Can China become a true global economic power? That depends on the evolution of the Chinese high-technology sector. The industry's success or failure will determine whether China becomes a modern economy or simply a large one, argues CFR Senior Fellow Adam Segal in the first detailed look at a major institutional experiment with high-tech endeavors in China.

Without developing an indigenous high-technology sector, China will never be a global economic—or military—power, at the level of Japan or the United States. But according to Segal, this poses a monumental challenge to China's leaders, who will need to balance economic growth against political ideology, and national security against participation in open global production networks. Drawing on a close examination of four cities' experiences with development of their information industries, Segal identifies the elements of a successful national high-tech strategy, including new ways of intervening in markets.

During the economic reforms of the last twenty years, China adopted policies designed to raise its technological capability and foster industrial growth. Ideologically, the government would not promote private-ownership firms and instead created a hybrid concept of "nongovernmental enterprises," or minying qiye. Segal examines the minying experience, particularly in high technology, in four key places: Beijing, Shanghai, Xi'an, and Guangzhou. Minying enterprises, he finds, have been neither clear successes nor abject failures. Extending his analysis, he compares the experience of creating technology enterprises in China with those of Korea and Taiwan.

Download Chapter One, "High-Technology Enterprises in China" [PDF].

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