China's progress is not in theft of trade secrets

The US indictment of five Chinese military men for cyber-espionage against American firms is really a challenge to Beijing to fulfill its own goal of sustaining growth through home-grown innovation in technology.

AP Photo
Jack Ma, chairman of the world's largest e-commerce group Alibaba, poses during a show at the 2013 Summit of China Green Companies in Kunming. Alibaba has begun the process to sell stock in the US.

For nearly a decade, China has tried to create a strong culture of innovation among its technology researchers. The party line: Be creative, discover new ideas, and accept temporary setbacks like a Steve Jobs.

Imagine the shock then on Monday when the United States indicted five Chinese military officers for allegedly stealing secrets from several American companies such as Alcoa and Westinghouse. In accusing China of massive cyber-espionage, the US is challenging Beijing to live up to its own goal of becoming a global leader in science and technology by 2020.

“Success in the international marketplace should be based solely on a company’s ability to innovate and compete, not on a sponsor government’s ability to spy and steal business secrets,” US Attorney General Eric Holder said in announcing the indictments.

The alleged thievery involved hackers at a spying operation near Shanghai extracting such information as nuclear plant designs and the price for solar panels from the US. The military is involved because it has a heavy hand in state-linked enterprises that dominate the Chinese economy. Many of those enterprises have lately begun to falter in global export markets.

The five suspects were named and their pictures put on the FBI’s most-wanted posters – although they are unlikely to face trial in the US. The main point of the indictments is to shame China into ending its official campaign of pirating intellectual property from abroad and to speed up innovation at home.

China has many successful technology companies, such as Alibaba, Lenovo, and Huawei. But none are in the Top 100 Global Innovators (the US has 45). And much of China’s progress since 1980 has been based on borrowed technology, either stolen or coerced out of foreign companies seeking to enter the large Chinese market.

As its economic growth slows, China needs to move up faster in the world’s high-tech supply chain in manufacturing and software. Yet it still spends far more in buying royalties than earning from royalties. Changing this will entail a second cultural revolution, one that promotes free-spirited innovation, risk-taking, a tolerance for mistakes, and opportunities for second chances.

“We prefer honest work, even if it comes to nothing,” said China’s science and technology minister, Wan Gang, in 2010. “We need a society which has enough patience to be able to withstand failures.”

Other cultural shifts are needed. Mr. Gang expressed outrage last year at the level of cheating by China’s scientists. While Chinese patents are now more numerous, many are deemed not to be innovative. The number of Chinese scientific publications has boomed, but the papers are often plagiarized or infrequently cited. The country educates more than a million engineering graduates a year, but Chinese schools still emphasize rote learning over creative thinking.

China’s political culture keeps a tight lid on the truth while encouraging scientific researchers to seek the truth. Its leaders push for rapid progress in industry but do little to dispel the notion in China that wealth is a zero-sum game.

The world’s second largest economy can shift away from being a copycat of technology if it sees progress as based on a constant flow of new ideas available to those able to uncover them. Innovation cannot be hacked. It requires a culture in which individual creativity and the breaking of mental bounds are nurtured through freedom and protected by rule of law.

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