Thank You for Your (Technology) Cooperation!
Source:Chief Editor, CCEN   Date:2010-04-08   Author:Tom Pellman

Among the more groan-worthy clean energy headlines to cross my desk over the past two weeks, USA Today’s “Should the U.S. Compete or Cooperate with China on Clean Energy?” is up at the top. Now is the time of year when 2009 annual reports, statistics and, sigh, rankings are released. Thus, we are witness to the obligatory media tide declaring which countries are winning the “Green Energy Race/War/Competition/Death Match,” or what have you.

 

I’d rather not spend the rest of this column ridiculing why thinking about U.S.-China competition vs. cooperation is misleading. Most intelligent people recognize this competition/cooperation is a false dichotomy right away and get on with reality, which is messy and gray. China and the U.S. will undoubtedly be tangled in a weird web of cooperation and competition for the rest of their existences.

 

Instead, I’m interested in technology cooperation/competition. USA Today’s panicked headline was triggered by the signing of roughly US$150 million worth of new joint Sino-U.S. cleantech research projects by both countries’ governments. National-level cleantech technological cooperation appears to be in full bloom. Reality is less sanguine on the private sector side.

 

With the exception of China’s solar industry, there remains a sizable technology gap between cleantech companies in the U.S. and Europe, and China. Technology transfers, whereby foreign companies provide local “partners” with technology in exchange for increased market access, has been apart of China’s economic planning since the time of Deng Xiaoping. In the case of renewable energy technology, China’s leadership upped the ante, arguing that developed countries have a moral obligation to transfer technology if they expect China to do more to stem global warming.

 

Try telling that to the companies that have already invested billions of dollars and decades of time in cleantech R&D.

 

Is such “cooperation” worth it? That was precisely the title of a recent and fascinating American Chronicle article, which tracked two technology transfer case studies, including one involving Chinese wind giant Xinjiang Goldwind and a series of established European players hoping for a foothold in the Chinese market. The key technologies received by Goldwind, coupled with supportive government policies essentially catapulted the company into national champion status.

 

And, as for Bonus Energy, Jacobs Energie GmbH and Repower – Goldwind’s three technology partners over the last 20 years? All three have virtually no presence in China at present.

 

The article’s authors, Amy Jarrett and Kenneth Wendholt, rightly assert that foreign companies in China generally view technology transfer as the price of entry rather than an option. After a serious assessment of risks and rewards, they advise: “For foreign companies confident that they can innovate more rapidly than their Chinese partners, a strategic alliance with a Chinese company may be a viable option.”

 

Paradoxically, Beijing has added to the unease over technology by driving toward so-called “indigenous innovation” across a range of industries at the expense of a level playing field for foreign companies. Such requirements have naturally raised the ire of foreign companies heavily invested in China and foreign chambers of commerce.

 

High-profile joint R&D centers are nice, but top-down demands for innovation, predatory technology transfers and weak IPR enforcement – this is a technology environment that is not sustainable in the long-term, when Chinese companies catch up.

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