Scaling the Commanding Heights: The Logic of Technology Transfer Policy in Rising China

Abstract

This paper examines China’s efforts to accelerate its economic rise using technology extractors, defined as policies that condition foreign market access on technology transfers to domestic firms. I argue weak enforcement capacity and China’s position in global value chains (GVCs) constrain its bargaining power over foreign investors, limiting the use of technology extractors even in highly strategic sectors such as semiconductors. Case studies and analysis of a new industry-level dataset from 1995-2015 suggest strategic industries account for most of the sixfold increase in tech extractors’ use after 2002. However, in strategic industries in which China is intermediate to GVCs, its reliance on foreign firms to drive exports and associated employment prevent it from imposing these policies. My findings illuminate how GVCs reshape the politics of bargaining over technology transfer between states and foreign investors, and how position in production networks influences the strategic choices behind China’s economic rise.

Keywords: Rise of China, technology transfer, global value chains, foreign direct investment