China Faces 'Middle-Technology Trap', Warns Official Think-Tank

A top state-run Chinese think-tank warned China of a potential 'middle-technology trap' unless it opens doors 'wide open' for new investments and scientific innovation to deal with increasing containment in the ongoing tech war with the US.

'China's manufacturing sector is still in the downstream of the global value chain, and it faces a risk of being hamstrung at the low and mid-end by developed countries such as the United States, Germany and Japan,” the Chinese Academy of Sciences said in its latest report released during the weekend.

'The countries that develop later usually have difficulties in industrial upgrading and transitioning to high-income countries because they lack original technological advances after technology importation, imitation, absorption, and tracking,” the report said.

The report came amid stepped-up technology curbs by the US, while Chinese manufacturers are finding it increasingly difficult to move up value chains.

The 'middle-technology trap” describes a scenario in which developing countries benefit from industrial transfers due to their low-cost advantages, but face long-term economic stagnation when the advantages diminish, and local firms struggle to catch up with the core technologies retained by developed nations, the Hong Kong-based South China Morning Post reported on Sunday.

Concerns over China's state of the economy were increasing as the property sector, which is one of the growth sectors of the country is in deep crisis.

Besides, China for the first time in recent years faced high youth unemployment as a result the government has stopped publishing official employment data to prevent public protests.

Also, the pilling of local government debts is adding to pressures on the financial system of the second-largest economy.

Significantly, the annual Central Economic Work Conference presided over by President Xi Jinping held on December 12 has flagged the concerns while analysing the current economic situation and laid guidelines for next year's economic policies.

'To further revive the economy, China still has to overcome some difficulties and challenges, including lack of effective demand, overcapacity in some sectors, lacklustre social expectations, certain risks and hidden problems, bottlenecks in the domestic circulation, as well as rising complexity, severity and uncertainty of the external environment,' the key meeting said.

'It is important to be more mindful of potential dangers and to effectively respond to and solve these problems,” the meeting said, according to the state-run Xinhua news agency.

It has called for the introduction of more policies that will help stabilise expectations, growth and employment, as well as active endeavours to promote the transition of growth models, structural adjustment, and quality and efficiency improvement, so as to consolidate the foundation of stable economic development with a positive outlook.

The government needs to increase spending to tackle the choke points, such as semiconductors and the world's second-largest economy also needs to embrace a more open policy and sweeping reforms to achieve technological upgrades, Zheng at the Chinese University of Hong Kong, said, commenting on the Chinese Academy of Sciences report.

'China needs to open its doors to attract international talent, and if it is not capable of attracting European and American scientists, it should at least try to attract scientists from Russia, Eastern Europe, India and other developing countries,” the Post quoted him as saying.

Zheng also said Beijing should open up its national industrial experimental laboratories to more private enterprises.