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Prevent multinational companies from integrating China’s strategic industries

[Abstract] The 2005 National Science and Technology Conference replaced “open innovation” with “independent innovation”, which is a key step for the country to establish a correct industrial development strategy. However, the country and enterprises who are the main players of innovation are still inconsistent. In 2000, our non-mainstream economics learned Zhao Ying’s concept of “super industry” and proposed the concept of “strategic industry”, including nuclear, electronic, aerospace, conventional military weapons, strategic oil and material reserves, etc., in theory. Beyond the traditional “public and private”, “military and civilian”, “nation and foreign investment”, “market and state”, to provide new concepts for the development of independent and powerful new national industries under new historical conditions And the theory, the strategic industry is country-led, through the processing of parts systems and private enterprises, foreign-funded enterprises combined, the dominant power is in the hands of the state.

This paper points out that under the conditions of the new scientific and technological revolution, the participants of the new economy and globalization are not only enterprises and individuals, but more importantly, the state and the nation. The main body of international competition in the 21st century is the competition of big country super industry. Developed countries support the characteristics of strategic industry development. Multinational companies have brands and core technologies that dominate industry standards and can control the entire industry. This is a more direct and effective “non-equity control” than equity control.

This article criticizes a series of views that are harmful to China’s strategic industries: such as static comparative interests, relying on foreign technology export theory, and market-for-technology theory. Introduced the latest “learning effect theory” to demonstrate the significance of dynamic comparative interests and moderate protection.

There has been a sharp debate on the issue of China’s industrial development. The idea of ​​”open innovation” has always dominated. This view is based on the concept of economic liberalism, replacing the industrial-related benefits with the economic benefits of enterprises, and replacing the national security benefits with economic benefits. For the basic theory of international trade: comparative advantage theory, doing static interpretation, denying comparative benefits is Dynamic; China can only develop labor-intensive industries, because it is in line with the national conditions of labor surplus, so there is a strategy of “working for the international community with 100 million trousers for one aircraft” and “world processing factory”. Be proud. This view is particularly opposed to the promotion of industrial structure by the power of the state, and believes that state intervention will generate rent-seeking and interest groups; in history, it completely negates the industrialization of the country during the economic period, which is considered to be a non-conforming economy. The principle of efficiency, there is no way out of the “catch-up strategy.”

In recent years, the economy has seen a new situation around the world. The fourth new scientific and technological revolution led by the United States has made a breakthrough. Information and biotechnology have begun to industrialize, and a series of emerging industries have emerged, including the tertiary industry such as the media industry and the financial industry, which prompted the third scientific and technological revolution. Traditional industrial clusters are subject to large-scale integration based on new technologies. A series of large-scale mergers of enterprises and banks have been completed, the most famous of which is the integration of the world’s aviation manufacturing industry: under the leadership of the US government, Boeing merged with McDonnell Douglas and smashed the MD series of large-scale jet airliners that cooperated with China. The five European countries jointly produced Airbus and formed two oligopoly in the international aviation industry. Brazil and Canada can still produce 100-seat regional aircraft. The huge industrial production capacity of Japan and South Korea is positioned by the United States as a Boeing accessory due to the security treaty and cannot have its own brand. This is the US-led “production internationalization” and industrial integration. With the brand and core technology, leading industry standards, you can control the entire industry. It is worth noting that there is no “institution and property rights” here. This is a more direct, more effective and more subtle “non-equity control” than equity control.

Adapting to the background of the scientific and technological revolution, globalization and the new hegemony of the United States, new economic liberalism theory emerges as the times require. This is an open or covert claim: to integrate Chinese industries with foreign investment as the leading factor. Developed countries not only transfer the processing and assembly parts of the industry to China, but more and more “research and development” are also shifting. Some people then said that technology is changing from monopoly to mobility in the international arena. The fundamental driving force is that the cost of original technology is too high, which has prompted multinational companies to transfer new technologies to China to occupy the market, otherwise they will not be able to recover costs. There is no need for China to make original technological inventions at great cost. “To change technology with the market” can be successful. There is no need to emphasize “national capital” and “state capital”. As long as it is registered in China, it is a Chinese enterprise that can create GDP, increase employment, and improve consumer welfare.

