China ’s position on climate change is evolving rapidly. The two targets it has adopted as part of its 2007 energy security strategy will have a significant impact on reducing the growth in emissions – namely, decreasing the energy intensity of the Chinese economy by 20 per cent by 2010 and increasing the use of renewables from 5 per cent to 20 per cent of energy production by 2020. It is already the world’s largest user of alternative energies, including wind power. [504] It is making huge investments in a wide range of clean-technology innovations, especially in wind, solar and hydrogen. Such is the scale of these investments that whatever technologies China develops in clean and renewable energies are likely in practice to become the new global standard. It could easily become the world’s leading manufacturer of renewable energy plants, and at a price, furthermore, affordable to other developing countries. [505] It is widely believed that in the relatively near future some of the most exciting potential breakthroughs in photovoltaics (the use of solar cells for the generation of electricity) and hydrogen-powered vehicles may come out of China rather than the United States. [506] The two largest Chinese car producers are in the process of launching hybrid models, and, encouraged by the government, they, together with other manufacturers, have ambitious plans to become world leaders in electric and other alternative-energy vehicles. [507] Just as its economic development combines both the backward and the advanced, so the same could well prove to be the case with the environment, as the drastic action taken by the central government in advance of the Beijing Olympics to try and improve the capital’s appalling air quality, including major restrictions on the use of cars, illustrated. [508]
At present, China’s comparative advantage lies in low-end manufacturing, where it is able to exploit the huge supply of cheap unskilled labour and thereby produce at rock-bottom prices – or ‘China prices’, as the new global benchmark has become known – for the world market. [509] In the longer run, there are two inherent problems with this. First, in terms of the total costs of getting a product to market, the proportion represented by manufacturing is very small – around 15 per cent of the final price – with the bulk of costs being creamed off by design, marketing, branding and so forth, tasks which are still overwhelmingly carried out in the developed world. [510] Second, most of China ’s exports are produced by Western and Japanese multinationals, with Chinese manufacturers cast predominantly in the role of subcontractors. In other words, China ’s role is basically as the low-end manufacturing subcontractor in the multifarious global operations of multinationals based in the developed countries. [511]
There is, however, plenty of evidence that China is steadily climbing the technological ladder. Like all newcomers, it has been obliged to make it up as it goes along and find its own distinctive path. One avenue used by China to gain access to new technologies has been a combination of copying, buying, and cajoling foreign partners in joint-ventures to transfer technology in return for being granted wider access to China ’s market. The lure of the latter has proved a powerful bargaining counter, especially with second-tier multinationals. [512] In a short space of time, China has already overtaken many South-East Asian countries in important areas of technology, and its ability to drive a hard bargain with foreign multinationals has been a major factor in this. While Proton, Malaysia ’s national car company, has been unable to persuade any of its various foreign partners – most notably Mitsubishi – to transfer key technology, the Chinese car companies have, one way or another, been rather more successful. The bargaining counter of size carries great clout: China has fifty times the population of Malaysia. [513] There is another route by which China has been negotiating its way up the technological ladder: when foreign multinationals move their manufacturing operations to China, there is a strong tendency for other functions to follow so as to take advantage of economies of scale, for reasons of convenience, and because highly skilled Chinese labour is plentiful and cheap. [514] The textile industry in Italy, for instance, has progressively migrated to China, starting with manufacturing, followed by more value-added processes like design. [515] Microsoft, Motorola and Nokia have all established major research and development centres in Beijing, while Lucent-Alcatel has done the same in Nanjing. As a consequence, Chinese professionals will become increasingly important players in the R & D activity of such leading-edge multinationals. [516]
