively counter any Chinese initiative, they believe.

But those countries also fear being left out of whatever may emerge from this process. They cannot afford to be left on the outside, looking in.

Ultimately, neither can the United States. The President's trip is a belated recognition of that fact. But to be more than a momentary gesture, the United States must give East Asia the consistent attention it deserves.

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Open source software (OSS) is widely used as operating systems (Linux), web tools (Apache, JBoss), database platforms (MySQL) and a range of applications. Creating OSS is widely believed to be a relatively easy process compared with proprietary software. Its growing use and support from large firms such as IBM and HP have led many to believe that OSS will ultimately replace proprietary software. While this is hotly debated, there is little doubt that as its use increases, it will impact how software services will be delivered. In particular, low cost global delivery centers might benefit from ready access to OSS code. The panel will discuss these and other issues related to the globalization of software services caused by OSS.

Panelists:

Mike Balma is HP's Linux Business Strategist. Mike has helped drive HP's strategy for Linux and Open Source software across HP since 1999. Mike is a member of HP's Open Source Review Board that reviews HP open source projects. He was involved in the Linux port to Itanium. He also helped create an exchange for open source software development. And he helps drive HP's Linux strategy in the public sector including the security related technologies and certifications.

Mitchell Kertzman is a partner at Hummer Winblad Venture Partners. He has over 30 years of experience as a CEO of public and private software companies. Most recently, Mitchell was chairman and CEO of Liberate Technologies, a provider of platform software for the delivery of digital services by cable television companies.

Rajesh Setty chairman of CIGNEX Technologies, Inc., a company that he co-founded in late 2000. Setty has managed technology projects and practices over the last 14 years in several parts of the world (India, Singapore, Malayisa, Hong Kong, France and the United States.)

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Mike Balma Linux Business Strategist Panelist Hewlett Packard
Mitchell Kertzman Partner Panelist Hummer Winblad Venture Partners
Rajesh Setty chairman of CIGNEX Technologies, Inc. Panelist
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China's integrated circuit market is the fastest growing in the world, increasing from 7 percent of the world in 2000 to 20 percent in 2004. China's State Council has set the ambitious goal of having domestic production satisfy most of this demand, while closing the technology gap with developed countries.

Mr. Yu, President of the China Semiconductor Industry Association and former chief engineer of the Ministry of Electronics, is uniquely positioned to review the past decade's transition of the Chinese semiconductor industry from state controlled enterprises to growing companies responding to market forces. Mr. Yu will also provide his insights on the future of China's high tech development and its ramifications for trade relations with the U.S.

Mr. Yu Zhongyu has been engaged in semiconductor research and management for many years and is one of the leaders of China's integrated circuit (IC) industry. He has engaged in research and design of IC products and was honored with the National Science and Technology Award. Having joined the government in 1988, he was responsible for organizing and leading the IC project during "7th five-year plan" and "8th five-year plan"; he acted as a member of the leading group for the National "908" project and headed the construction leading group of the Huahong factory in the "909" project. These projects made important contributions to China's IC industry development. Mr. Yu has been the President of the China Semiconductor Industry Association since 2001.

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Yu Zhongyu Speaker President of the China Semiconductor Industry Association (CSIA)
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Mr. Schriver will address China's military modernization program, its growing economic clout, and its increased willingness to exercise pro-active diplomacy to further its interests. He will examine how this widening "tool box" of capabilities impacts China's approach to security challenges in Asia including its long-standing differences with Taiwan, more recent renewed tensions withJapan, the Korean nuclear challenge, and energy security. And he will assess what all these developments mean for the security interests of the United States and what policy options are under consideration in Washington in response to the China challenge.

Mr. Schriver is Partner with Armitage International, is the former Deputy

Assistant Secretary of State for East Asia with specific responsibilities for China, and the former Senior Director for China in the Office of the Secretary of Defense.

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Randall Schriver former Deputy Assistant Secretary of State for East Asian Affairs Speaker
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On October 18, 2005, SPRIE presented the next seminar in its 2005-2006 series on "Greater China and the Globalization of R&D" with speaker Dr. Doug Fuller, current SPRIE Fellow. Dr. Fuller, speaking on "From California Dreaming to Silicon Success: The Rise of China's Semiconductor Industry," presented both industry-wide data and case studies of individual firms to explain how the politics of finance in China shape which Chinese chip firms become fast learners able to compete in world markets and which ones remain technological laggards.

