The BBC's article, “China's drive to promote invention” - My Review

The BBC's article, “China's drive to promote invention” (http://news.bbc.co.uk/2/hi/asia-pacific/6912056.stm) was an interesting attempt to explain a critical transformation in the structure of the global value chain. However, it was far too short and anecdotal for coverage of such an important issue. The rise of China as a technological superpower is a tectonic shift in the balance of power from West to East that could potentially affect the lives and livelihoods of literally hundreds of millions if not billions of people worldwide. Given the opacity and rather authoritarian nature of the Chinese regime, the potential negative implications of this shift should not be ignored as they were in this article. This is not merely a case of where your tennis shoes are made; rather this is a shift in the balance of power away from the liberal democracies of Europe and North America to a politically closed and one-party state.

Lastly, I would like to point out that the R&D numbers are highly skewed. It is obvious that the author chose to use purchasing power parity (PPP) numbers for his spending comparison to Japan and the United States. While PPP has its utility when comparing the cost of apples and hair cuts across disparate economies, it is the wrong tool when comparing high-end research. Due to the commoditization of basic research tools and the exotic nature of most high-end research equipment, prices for such items are the same regardless of where they are consumed. Moreover, high-priced talent, whether from India, China or the US command roughly the same salaries. Even the price of high-end office space is roughly the same if not more expensive in the primary research destination cities of China, such as Beijing, Shanghai and Qingdao. As a result it is far more appropriate to use exchange rate numbers for R&D investments, which places China 15 years behind Japan and 40 years behind the US.