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China’s dash for technological leadership — C. P. Chandrasekhar and Jayati Ghosh

Summary:
These allegations are founded on one undeniable aspect of China’s manufacturing eco-system: its control by the Chinese state, despite the substantial increase in private ownership of manufacturing equity. But what is inadequately emphasized in this discourse is that, using power centralized in the State, China is managing what was seen in market systems as impossible without “rivalry”—the planned acceleration of research and development, invention and innovation that advances both market and political objectives.Of course, China could not have advanced as quickly without building on the achievements of the West. That's what the distribution of knowledge is supposed to be about. In effort to preserve colonialism, the West established various means to hoard knowledge. That is short sighted

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These allegations are founded on one undeniable aspect of China’s manufacturing eco-system: its control by the Chinese state, despite the substantial increase in private ownership of manufacturing equity. But what is inadequately emphasized in this discourse is that, using power centralized in the State, China is managing what was seen in market systems as impossible without “rivalry”—the planned acceleration of research and development, invention and innovation that advances both market and political objectives.
Of course, China could not have advanced as quickly without building on the achievements of the West. That's what the distribution of knowledge is supposed to be about. In effort to preserve colonialism, the West established various means to hoard knowledge. That is short sighted and against the spirit of science. It's is also counterproductive in that with decolonization and development, the pie will grow a lot bigger, faster.

This is not about capitalism and socialism as economic systems, in that China's growth was stagnant under socialism and did not begin to take off until capitalism was introduced. It is about the role of the state in a capitalistic system. The Chinese system suggests that economic liberalism may not be the optimal approach, suggesting that state managed capitalism may be superior to chiefly private managerial capitalism in deploying financial and economic resources.

The take-away in this post is the level of investment in R&D. This is a key aspect of market socialism with Chinese characteristics. China has left behind the reliance on imported technology and embarked on an innovative path domestically based on commitment to R&D.

While the West complains that China is "stealing" its technology, China is forging ahead with its own innovation, also a key piece in the central plan.

Real-World Economics Review Blog
China’s dash for technological leadership
C. P. Chandrasekhar and Jayati Ghosh

Originally at Business Insider

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Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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