It was just 2 months ago that our blog Planes, Trains, and Drones–China’s Reverse Engineering Controversy pointed out the costs and dangers of sharing technology and trade secrets with China. American, European, 
and Israeli firms have all learned that the short-term profits from chasing the lucrative markets in China have longer-term negative implications when Chinese companies beat them at their own game by making the same products cheaper, if not better. But as one who has served on the board of a publicly- traded (NASDAQ) manufacturer, I am well aware of the quarterly and annual pressures from shareholders who want immediate returns and profits. What US firm takes a 20- or 50-year view of global strategy?
With the Chinese President touring the US this week, the risk and reward strategy has no better example than GEs decision to share its airplane electronics and engines with a state-owned Chinese partner, Avic, for the new C919 jetliner. (See Ch.5’s discussion of joint ventures and alliances). The New York Times (Jan.18,2011) reports, “As China strives for leadership in the world’s most advanced technologies, it sees commercial jetliners…as a top prize. The Times adds, “GE will be sharing its most sophisticated airplane electronics, including some of the same technology used in Boeing’s new state-of-the-art 787 Dreamliner”.
Neither Boeing nor Airbus are thrilled to see GE, one of their major suppliers, helping the Chinese so much. But both firms have already opened their own joint plane and parts factories in China. “Boeing has opted to accept the reality of both partnering and competing with China”, says the firm’s CEO.
The VP of another aviation firm, Rockwell Collins, adds, “his employees often ask whether the company is trading its future for immediate sales in China… It comes down to who can innovate faster”.
Discussion questions:
1.What are the benefits and dangers of joint technology ventures with Chinese firms?
2. Where does China view itself in 20 years in terms of manufacturing?