This kind of theory is extremely misleading: it avoids the issue of national interests and national security in the context of globalization. As a rising power that cannot be attached to developed countries, China must be relatively independent in key technologies and basic technologies. It is also impossible to transfer core technology to us. Second, it avoids the problem of enterprise and industry dominance in the middle of industrial internationalization. China cannot always stay at the end of the international industrial chain and give high-end to developed countries. Third, it Consumer welfare replaces the interests of producers and inventors, guiding Chinese people to be consumers only as producers, and not to be inventors.

China’s national enterprises are weak and need the state to support them to participate in international competition, have their own core technologies and basic research, and participate in the formulation of international industry standards. State support must also avoid corruption and rent-seeking. If this is not possible, the Chinese industry, including the financial and media industries, will not be far away from the integration of multinational corporations in developed countries. China will not have its own independent industries and core technologies. GDP or licenses maintain high growth, but GNP will be less and less, that is, production and processing are on our side, but profits are in the hands of foreign capital. On the surface, this is the result of our sale of the market, which is actually the result of the loss of industrial ownership. For the immediate profit without striving for industrial dominance, in the end, not only will economic sovereignty be lost, but also no profit.

At the end of 2005, the National Science and Technology Conference replaced “open innovation” with “independent innovation”, which is a key step for the country to establish a correct industrial development strategy. However, the country and enterprises who are the main players of innovation are still inconsistent. In 2000, our non-mainstream economics learned Zhao Ying’s “super industry” and proposed the concept of “strategic industry” in order to theoretically surpass the traditional “public and private”, “military and civilian”, “national and foreign”. The “market and state” dispute provides new concepts and theories for the development of independent and powerful new national industries under new historical conditions.

The “globalization theory” defined by the West has one-sidedly attributed the main body of the new economy and globalization to enterprises, especially developed country multinational corporations. It is one-sided to logically dissolve national sovereignty and national interests. The participants in the new economy and globalization are not only enterprises and individuals, but more importantly, countries and nations. The main body of international competition in the 21st century is the competition of big country super industry.

Super industry or strategic industry, with its huge scale, huge investment, huge space and great interests, has become the main embodiment of comprehensive national strength and national strategic capability, with the defense industry as the core: including nuclear, aviation, aerospace, marine, electronic, conventional weapons. , strategic material reserves and other industries.

The strategic industry is based on breakthroughs in science and technology, with high risks and returns. The development of strategic industries can promote the country’s technological innovation capability, which is the core interest of the country and requires a huge amount of social capital. The strategic industry mainly provides public or quasi-public products, and the government is the main buyer. The entry of strategic industries is extremely high. The development depends on the size of the big country and the capacity of the government. In the early stage of growth, the national basic research plan and defense procurement are required.

For example, the aviation industry is a high-tech, strategic core industry involving machinery, instrumentation, electronics, materials, metallurgy, chemicals and transportation. It has the highest added value in the manufacturing industry, and is calculated based on the value created by the unit weight of the product. The car is 9, the color TV is 50, the electronic computer is 300, the jet airliner is 800, and the aircraft engine is 1400. The navigation equipment and software of the new fighters already account for 50% of the cost. Development research costs 5 billion US dollars, with 8 – 10 years. Modern aviation manufacturing integrates the cutting-edge technologies of materials, machinery, engines, aerodynamics, electronics, and weapons, including ultra-precision machining and special processes. The determination to develop the aviation industry is equivalent to mobilizing the national industrial and technological elites. It is a culture to forcefully upgrade the industrial manufacturing level of the country. It is not enough to rely solely on the financial support of the state. It also requires the will of the entire country, including civil servants to take the lead in domestically produced aircraft. After decades of hard work, it can be achieved.

Some people think that it is an illusion to introduce advanced manufacturing technology through international subcontracting and cooperation. It may have been “locked” by foreign countries for many years in the processing of accessories. China can participate in subcontract production of international aircraft, but it should be placed on large aircraft that develop independent intellectual property rights. Standards and models are their own, and some uncreated parts can be imported and subcontracted. Openness and protection are always complementary. After 30 years of opening, China’s shipbuilding industry undertakes most of the international processing business. Orders are constantly flowing, but they cannot produce crankshafts themselves. They need to buy them at high prices everywhere, which is very passive. The original crankshaft factory was shut down because of the temporary loss of “state-owned enterprise property rights are unclear” and the efficiency is not high. In fact, this is not a property issue, but there is no order for the time being. From a long-term perspective, the state should implement subsidies, short-sightedness, or be misled by certain theories. Once the processing and production suddenly develops, it is found that there are no key links, and regrets are late!

