Finance
When China Innovates – Econlib
Western countries often complain that Chinese companies do not innovate, but that they copy Western ideas and technology. How does the West react when Chinese companies actually innovate?
Because Chinese EV manufacturers are ‘poaching’ Western designers, many people might assume that only the Chinese are stealing product ideas and intellectual property. But in the world of electric vehicles, we are actually seeing the Chinese innovate (out of competitive need) and Western EV manufacturers starting to ‘borrow’ outdated Chinese designs. . . .
I think the real reason for the tariffs is that the US EV industry – and the Japanese and Korean automakers that have US manufacturing operations – simply don’t have a very competitive offering in the market. That’s why the US has made the strategic decision to prioritize building a competitive EV industry in the short term at the expense of American consumers..
China’s massive increase in renewable energy, especially solar energy, puts us on track to achieve these goals for the first time. As Ember reports, it has surprised experts around the world:
Each year the IEA has upgraded its forecasts: from 2021 to 2022 to 2023, the IEA’s accelerated scenario projected annual additions in 2023 to be 218 GW, 257 GW and 406 GW, respectively. With recent updates from China, actual additions for 2023 are 444 GW according to BNEF. To put the magnitude of 2023 additions into context, annual solar additions had not exceeded 200 GW per year until 2022, which was itself a record year.
After destroying all previous experiences with renewable energy rollouts, China’s solar boom now effectively puts us within striking distance of achieving a net zero path powered by green energy. . . . What we are witnessing is the fastest introduction of a major energy technology in history.
Was China praised for this innovation? Just the opposite:
The reaction of Western politicians? Protectionism. Of course there are complex motives. They must build coalitions to support the energy transition. They are concerned about the CCP regime in China. They want to escape extreme dependence on imported energy sources (although in the field of renewable energy it is of course capital goods and not energy that they are importing). But the more fundamental question is simply this. Are Western governments and societies prepared to prioritize the energy transition if this is not their drama and not their success story? Or, if the PV panels and electric vehicles come from China, do other interests take precedence?
One of the most impressive examples of Chinese innovation is the social media site TikTok. How did the US government respond? By banning the app. We are also doing everything we can to stop innovation in China’s computer chip industry.
I see a certain ambivalence in the Western attitude towards China. We don’t want China to become a highly successful technological superpower because that would threaten our national security. We don’t want China to become a non-innovative middle-income country that just borrows technology from the West, because that would threaten jobs in our less dynamic industries. We seemed happiest with China when it was a highly inefficient, low-income country, where its people lived on the brink of famine, cut off from the rest of the world. North Korea with a billion inhabitants. China is not likely to comply with our wishes, nor should it be.
The final part of the “we wuz robbed” argument is the claim that Chinese companies are “stealing” the intellectual property of their American partners in joint ventures. China’s prowess at the negotiating table is undeniable, and the country is aggressively using its bargaining power to trade access to Chinese markets for learning. Yet the American companies that claim to be victims enter into these agreements freely and rarely emerge as net losers. These American companies have raked in trillions in revenue and posted hefty profits – a testament to their ability to navigate the competitive landscape.
The hawks vastly overestimate the value of any IP address that can actually be stolen. Clueless about the technologies that most concern them, the hawks fixate on the blueprints without appreciating the craftsmanship that goes into bringing them to life. After all, the secrets of technological innovation are not hidden. The recipes for making microchips have been available in college libraries for almost seventy years, but building them takes much more than just following instructions.
