Promoting indigenous capability: The Chinese government and the catching-up of domestic telecom-equipment firms

This paper analyses the role the Chinese government has played in promoting indigenous technological capability during the development of domestic telecom-equipment firms since the early 1980s. To nurture technologically advanced and economically efficient domestic firms, the government has intervened heavily in their development in the following ways: when the market was dominated by multinational firms in the mid-1980s and early 1990s, the government provided direct technological support and a wide range of non-technical support. When domestic firms had grown strong and were able to compete with the multinational firms in several fields in the mid- and late 1990s, the government became less directly involved and only offered incentives for research and development through national science and technology programmes. Government intervention has been necessary for the birth and growth of domestic firms. It is also strategic: the intervention was guided by the development level of domestic firms and aimed at nurturing technologically advanced domestic firms through selecting the most competitive ones. In summary, despite some failures, government intervention has in general rewarded the efforts of domestic telecom-equipment firms in building innovation capability and developing proprietary technologies, which are the ultimate driving force enabling them to catch up with the multinational corporations.