Chapter 3: Techno-nationalism in China
3.4 Technology, National Development and the State
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new risks to the state actors in terms of both controlling the flow of information within society and ensuring
“network security” in the face of both internal and external security threats. As Graham Webster wrote recently in assessing Chinese IT policy: “efforts to secure and exercise sovereignty over the internet at home are well aligned with a goal to develop leading high-tech industries at home.”112
3.4 Technology, National Development and the State
That a security-centric realism continually pervades Chinese strategic thinking regarding its international environment is only one aspect of China’s techno-nationalism. Ideas about the role of the state in economic management and technological development also point toward a strong techno-nationalist orientation. As covered in the literature review section, techno-nationalists also belief in the power of state institutions in positively promoting domestic technology in a number of ways: the cultivation of a holistic “national system of innovation,” policy support for domestic champions, and through the restriction of foreign ownership in key sectors. In this sense, techno-nationalist strategies of development aren’t seen as trading growth and efficiency for greater security.
Techno-nationalists reject the trade-off between the two objectives (security versus development) as
mutually exclusive, instead seeing them are mutually compatible; a pro-active state both guarantees security and enables superior developmental outcomes by ensuring that the national economy remains competitive in leading industrial and technological sectors. Concerted state action is integral in driving processes of
economic transformation and overall national development. Put differently, for a state to survive it must develop; for it to develop it must encourage technological transformation; and for technological
transformation to occur, the state must lead the way.
112 Graham Webster. “China and the Eight Guardian Warriors of American Tech.” SupChina.
<http://supchina.com/2017/03/16/china-eight-guardian-warriors-tech/>
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There is evidence suggesting China adheres to these core tenets of developmental techno-nationalism. This is, at least in part, a reflection of specific lessons China internalized from the relative success of its East Asian peers in successfully developing indigenous high-tech industry. “Visible hand” interventionism, apparent most notably in Japan, South Korea and Taiwan, saw the state both protect and support domestic technology producers in the face of foreign competitors in hopes of developing indigenous capacity in specified sectors.
As Xielin Liu and Peng Cheng argue in a report on China’s Indigenous Innovation strategy for the East – West Center, the interventionist approach to innovation “remains popular in China” where “many scholars
continue to use these histories in their arguments supporting China’s current indigenous innovation
strategy.”113 This is not to say China strictly adhered to the East Asian “developmental state” model; unlike Japan and Korea, China’s strategy of export-led growth relies more strongly on state-owned enterprises (SOEs) in key sectors while also being much more dependent on foreign direct investment (FDI).114
However, the dominant line of thinking within the CCP contrasts with the dominant liberal view of markets and states as being fundamentally in tension with one another. Arthur Kroeber writes that “Chinese leaders have rejected this choice…the reason is they see economic growth and political power as complementary, not contradictory. The uncontested power of the party makes possible vigorous economic development policies that would be hard to sustain in a more open system; in turn, economic success is the main source of the party’s legitimacy.”115 According to Kroeber, the CCP leadership holds an instrumentalist attitude toward the role of the market. This differs significantly from the “developed economy” norm, wherein markets represent the optimal mechanisms for organizing economic activity and the state plays the role of
“rule-setter” rather than active intervener. Kroeber writes that in contrast to the Western paradigm, the
“default setting” for economic management in contemporary China is direct control by the state, particularly
113 Xielin Liu and Peng Cheng. “Is China’s Indigenous Innovation Strategy Compatible with Globalization?” East-West Center.
2011.
114 Arthur Kroeber, China’s Economy: What Everyone Needs to Know, 2016.
115 Ibid
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in sectors deemed strategically important to CCP interests.116
The view of China as a “market instrumentalist” seeing marketization as a means of bolstering party-state power rather than an end unto itself comes across in the work of Hsueh, who finds that processes of market reform unfolded unevenly at the sectoral level. In industrial sectors deemed strategically important, the state proactively intervenes in processes of market coordination in a manner contradicting simplistic narratives of China’s economy moving uniformly in the direction of greater liberalization.117 Chinese central state authority remains prominent in many key high-tech sectors which, according to Hsueh, are seen as invaluable to China’s overall technology base and to both internal and external security.
This categorization of China’s approach toward market forces is echoed by Peter Martin, who finds that “Xi and those around him tend to think of markets as an important tool for achieving political ends, but they are clear about the limitations of markets.”118 In his analysis, both economic and political reforms must be placed into the broader CCP project of China’s national rejuvenation. Xi’s efforts to impose greater levels of both political and market discipline are viewed as essential to maintaining the existing governance structure.
Ian Bremmer further echoes this analysis, seeing China as exercising state influence over entire sectors of economic activity in a normatively different manner from the variants of capitalism found in North America and Western Europe. According to Bremmer, among others, this emphasis on the role of the state in dictating economic activity merits categorization as “state capitalism,” wherein political considerations trump
allocative efficiencies.119
Active state involvement in the promotion of strategically important domestic technology has not gone out of fashion despite China’s significant integration within patterns and process of globalization. Instead, regime frustration born out of an inability to successfully move up the technology value chain has, in certain
116 Arthur Kroeber. “Reform of Prices, Not Ownership.” CSIS. 2016
117 Roselyn Hsueh. “Strategic and Nonstrategic Sectors.” CSIS. 2016.
118 Peter Martin. “Why Patchy Progress on China’s Economic Reforms is Inevitable.” CSIS. 2016.
119 Ian Bremmer, The End of the Free Market, 2010.
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instances, resulted in a renewed emphasis on state interventionism in accordance with the broader economic ideology of state capitalism. Writing in 2010, Thomas Hout & Pankaj Ghemwat concluded that within China today, “its leaders see state capitalism and the containment of foreign companies as China’s best chance of regaining technological superiority.”120
As Morris Bian points out, China has undergone massive systemic change at both the ideological and
institutional level in defining the relationship between state and market forces. In spite of this, China remains constrained in executing certain reforms by its path dependency. While institutions of economic governance have been overhauled and reformulated to address new challenges and meet new objectives, Bian argues that
“China’s government has displayed an enduring faith in the necessity and efficacy of government-led
change. Discussions of economic development have often assumed that the government must take the lead in shaping the process, and this was as true today as it was in the 1920s.”121 Evidence of this imperative on proactive government management of the economy can be seen in both the 2008 response to the global financial crisis and in weathering turbulence in the Chinese stock market in 2015.