Evolvement of Joint Ventures in China

In the past, joint ventures with foreign firms investing in the country were the primary means for China in acquiring new and foreign technology.

But since China's entry into the World Trade Organization (WTO), foreign firms were able to set up wholly-owned subsidiaries. This enabled such firms to avoid sharing technology with their Chinese partners.

This provides incentives for Chinese firms to pursue technology by acquiring foreign companies. For example, Huawei (华威), a major Chinese telecommunications manufacturer, has expressed interest in purchasing the British firm Marconi. Shanghai Automotive Industry Corp (SAIC), a leading Chinese auto manufacturer, on the other hand, purchased Korean automaker SsangYong Motors for $500 million in October 2004. Access to Korean firms' technology, research and development capability was said to be an important motive for the deal (Phillips C. Saunders, China's Global Activism: Strategy, Drivers and Tools, Institute for National Strategic Studies, National Defense University Press, Washington DC, October 2006).

Beijing also has other means of acquiring technology. It has signed technology sharing agreements with more than 50 countries, including Russia, Israel and major western European countries. These agreements allow China to acquire technology legitimately. Illegal methods include organized espionage or from individuals who know that bringing commercially valuable technology to China will be helpful in securing employment.