China's 'Technology Transfer' Draws Ire Host Melissa Block talks to Wall Street Journal reporter Norihiko Shirouzu about his story on high-speed rail in China, and the practice of "technology transfer," which China requires of companies that do business in China. Shirouzu reports that four foreign companies helped China build high-speed trains, and in the few years since, China has taken that technology, "re-innovated" or built on it, and are now calling it their own, creating tensions with the companies who fear they're now having to compete with China.
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China's 'Technology Transfer' Draws Ire

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China's 'Technology Transfer' Draws Ire

China's 'Technology Transfer' Draws Ire

China's 'Technology Transfer' Draws Ire

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Host Melissa Block talks to Wall Street Journal reporter Norihiko Shirouzu about his story on high-speed rail in China, and the practice of "technology transfer," which China requires of companies that do business in China. Shirouzu reports that four foreign companies helped China build high-speed trains, and in the few years since, China has taken that technology, "re-innovated" or built on it, and are now calling it their own, creating tensions with the companies who fear they're now having to compete with China.

MARY LOUISE KELLY, host:

It's ALL THINGS CONSIDERED from NPR News. I'm Mary Louise Kelly.

MELISSA BLOCK, host:

I'm Melissa Block.

And it's time for All Tech Considered.

(Soundbite of music)

BLOCK: Today we're going to talk about technology transfer. Those two words are a key part of doing business in China. Whether you're GE and you want to build electronic systems for China's first large passenger jet or you're GM and you want a piece of China's electric vehicle market, China demands that you share technology. Now some companies are wondering whether sharing technology is such a good idea, given China's rapid rise as an economic power.

Wall Street Journal reporter Norihiko Shirouzu has been writing about this topic, and he joins us by Skype from Beijing. Welcome to the program, Nori.

Mr. NORIHIKO SHIROUZU (Reporter, The Wall Street Journal): Thank you.

BLOCK: You had a story last week looking at high speed rail in China and one thing you found is that the Japanese and European companies that helped China develop high speed rail now are finding themselves competing with those same Chinese rail companies just a few years later. What happened?

Mr. SHIROUZU: Well, starting in 2004, four foreign companies - Siemens of Germany, Alstom of France, Bombardier of Canada and Kawasaki of Japan - they agreed with China to transfer technology so that China can come up with the high speed trains. China spent money for that. In Kawasaki's case, China spent close to $760 million to come up with a train that goes as fast as 155 miles per hour.

And over the last five to six years, China's train companies learn quickly, enough so that they started adding technology, innovation to the original technology. And they believe they've done enough re-innovating that trains that they came up with are their own technology.

BLOCK: You talk in one of your reports for the journal with folks at one of China's high speed rail companies, CSR, and a spokesman says, look, this is nothing like Kawasaki's bullet train. He has this great quote, we attained our achievements in high speed train technology by standing on the shoulders of past pioneers.

Mr. SHIROUZU: Yes. That's what they say. They don't deny the fact that their latest trains are based on foreign technology. They don't deny that. Foreign companies are saying that you haven't made enough additional innovation. There's no way you can call this your own technology.

But, China says, no, no, no. You know, we made enough additional innovation that we're calling these trains the result of our effort. So they feel that they can export these trains to places like U.S., Brazil, Russia maybe, and foreign companies feel that that is in violation of their contract.

BLOCK: And do the foreign companies have legal recourse at that point?

Mr. SHIROUZU: I think they do. I mean, they can sue China. But how long that's going to take? Ten years, 15 years? In the meantime, are you going to be able to sell the technology? So that's the risk that you have to take.

BLOCK: Nori, you also write a lot about the auto industry. Do you find that foreign carmakers are still eager to develop new car technologies in China, given what a huge, huge market that is?

Mr. SHIROUZU: Basically, yes. I mean, they have no choice in many industries including auto, China is now the biggest. So if you don't succeed in China, there's no future for you, basically. So, the dilemma is how to control how much you give to China. Publicly I think you have to strike this posture that you're really willing to help China.

But at the same time, you have to find a way to control the technology transfer process. And that's going to be a big challenge for anybody.

BLOCK: I've been talking with Norihiko Shirouzu. He's a Wall Street Journal reporter based in Beijing. Nori, thanks very much.

Mr. SHIROUZU: Thank you.

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