The independent development of strategic industries is the need for national defense security and upgrading of industrial technology. Township and village enterprises have been able to independently design and manufacture motorcycles and automobiles. Only aviation and aerospace can drive the comprehensive upgrading of technology and industry, making room for ordinary private and state-owned enterprises, and driving them to process spare parts for strategic industries through open tendering. It is completely wrong to emphasize the reform of property rights one-sidedly and to confront the development of strategic industries with the private economy.

The development of strategic industries can create long-term dynamic comparative benefits and drive countless industrial chains. Such industries are in a childish period, and the state should be supported by long-term support with a firm will and laws. This is by no means a closed-door country. Study and study, translation materials, and global processing orders are all open to the public. If the weak want to overcome the strong, they must dare to be good at breaking the rules of the strong. The Chinese are not without the bargaining capital with the developed countries. The future domestic market, strengthening national defense and technological strength are our advantages.

Labor-intensive industries are close to saturation around the world. With China’s annual savings rate of 40% and trillions of RMB investment, investment in labor-intensive industries will continue to make global products surplus.

Even from the perspective of making money, developing satellites and aircraft is not necessarily as good as clothing and toy airplanes. Satellites have been used in geological exploration, weather forecasting, map mapping, military intelligence, and network telecommunications in all aspects, with considerable profits. Judging from the comprehensive economic benefits of foreign trade for the national economy, clothing can only drive general labor employment, and most of the textile machinery and fabrics, especially raw materials, are imported. The aircraft pulls a series of industrial and scientific sectors: including high-precision aluminum alloy, CNC machine tools, electronic remote control, computers, advanced air conditioning and other safety equipment, weapons and equipment, instrumentation, engines, hydraulic systems, fuel systems and so on. Even if the aircraft is ultimately difficult to be completely successful, it will fully promote the development of industry and technology in the trial production process, and it is not the same as the simple processing and assembly. This is why Russia still insists on the development and production of aircraft and rockets in the event of a country split and economic collapse.

The latest “learning effect theory” demonstrates the significance of dynamic comparative benefits and moderate protection. If a country produces a product with a relatively high relative productivity, the relative cost of producing it will naturally be lower. However, the level of productivity is not natural. It depends to a large extent on people’s learning and exercise in practice. The more people do the same job, the higher the work efficiency, the same kind that a company has produced.

The more products, the higher the production efficiency and the lower the production cost. Americans estimate that the cumulative production of a model aircraft doubles and its production costs are reduced by 20%. This “learning effect” has two characteristics: the productivity of a product depends on its production history, and the more it is produced in history, the lower the cost; the longer the production history of a product, the more its potential for cost reduction small. From the production of the first aircraft to the production of a second aircraft, the cost can be reduced by 20%. After the production of 10,000 aircraft, it is necessary to reproduce 10,000 aircraft to reduce the cost by 20%. From this point of view, the production of unproduced products can quickly reduce its production costs, while the production of old products will not reduce its cost. There are fewer “new products” (modern industrial products) in developing countries, and the productivity of new products relative to old ones is lower than that of developed countries, and the relative cost is higher than that of developed countries. This is the fundamental reason why people complain that “the price of domestic cars is high.” The main way to reduce the relative cost of new products is to produce them more.

The relative cost of these new products is initially very high. If free trade is implemented and competition is made between imported products and the introduction of foreign equipment, enterprises in these industries will lose money, production will not be carried out, and learning effects will never be obtained. Relative productivity will never be Will improve. If the production of these new products in the country is protected by high tariffs, so that the enterprises that produce them will not lose money, the production of these new products will develop. After a period of time, the relative productivity of these new products will increase, and their relative costs will increase. Will fall. In this way, free trade policies may actually prevent a country from increasing the productivity of products that produce very little in its history, while protection of tariff policies is conducive to increasing such productivity. In the words of the 19th-century German economist Liszt, the father of the theory of the protection of infant industry, the protection of tariffs is the value of the present, but the development of national productivity. This is the most typical example of how economic policy itself can affect productivity.

In short, China’s relatively inferior industries are: high-tech, some capital-intensive products, such as chemicals, aerospace products, advanced technology and equipment, especially strategic industries with independent intellectual property rights, must be cultivated as long-term dynamic comparative advantage, blindly superstitious market freedom Competition will always be a disadvantage. As a politically independent world power, China must take two paths at the same time: follow the laws of market economy to upgrade the current labor-intensive industries, and use the national strength to foster strategic industries with independent intellectual property rights. This is the development and creation of dynamic comparative advantages, two parallel roads.

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