702 { China’s Quest
industrialization. China’s export of high-technology goods—defined by the
World Bank as goods having a high ratio of R&D expenditures relative to gross
output and value added—began rising after Deng’s 1992 launch of the second
opening. As Figure 25-6 indicates, China’s export of high-tech goods grew
steadily in the decade after 1992, then began an even sharper ascent follow-
ing China’s WTO accession. In 2004, its high-tech exports exceeded the US
level, according to World Bank indicators, and kept going. By 2011, China was
by far the leading global producer of high-tech exports. In that year, China’s
exports of high-tech goods were 2.6 times the US level, the world’s second
leading high-tech exporter. Most of the PRC high-tech exports were comput-
ers, telephonic communication equipment, and other electronic goods.
Of course, most of these high-tech goods were foreign designed and
branded. They were also typically produced with foreign-innovated (and
therefore licensed) technology. Many of the crucial components of these
“high-tech” goods (microchips and processors, special materials, etc.) that
contributed most of the value added to these goods were produced outside
of China (often in Taiwan or South Korea), and again under foreign pat-
ent held by a US or other Western firm. This arrangement also meant that
China remained dependent on other countries, especially the United States,
for innovation, and would probably continue to lag behind the United States
in terms of overall technological level. It also meant that a large part of
the value of these high-tech exports went to the foreign brand and patent
holders. One study of one of China’s high-tech exports, an Apple iPhone,
found that of the $179 cost of producing an iPhone in China, only $6.50
was value added by assembly in China.^55 The other $172.50 was the cost of
importing into China parts produced in other countries and sent to ChinaBillions constant US 2005$500
450
400
350
300
250
200
150
100JapanUSAPRCUKGermany50
0
198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011
FIGUR E 25-6 High-Technology Exports (current US$)