Bureau of Export Administration
Office of Strategic Industries and Economic Security
Defense Market Research Report

U.S. Commercial Technology Transfers to the
People’s Republic of China

January 1999 -

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The phenomenal economic growth witnessed in China since Deng Xiaoping first declared China's "A Open Door" policy in 1978 has led many to predict China's certain emergence as an economic superpower in the early 21st Century. Indeed, China has followed a structured path toward gradual market reform of its still largely state-owned industrial sector, which has been transfused with increasing amounts of foreign capital and technology.

There have been numerous reports over the last several years, however, of US companies being "forced" to transfer technology to China in exchange for access to this enormous market. The purpose of his study is to assess the extent to which US commercial technology is being, in effect, "coerced" from US companies engaged in normal business practices and joint ventures in China in exchange for access to China’s market. The cumulative effect these transfers may have on China’s efforts to modernize its economy as well as its industrial and military base is also examined. Finally, this study addresses the impact of US technology transfers to China on the issues of long-term US global competitiveness and broad economic and national security interests.


The first section of this study addresses China’s foreign investment and trade policies, regulations, and practices, which largely explain how and why US technology is being transferred to China. The answer lies in the underlying and stated objectives of China’s foreign investment and trade policies, the goals of which are modernization and self-sufficiency of China’s industrial and military sectors. The transfer of US and other Western technology plays an important role in these efforts. This section, therefore, describes China’s policies regarding reform of its scientific and research and development institutions; China’s ability to absorb, assimilate, and innovate transferred technology; as well as the emerging role of US high-tech firms in China’s science, technology, and research efforts.

Key findings:

Science and Technology

Research and Development

China’s Ability to Absorb and Apply Technology

Foreign Direct Investment

Import Policies

Defense Conversion

The Role of US Technology



This section examines US investments in three key industry sectors in China: automotive, aerospace, electronics (including telecommunications). Each case study assesses the relationship between investment by high-tech US firms and provisions in China’s investment or industrial policies, competition with China’s state-owned or non-state sector enterprises, the effect of China’s infrastructure on investment, and the current state of the industry in China. Also addressed are technological or potential military advances that could result from US commercial technology transfers. Trade statistics are included as a means of assessing the effect(s) of US high-tech investment in these areas. Finally, a brief examination is made with regard to the approaches to technology transfers taken by the European Union nations and Japan, and contrasting these to the prevailing US view.

Key findings:

Conclusion: US Commercial Technology Transfers to China

This section addresses the potential short- and long-term economic and security implications of US technology transfers to the People's Republic of China. The conclusion addresses the basic questions that this study is designed to answer: "Is the transfer of US technology the price of entry into China’s market?," and "Are US commercial technology transfers forced?" The following are key findings resulting from this study:

Key Findings: