The Economist (2022-02-26) Riva

60 Business TheEconomistFebruary26th 2022

hasbeenlinkedtooneman,YingBo.For

severalyearsMrYingworkedonmrnaat

Moderna,beforereturningtoChinafrom

Bostonatthestartofthepandemic.His

homecomingwashailedbystatemediaas

apatriotansweringthecallofthemother-

land.Hiscompany,AbogenBiosciences,

hasworkedwiththePeople’sLiberation

Armytodevelopthecountry’smostad-

vancedmrnashot,andwaspartofapro-

grammethathasinvestedatleast$2.3bnin

developinglocalvaccines.

Resultsfromphase-oneclinicaltrials

ofAbogen’sjab,knownasarcoVax,were

recentlyreleased,accordingtostateme-

dia.Insomeways,thatlooksimpressive,

comingjustayearandahalfaftertheWest-

ernversions.However,thecompanyhas

notmadeanystatementsaboutwidede-

ployment.Annualproductioncapacityof

200mdoseslooksmodestnexttothe4bn

dosesexpectedthisyearforthePfizer-

BioNTechvaccine. BioNTechofferedto

provideitsshottoChinainapartnership

withFosun,alocalconglomerate,ayear

ago.BychampioningarcoVaxwhiledeny-

ing approval to Western mrna jabs

(thoughnotWesterncovidpills,oneof

whichwasapprovedthismonth),MrXiap-

pearstohaveplacedahighervalueonself-

reliancethanonpublicwell-being,says

HuangYanzhongoftheoftheCouncilon

ForeignRelations(cfr),athink-tank.

Similarconsiderationsappeartohave

slowedprogressinagrochemicaltechnol-

ogy. Foreign genetic-modification and

seed-editingmethodshavebeenbanned

fromdomesticuseoutofalong-heldfear

thatthiswouldhandforeignfirmscontrol

ofChina’sgrainsupply.Chinesecompa-

nieshavebeendevelopinghome-grownal-

ternatives;DabeinongBiotechnology,abig

feedproducer,isinvestingheavilyinre-

search.They havealsobeenprocuring

themthroughacquisitions.Themostnota-

bleofthesewasthe$44bnpurchasein

2016 by ChemChina, a state-controlled

chemicalsconglomerate,ofSyngenta,a

Swissseed-and-agrochemicalsgiantwith

agranary’sworthofintellectualproperty.

Butacontinuedlackofdomesticproduc-

tioncapacitymeansthatChinaisstillde-

pendentontheimportofcrops.In 2021

Chinaspentatleast400bnyuanonim-

portsofsoya,cornandcotton—muchofit

geneticallymodified(seechart2).

Importedaeroplanesand partscost

Chinaconsiderablylessthanthat—$19bn

lastyear.Buthere,too,thepartywantsthe

industrytoflyfreeofforeigndependen-

cies.Ifstatemediaaretobebelieved,ital-

readyis.Thisyearcomac,astate-owned

aerospacegroup,planstostartdelivering

itsnarrow-bodyc919,arivaltotheBoeing

737 andAirbusa 320 indevelopmentsince

2008.Chineseairlineshaveorderedhun-

dredsofthem.

Oncloserinspection,though,thec 919

doesnotlookallthatChinese.Thepro-

grammehaseatenup$72bnormore,ac-

cordingtoananalysisbytheCentrefor

Strategicand InternationalStudies,an-

otherthink-tank.Yettheaircraftremainsa

jumbleofforeignparts.Becausetheturbo-

fanenginesbeingdevelopedforithave

beenmiredintechnicaltroubles,forex-

ample,theaeroplaneswillfornowbefit-

tedwithenginesfromajointventurebe-

tweenFrance’sSafranandAmerica’sge

Aviation.Withhundredsofothercompo-

nentsalsoproducedabroad,thefinalpro-

ductisafacsimileofaWesternplane—and

notexactlystate-of-the-art.OneWestern

airline-industrybigwigpointsoutthatthe

c 919 isagenerationbehindAirbus’sfuel-

efficienta320neo,andthereforemuchless

competitiveintheglobalmarket.