Over the last several decades, there has been a strenuous debate about policies for economic development between the Washington Consensus promoted by the major international financial institutions and the revisionist political economists . Followers of the former view advocate free and unfettered markets buttressed by institutions to protect property rights. The revisionists argue that development involves social and political processes not adequately captured by the narrow prescriptive focus of the Washington Consensus.

In confronting globalization, there is also a new split among the revisionists themselves. Whereas the Washington Consensus welcomes globalization as a boon to developing countries through expanding the scope of market forces, the revisionists divide over the prospects for developing countries under globalization. The optimists, such as Ernst and Saxenian, see transnational networks as providing opportunities for developing countries to continue to learn the skills and competencies necessary to further their progress. The pessimists of the revisionist camp, such as Stiglitz and Strange, see globalization eroding the capabilities of the state or state-societal alliances necessary for development.

Using the case of technological upgrading (one aspect of economic development) in China's information technology (IT) industry, I demonstrate that opportunities for development exist under globalization. These paths to development are not simply the result of picking the right international networks to join nor are they due to the continued efficacy of state action. They also do not arise from well-developed market institutions within China. China's development success in spite of low levels of state industrial policymaking capacity and very incomplete market institutions tells us that other developing countries similarly unequipped can develop even in this globalized world.

In China's IT industry, two local institutional variables, firm operational strategies and state-firm relations, have interacted with the technology flows present in global networks to create opportunities for certain types of firms to upgrade. A firm's operational strategy (OS) determines its motivation to upgrade in China as opposed to doing so elsewhere. The relationship of firms to the state determines their sources of finance i.e. whether or not they can access functioning financial institutions.

The relationship of firms to the state determines their sources of finance and these sources of finance in turn impact their ability to upgrade. Sources of finance that provide credit with hard budget constraints give firms incentives to upgrade. Firms have hard budget constraints when they do not receive free help in covering their own financial obligations. With hard budget constraints forcing firms to meet their financial obligations, firms have to remain competitive to survive. For technology firms, a critical part of their competitiveness is their technology so they have every incentive to improve their technologies to keep pace with competitors. Finance that provides credit with soft budget constraints deprives firms of the incentives and even the capabilities to upgrade. Firms have soft budget constraints when they do not have to pay for some or all of their financial obligations themselves. These firms can rationally expect to survive even if not competitive because others are willing to bail them out. A third possibility is no source of finance. Firms without financing will not be able to invest in technological development.

 

There are four types of firms in China: the favored domestic firms, the neglected domestic firms, the hybrid foreign-invested enterprises (FIEs) and the regular FIEs. Financing and motivation have varied across firm categories. Due to different state-firm relations, FIEs rely on foreign finance and domestic firms do not. Hybrid FIEs differ from regular FIEs because the hybrids have a China-based operational strategy. This operational strategy (OS) is a mix of interests and ideational factors that causes these firms to perceive China either as the vital center of their operations (the China-based OS) or as just another location among many (the non-China-based OS). Thus, variation in firm-state relations (finance) and operational strategy (motivation) determine the variation in technological upgrading.

This thesis finds that the two types of FIEs are more likely to contribute to upgrading in China than the two types of domestic firms. Among the FIEs, the hybrid FIEs are more likely to contribute than the regular FIEs though the discrepancy is not as large as it is between the FIEs and domestic firms.

The hybrids are the most successful upgraders because they have both disciplined finance (i.e. credit with relatively hard budget constraints) from foreign financial institutions and the motivation to upgrade in China due to their China-based OS. The unsuccessful domestic upgraders lack finance (neglected domestic firms) or financial discipline (the favored domestic firms) due to their particular relationships to the state. The regular FIEs have the capabilities to upgrade due to their financial discipline and access to transnational technology networks, but undertake less upgrading in China than the hybrids because they lack the China-based operational strategy.

