Amid US tech war, is China stuck in a middle-technology trap? Is it time to open its doors wider?

China’s top science academy has warned of a potential “middle-technology trap”, with the leading analyst who published the concept calling for the country to “open its doors” to avoid becoming stuck at a key stage needed to fuel sustainable economic growth through innovation.

The Chinese Academy of Sciences report in early December came at a delicate time when the United States has stepped up technology curbs, while Chinese manufacturers are finding it increasingly difficult to move up value chains.

“The countries that develop later usually have difficulties in industrial upgrading and transitioning to high-income countries because they lack original technological advances after technology importation, imitation, absorption, and tracking,” the report said.

The “middle-technology trap” describes a scenario in which developing countries benefit from industrial transfers due to their low-cost advantages, but face long-term economic stagnation when the advantages diminish, and local firms struggle to catch up with the core technologies retained by developed nations.

The idea was first brought forward by Zheng Yongnian, a prominent political scientist at the Chinese University of Hong Kong, Shenzhen, and his research team in March, but it has now become a concern for Beijing following a recent tone-setting meeting.

“It is necessary to promote industrial innovation through scientific and technological innovation, especially subversive and cutting-edge technologies, to spawn new industries, new models and new momentum,” the statement said.

The “middle-technology trap” concept comes amid the escalating tech war with the US, diversification of the global supply chain and China’s efforts to gain an upper hand in the global tech race to create new economic growth points.

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According to the Chinese Academy of Sciences report, China’s manufacturing added value accounted for nearly 30 per cent globally, close to the combined total of the United States, Japan, Germany, South Korea and India.

Its spending on research and development, meanwhile, ranked second after the US, while China’s technological strength remains in the third tier globally.

“China’s manufacturing sector is still in the downstream of the global value chain, and it faces a risk of being hamstrung at the low and mid-end by developed countries such as the United States, Germany and Japan,” the report warned.

And in addition to increased spending to tackle the choke points, such as semiconductors, the world’s second-largest economy also needs to embrace a more open policy and sweeping reforms to achieve technological upgrades, Zheng at the Chinese University of Hong Kong said.

In a report in July, Zheng said China needs a wider open-door policy, or even to unilaterally open up to the rest of the world even amid decoupling.

“China needs to open its doors to attract international talent, and if it is not capable of attracting European and American scientists, it should at least try to attract scientists from Russia, Eastern Europe, India and other developing countries,” he wrote.

Zheng also said Beijing should open up its national industrial experimental laboratories to more private enterprises.

He added that China should also reform the enterprise system so that state-owned firms and large private companies can share resources to expand the supply and industrial chains.