Chinafacesthesameproblemintrying

toextricateitselffromtheglobalsemicon-

ductorsupplychain,whichlikethatfor

aircraft iscomplex and dominated by

Americaanditsallies.China’svulnerabili-

tytotechsanctionsbecameclearin2018,

whenDonaldTrump’sadministrationhalt-

edthesalesofsensitivehardwarethatused

AmericantechnologytotwoChinesetele-

coms-equipmentmakers,zteandHuawei.

Toavertanythinglikethishappening

again,thelatestfive-yearplanstipulates

thatChinashouldproduce70%ofthe

chipsitconsumesby2025,upfromless

than20%lastyear.Asintheotherareas,

thecountryismakingsomeprogressto-

wardsthatgoal.smicisplanningtocom-

pletetheconstructionofthreenewfac-

toriesthisyear.Thestatehaspouredhun-

dredsofbillionsofyuanintothesector.

ThemoneyhashelpedChinesechipmak-

ersgoonarecruitingbinge.AlabinShang-

hairunbyMicron,anAmericanchipmak-

er,hasbecomeapoachinggroundforlocal

firms. On January26thMicron saidit

wouldclosethelabaltogether.Theresult

hasbeentoenablesomebigChinesechip-

makers to operate production lines

cleansedofAmericantechnology,notes

AdamSegalofthecfr.

Achipontheirshoulder

Butaswithairliners,theChinesechipslag

wellbehindthecuttingedge.smicandoth-

ersaretryingtofullydomesticatethesup-

plychainforchipswithstructuresmea-

suredintensofnanometres(billionthsof

ametre),anorderofmagnitudebiggerthe

mostadvancedcurrentchips.Thatputs

themafewgenerationsbehindtsmcof

TaiwanandSamsungofSouthKorea,the

twoindustryleaders.Chinaisprobably

yearsawayfromreplicatingthelithogra-

phymachinesbuiltbyasml,aDutchfirm

whichhascorneredthemarketforequip-

menttoetchthetiniestintegratedcircuits

ontosiliconwafers.ShanghaiMicroElec-

tronicsEquipmentGroup,thestatecom-

panytaskedwithcatchingupwithasml,is

runningbehindondeliveringthedevices,

accordingtoTillyZhangofGaveKalDrago-

nomics,aresearchfirm.Somelargeinvest-

mentsinChinesesemiconductorcapacity

havegonetofirmsthatfoldedorturned

outtobefrauds.

InthelasttwocriticaltechnologiesChi-

na’sproblemhaslesstodowithmastering

atechnologyorrecreatingsupplychains

andmorewithovercomingusers’lackof

trustinitsalternatives.Theoperatingsys-

temsthatpowerpersonalcomputersand

smartphonesareaprimeexample.When

theTrumpadministrationbannedAmeri-

Brain-powerstruggle

China,research-and-developmentspending*

Source:NationalBureauofStatistics *Publicandprivate

1

3.0

2.5

2.0

1.5

1.0

0.5

0

3.0

2.5

2.0

1.5

1.0

0.5

0

2017 21201918

As%ofGDP Yuantrn

Planes, grains and mobiles

China, selected technology sectors

Sources:Pressreports;TheEconomist *mRNAandother platforms

2

Investment Selected items Import cost

Sector $bn Period in sector $bn Period

Civilian-aircraft

programme

2008- Soyabeans,

present cornandcotton

Semiconductor-

related

Operating Jan2019-

systems Sep 2021

Mar2020- Noforeign

present vaccines

72 2008-20 19 2021

Agrochemicals 47 62 2021

Semiconductors 33 2020 55 2021

3.9 Licensingfees 2.6 2018

Vaccines* 2.3 nil n/a

Aircraft

and parts