|China Overtakes U.S. as Supplier of Information Technology Goods
By DAVID LAGUE,
International Herald Tribune
BEIJING, Dec. 11 - After almost a decade of explosive growth in its
electronics sector, China has overtaken the United States as the world's
biggest supplier of information technology goods, according to a report
by the Organization for Economic Cooperation and Development.
Data in the report, to be published on Monday, show that China's exports
of information and communication technology - including laptop
computers, mobile phones and digital cameras - increased by more than 46
percent to $180 billion in 2004 from a year earlier, easily outstripping
for the first time United States exports of $149 billion, which grew 12
percent from 2003.
The figures compiled by the Organization for Economic Cooperation and
Development, based in Paris, also reveal that China has come close to
matching the United States in the overall value of its trade in
information and communications technology products. The value of China's
combined exports and imports of such goods soared to $329 billion in
2004 from $35 billion in 1996. Over the same period, the value of
American information technology trade expanded at a slower rate, to $375
billion from $230 billion.
To some industry experts, the report is more evidence that China has
made progress in its long-term plan to upgrade the capacity of its
manufacturing as it strives to become a major economic power.
"It confirms that the Chinese economy is really moving up the value
chain from simple manufactured goods like textiles, shoes and plastics
to very sophisticated electronics," said Arthur Kobler, a business
consultant in Hong Kong and former president of AT&T
The most spectacular demonstration of China's ambition to become a
consumer electronics heavyweight came in May this year when Lenovo
the Chinese computer maker, paid $1.75 billion to buy I.B.M.'s
personal computer unit.
Also, China's efforts to impose its own technology standards across a
range of consumer products, including mobile phones, digital photography
and wireless networks, are widely interpreted as a strategy to dominate
the global market for information technology goods.
Some analysts say they believe that Chinese technology exports would
have overtaken the United States much earlier without restrictions
applied by Western countries to China on the transfer of so-called
dual-use technologies - which can be used for both civilian and military
ends - to China after the 1989 Tiananmen crackdown.
"Without this trade barrier, China's information technology industry
would have grown much faster," said Li Hui, head of China research for
Investment Bank CLSA Asia-Pacific Markets.
The Organization for Economic Cooperation and Development report could
also heighten fears among some critics that China's drive to build a
powerful information technology and consumer electronics sector could
have far-reaching military consequences for the United States.
China's military industry works closely with information technology
companies and the government's research and development sector in what
some analysts have described as a "digital triangle" that supports the
country's rapid military modernization.
"The People's Liberation Army is moving very quickly to adopt
practically every information-related aspect of military technology that
the U.S. is pursuing at this time," said Rick Fisher, vice president of
the International Assessment and Strategy Center in Washington.
In a report to Congress in November, the United States-China Economic
and Security Review Commission said the Pentagon had become reliant on
an increasingly globalized private sector for some critical military
"This is taking place as China's position at the center of the global
technology supply chain grows, raising the prospect of future U.S.
dependency on China for certain items critical to the U.S. defense
industry as well as vital to continued economic leadership," the report
It is foreigners who have driven much of the growth, with heavy
investment from global giants like Intel
and Cisco Systems
Figures from the Chinese Ministry of Commerce show that companies that
had received overseas investment accounted for almost 90 percent of 2004
exports of high technology products.
And foreign companies are increasing their research and development in
China in a bid to generate real innovation. "Ten years ago, it was done
just to please the Chinese, but now these R.&D. facilities are integral
to their global manufacturing," said Mr. Kobler, the consultant.
Leading integrated circuit manufacturers, however, have avoided setting
up fabrication facilities in China in order to protect their chip
designs and manufacturing technology. This means that China is still
heavily dependent on imports of advanced chips it needs to assemble
But Ms. Li, the CLSA research chief, said, "Most equipment makers are
getting close to cutting-edge technology."
Recently, China has unveiled a supercomputer capable of 11 trillion
calculations per second, making it among the fastest anywhere. Also,
Tsinghua University has produced a microprocessor that matches Intel's
For military analysts like Mr. Fisher, the combination of domestic
innovation and the spill-over effect from foreign research and
development means that China is now poised to make rapid strides in
"China is quickly becoming an innovator and, as we know, it has the
money to turn those ideas into weapons," he said.