Is China poised to close the technology gap?

Last year, one of the biggest and fastest rising US exports to China was something very basic: scrap metal.

China, meanwhile, is racking up billions of dollars in trade surpluses with America in computers and other items grouped by the US Commerce Department as "advanced technology products."

On Monday, an official at one of China's major aviation companies touted China's ambition to build large commercial jetliners by 2020 – a move that could put Chinese workers in direct competition with Boeing and Airbus in producing one of the world's most advanced industrial products.

This doesn't mean that China has caught up with the United States or Europe in its technological prowess. But the world's most populous nation is adding new capabilities with notable speed and determination.

Because China represents such a large potential market, it has been able to enlist help from the world's largest companies, including General Electric and Sony as it develops.

As a result, some experts say, China's trade relations with the US and other nations hold an unusual risk as well as opportunities for shared prosperity. The threat is that, as large corporations spread their best practices worldwide, China may climb the "value chain" – produce more advanced goods – and freeze the standard of living for most workers in the US, Japan, and Europe.

"We can compete ... only to the extent that we have far superior technology within our borders, not just in companies that may be incorporated in Delaware," says Charles McMillion, an economist who studies China at MBG Information Services in Washington.

The standard theory of trade is that all participating nations tend to benefit. Each gravitates toward selling products they are good at producing. Companies compete with one another, but in the process all national economies become more efficient.

To many economists, the current world economy still fits that pattern.

Still, both the boosters of globalization and those with deep concerns about it say that today's circumstances are unusual. In the past two decades, reforms in populous nations like China and India, coupled with the end of the cold war, have unleashed more than 2 billion workers – millions of them skilled – into the global labor market. Meanwhile, the rise of the Internet and other technology has made it easier for corporations to run global supply chains.

The result has been a great boom in trade, integrating the world economy as never before. China has become a huge market for US goods – everything from heavy equipment and chemicals to farm produce and paper products.

In many ways, China follows the trail already blazed by nations such as South Korea and Japan: First, low-end manufacturing like toys, then electronic goods like DVD players. Then automobiles.

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