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 IBM'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 OECD 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 U.S.-China Economic and
Security Review Commission said the Pentagon had become reliant on
an increasingly globalized private sector for some critical
military technologies.
"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 said.
It is foreigners who have driven much of the growth, with heavy
investment from global giants like Intel, Nokia, Motorola,
Microsoft 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
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 electronic products.
But 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 Pentium II.
For military analysts like 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
defense technology.