A decade ago, Chinese electronics company Lenovo bought out IBM's personal computer arm for $1.75 billion in what was China's first major overseas acquisition in the technology sector. The deal cemented Lenovo's status as one of the world's biggest PC manufacturers (it now ranks as the largest), and it launched China's journey to becoming one of the world's largest foreign investors in the technology sector.
That process has accelerated exponentially; in 2014, for example, Chinese direct investment in the U.S. information and communications technology industry accounted for about half of all Chinese investment into the United States. In some areas, such as semiconductors, biotechnology and green energy, investment came almost entirely from private Chinese investors.
China is following in the footsteps of Japan, South Korea and Taiwan in what is becoming the traditional pathway of development for East Asian economies. The first step is exporting low-end manufactured goods. Next, the economy moves into middle-end manufacturing while licensing foreign technology. Domestic companies then begin imitating or developing technology independent of licensing. The economy then focuses on middle- and high-end manufacturing. Finally, it begins its own innovations.
Domestic constraints, such as government-imposed regulations and economic controls, could limit how quickly or how far China can go down this path. However, China's ambition is clear: It wants to become a high-tech leader, rather than a follower, and leverage its size in the high-tech sector domestically and abroad.
Although China has often been criticized for stealing technology rather than developing it independently, in some areas the country is beginning to grow out of that stage of its development and contribute to the growth of technology. In March, for example, Germany's Deutsche Telekom invited ZTE to participate in its 5G innovation laboratory. This was in line with China's move toward international collaboration in developing new technologies that eventually will find their way back to its domestic telecommunications networks. China's progress is evident in other areas as well, such as startups and the Silicon Valley-like culture emerging in places such as Shenzhen. The question is whether this progress can be replicated throughout the country. China is the world's largest consumer and producer of semiconductors, but it relies heavily on the licensing of U.S. or other foreign technology and equipment rather than indigenous components. China hopes that one day its acquisitions will enable it to develop those technologies, either through collaboration or on its own.
