696 { China’s Quest
for S&T efforts increased substantially. It is far too early to say that China’s
S&T efforts will succeed in catapulting it into the ranks of the world’s lead-
ing technology powers, but it seems safe to conclude that the PRC has at least
partially unburdened itself of the centralized bureaucratic system that helped
drag down the USSR.
Foreign investment was a major mechanism for technology acquisition in
post-1978 China, a mechanism that had barely functioned in China after the
break with the Soviet Union in 1960. The “whole factory” approach, favored
from the 1950s through the 1970s, had proved both expensive and difficult
for Chinese to maintain and use at full capacity.^45 Indeed, huge imports of
turnkey projects during the Great Leap Outward during the 1977–1978 inter-
regnum nearly bankrupted the country. In 1980, the center issued guidelines
for the acquisition of foreign technology. Factories should be renovated by
import of select key technologies rather than by the import of whole facto-
ries. Acquisition of production technology was to be preferred over import of
the finished goods; the objective was to encourage China’s industrialization
rather than becoming a consumer of foreign finished consumer goods. In
the first decades of opening and reform, foreign investment often entailed
the transfer of new products, processes, materials, machinery and equipment,
and technologies to China. Overall, Chinese entities were quite willing to pay
for and/or license foreign technologies.
Joint ventures (JVs) with a Chinese and a foreign party both owning eq-
uity in a business quickly became a favored form of technology transfer.
Foreign investment was often synonymous with technological upgrading. In
a typical JV during the first two decades of opening, the Chinese partner
supplied land, labor, some resources, and components, plus official interface
with the Chinese bureaucracy. The foreign party supplied product design and
brands, channels to global markets, and modern technologies, both embed-
ded within machinery, equipment, and processes and “unembedded,” that is,
in the minds of well-trained engineers. Chinese engineers were increasingly
tempted to leave secure but low-paying jobs at state-owned enterprises for far
better-paid, if riskier, positions in the private or JV sector.
As noted in the earlier discussion of the debate over WTO entry between
economic nationalists and liberals, many Chinese believed that the mas-
sive inflow of foreign investment was locking China into a mid-level of
S&T that would consign it to a subordinate and dependent position in the
emerging international division of labor. One manifestation of this sub-
ordination was the frequent reluctance of foreign firms to transfer the
most advanced technology to China. There were two main, interrelated
reasons for this. First, protection of intellectual property rights was weak
in China. Valuable proprietary technology transferred to China was very
likely to be copied by Chinese competitors, sometimes even down to the
trademarked brand name on the product. This was part of the Chinese