In a strategic alert, a prominent state-run Chinese think-tank, the Chinese Academy of Sciences, has issued a cautionary note to China, highlighting the looming threat of a “middle-technology trap.”
The report, released over the weekend, underscores the risk faced by China’s manufacturing sector, positioned downstream in the global value chain.
According to the report, China is vulnerable to being constrained at the low and mid-ends of the global value chain by developed nations like the United States, Germany, and Japan.
The ongoing tech war, marked by heightened technology curbs by the U.S., poses a significant challenge for Chinese manufacturers aiming to ascend the value chain.
The concept of the “middle-technology trap” refers to the predicament faced by developing countries that initially benefit from industrial transfers due to low-cost advantages.
However, as these advantages diminish, long-term economic stagnation sets in, hindering the transition to high-income countries.
The report emphasizes that without original technological advances, countries may struggle to catch up with the core technologies retained by more developed nations.
This warning comes at a crucial time as the U.S. intensifies technology restrictions, creating hurdles for Chinese manufacturers to advance in value chains.
The report’s release coincides with concerns over China’s economic state, exacerbated by a deepening crisis in the property sector and a spike in youth unemployment, prompting the government to cease the publication of official employment data to forestall public protests.
The annual Central Economic Work Conference, held on December 12 and presided over by President Xi Jinping, acknowledged these concerns.
The meeting identified challenges such as a lack of effective demand, overcapacity in certain sectors, and rising complexities in the external environment.
To revive the economy, the conference stressed the need for more policies to stabilize expectations, growth, and employment, along with active efforts to promote growth model transitions and structural adjustments.
The Chinese Academy of Sciences report suggests that to overcome these challenges, China must invest in overcoming chokepoints, such as semiconductors, and adopt a more open policy.
Dr. Zheng at the Chinese University of Hong Kong emphasized the necessity for China to attract international talent and recommended opening national industrial experimental laboratories to more private enterprises.
As China faces a critical juncture in its technological trajectory, the call for wide-open doors for innovation and strategic reforms becomes imperative for navigating the complex terrain of the global tech landscape.