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Many people in China and the US assume that the new Taiwanese national identity is a political ploy which originated with Taiwan's government. Based on ethnographic research in both Taiwan and China, Melissa Brown argues that Taiwanese identity -- in both its ethnic and national forms -- are based on social experience. Because the people of Taiwan and China have had such different social experiences since 1895, Taiwanese identity as distinct from Chinese identity is real. The reality of Taiwanese identity poses challenges for resolving the debate over Taiwan's future relations with China, particularly in nationalistic responses due to lack of Chinese experience with Taiwanese society.

Melissa J. Brown is Assistant Professor of Anthropological Sciences and Research Affiliate at Asia-Pacific Research Center at Stanford University. She has been researching changing identities in Taiwan and China since 1991. Her books include Negotiating Ethnicities in China and Taiwan (University of California, Institute for East Asian Studies, 1996) and Is Taiwan Chinese? The Impact of Culture, Power, and Migration on Changing Identities (University of California Press, 2004).

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Melissa J. Brown Speaker Stanford University
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In today's global economy, access to resources around the world has never been easier. The high tech industry has always been in the forefront of globalization in lowering costs, acquiring talent as well as serving markets. For instance, Asian countries have long been known for their vast manufacturing bases for western high tech industry.

In recent years, thanks to Y2K, India has become the leader in software outsourcing. China, given its expanding economy as well as its open market direction, has rapidly become the emerging location for multi-national semiconductor companies to outsource their product development amidst China's own burgeoning integrated circuit (IC) industry. Mr. Lee has first-hand experience in building and managing an IC product development center in Shanghai, China. He will discuss the challenges of operating a R&D organization in an environment of different languages and cultures. He will also share his vision of the future of the IC industry in China.

Mr. Lee is Group Vice President and general manager of Timing Solutions Products at Integrated Device Technology, Inc.(IDT), a public semiconductor company of $650 million annual sales, focusing on valued-added solutions for communication, consumer and computing markets. He has been with IDT for the last 22 years and has served various management roles. In 2001, he architected the acquisition of Newave Semiconductor Corporation in China and established the Shanghai Product Development Center for IDT. Before joining IDT in 1984, Mr. Lee spent 5 years at Intel Corporation as a technologist for the early development of flash memory technology. Mr. Lee earned his B.S. degree in Electrical Engineering from National Taiwan University in 1975 and M.S. degree from Case Western Reserve University in 1979.

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Jimmy Lee Group Vice President & General Manager of Timing Solutions Products Speaker Integrated Device Technology, Inc.
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Susan Chira will speak about rising China, and compare it to her 20-year-old experience as a journalist reporting on risen Japan and rising Korea. Even as Iraq grabs the headlines, the story of Rising China is one of the most gripping, the most resonant of our times. It presents enormous and obvious policy challenges, and considerable journalistic challenges, too. What is familiar in China's rise, and what is unique? How do you cover and present to readers a country that is at once exuberant and fearful, increasingly prosperous and increasingly unequal, newly open and reflexively repressive? The New York Times has had a personal brush with these many faces of China: its researcher, Zhao Yan, is still mired in jail after a year, charged with violating its vaguely-written, draconian law on state secrets.

Susan Chira was named foreign editor for The New York Times in January 2004. Previously, Ms. Chira had been editorial director of book development since September 2002. Before that she was the editor of the Week in Review section at The Times since October 1999, after having served as deputy foreign editor of the newspaper since February 1997. Prior to that, she served in a variety of reporting positions including national education correspondent, correspondent for the newspaper in Tokyo from October 1984 until February 1989, metropolitan reporter in the Albany and Stamford bureaus, and reporter for the Business Day section.

Ms. Chira joined The Times as a trainee on the metropolitan desk in 1981 and was promoted to reporter in July 1982.

She received a B.A. degree in history and East Asian studies from Harvard University in 1980, graduating summa cum laude, Phi Beta Kappa. As an undergraduate, she was a reporter and later president of The Harvard Crimson. She studied Japanese for a year and a half at the Inter-University Center for Japanese Language Studies in Tokyo and at Middlebury College, Vt.

Susan Chira is married to Michael Shapiro, a writer and assistant professor of journalism at the Columbia University Graduate School of Journalism. They have a daughter and a son.

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Susan Chira Foreign Editor, The New York Times Speaker
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