HOW CHINESE GOVERNMENT USE A GREAT DOMESTIC MARKET for the needs of technology transfer and to achieve the goal of developing national technological capabilities (example of fast railroad technology):
The policy of the Chinese government to strengthen the global competitiveness of domestic fast railroad companies is explicitly stated in official state documents detailing the use of technology transfer agreements as a key to realizing the goal of technology development.
The “China High Speed Train United Action Plan Cooperation Agreement” was signed between the Ministry of Science (MoS) and the Ministry of Railways (MoR) on February 26, 2008 which contains cooperation between the two parties:
1. Development of technology to realize a network capable of supporting railroad speeds of 350 km/h or more.
2. Realizing independent intellectual property rights and increasing global competitiveness.
3. Exporting technology.
MoS provided funds of nearly 10 billion RMB ($ 1.6 billion), involving 25 universities, 11 research institutions, 51 national laboratories and engineering research centers (Science and Technology Daily, September 6, 2010). The MoR also mobilizes universities, science and technology research centers and manufacturing companies to carry out the “introduction, digestion, absorption and re-innovation program locomotive” (People’s Daily, September 5, 2008).
In 2003, when it was decided to build the Beijing-Shanghai line, it was discovered that Chinese companies were unable to meet the HSR development targets. According to MoR spokesman Zhang Shuguang, China needs more than a decade to be equal to developed countries because of the costs and difficulties of developing domestic technology.
As a solution, China uses a large domestic market for technology transfer needs and achieves the goal of developing national capabilities through: digestion, absorption and re-innovation (yinjin xiaohua xishou zai chuangxin) foreign technology.
On June 17, 2004, MoR announced the first auction for the procurement of railroad technology 200 km/hour. The government stipulates that the economic benefits of foreign participation must prioritize profits for the Chinese economy not for foreign economies (Xinhua, March 4, 2010) with the main goal of technology transfer that supports China in technology development.
The criteria established by MoR include competing pricing and that companies that win an auction must comprehensively transfer technology to Chinese companies and finished products must use the Chinese trademark. Foreign partners must provide technical services and training so that Chinese companies must be able to function without foreign partnerships (National Technology and Equipment Network, March 18, 2010). Chinese companies are free to determine foreign partners, but foreign partners must attend pre-bid and sign technology transfer agreements with domestic companies (Xinhua September 4, 2004). The government also stipulates that foreign companies must transfer not only existing technology to China, but also further development (Xinhua, March 4, 2010).
Alstom (France), Siemens (Germany), Bombardier (Canada) and a consortium of Japanese companies led by Kawasaki Heavy Industries participated in the auction from China. All must adopt the China standard for their high-speed rail products and assemble all units by joint ventures