“Innovation and China’s Global Emergence”, edited by Erik Baark, Bert Hofman and Jiwei Qian

“China’s new global status as a rising technology power”, as the editors of this new study put it, has increasingly engendered alarmed, if not alarmist, rhetoric by Western politicians and commentators. The combined response of Innovation and China’s Global Emergence, a new collection of academic essays that attempts a ground-up review of the issue, might be summarized as “take a breath”.

Those who wish to pronounce on the subject might do well to work their way through this book first. The entries are measured and reasoned; there is deafening silence from the absence of axes being ground.

The essays are divided into two parts; the first covers “Implications of China’s Innovation Emergence”. In “China and the US: Technology Conflict or Cooperation?”, Gary H Jefferson argues (using a “Kuznetz inverted ‘U’ curve”, which is less complicated than it sounds) that when the US had technology and China didn’t, the two economies were compatible, but as China moved up the technology curve, fears of competition (naturally) generated rivalry. Jefferson argues, should the growing parity be accepted, that the relationship might settle once more into cooperation, paralleling America’s relationship with Europe and Japan and that, furthermore, one should hope that it does because the West cannot in fact do much to contain or blunt China’s continued progress and that cooperation will prove more effective than conflict.

In “The US-China Trade War and Myths about Intellectual Property and Innovation in China”, Dan Prud’homme says that both China and foreign stakeholders ascribe to positions he calls “myths”: those propagated by Chinese stakeholders might be paraphrased as “nothing to see here”, while foreign myths either overstate the case or descend into cultural stereotyping (eg, “China’s longstanding Confucian culture prevents it from seriously protecting IPR”), both with unfortunate consequences:

These myths created misunderstandings and overzealousness among foreign stakeholders, also leading to the trade war.

Prud’homme similarly concludes that “that neither China’s IPR system, nor the trade war will seriously restrain Chinese innovation or Chinese entities’ usage of IPR in the long term.”

More than one paper addresses “Made in China 2025”, the recently announced industrial policy that “provided a launching pad for the US-China trade war in 2018”. As described by Erik Baark, it comes across a bit like a label applied post facto to existing policy directions and processes, into which overseas commentators perhaps have read rather more than is in fact there. Innovation, however, is innovation:

there may be both positive and negative implications of the Chinese ambition to promote indigenous innovation. On the one hand, Chinese technologies may become available globally to address global problems, for example in priority areas such as low-carbon innovation or advanced digital processing and communication; and Chinese innovations in the management of innovation have already demonstrated new abilities to cut costs and reduce time to market. On the other hand, these innovations may challenge foreign competitors and incumbents in global markets, with potential negative consequences for competitiveness in overseas economies and for their national security.

The introduction, of which Baark is a co-author, notes that one should be careful not to overestimate the state of Chinese innovation:

Despite the increase in R&D spending and patent count, China’s growing innovative capabilities have not, or not yet translated into higher productivity growth. In fact, productivity growth as measured by Total Factor Productivity (TFP) shows a drop since the global financial crisis.

Other papers discuss China’s need for talent and technology and that overseas educational institutions and companies remain key in supplying both.

The second, and shorter, section of the book deals with “Industrial Policy Challenges”. Carsten A Holz’s paper makes its point in its title: “PRC Industrial Policies Postdate Rather than Lead Economic Activity”:

Regression analysis suggests that industrial policies have little or no effect on investment outcomes in industry. At least through 2015, investment is driven primarily by profitability considerations. When industrial policies have an effect, changes in investment patterns precede industrial policy …

that Chinese policymakers don’t so much pick winners as anoint them once they’ve won.

Anton Malkin makes the point in “Made in China 2025 and the Proliferation of Intangible Assets” that the policy direction driven by a desire to partake in

the proprietorship over intangible assets like patents, data, standards and brands. In this respect, MIC 2025 tells us as much about significant changes in the global economy, as much as it tells us about the forward trend of China’s industrial policy planning.

None of this is to say that the US—and US companies—have nothing to be concerned about, but (although it isn’t quite phrased this way) the book’s contributors are on the whole taking issue with the zero-sum-game framing that seems to overtaken a considerable amount of thinking and commentary about China.

The book suffers from drawbacks that are intrinsic to the genre—the text is rather dense, and the essay format can leave some gaps in coverage. One cannot of course expect any given treatment to cover everything, but it’s perhaps worth noting that Innovation and China’s Global Emergence does not, for example, discuss the nature of IPR regimes or whether the current ones are sustainable: the recent pandemic has shone a light on shortcomings in the current patent system.

Those who have decided that China is a deserving target of the current trade war are unlikely to be swayed by Innovation and China’s Global Emergence. Those who however might prefer policy based on analysis rather than rhetoric, may find their positions helpfully informed by the essays in this book.