There may be valuable political conclusions to be drawn from the current tiff between Google and the Chinese government, but there certainly isn’t anything new on the economics or business side. Perhaps the main reason the PRC wants foreign technology and know-how is to drive foreign (and some domestic) companies out of business.
Google’s threat to stop its China service entirely has prompted broad discussion of the struggle of many multinational firms in the PRC. The discussion is well summarized by James McGregor, “There’s a sense China is saying, ‘We have your technology and your capital – and now we have control of the market.’”
The remarkable thing here is not China’s behavior but the fact that anyone didn’t know this years ago. The Chinese government has long been explicit about increasing intervention to promote state enterprises and using foreign companies in that quest. As Heritage noted in 2008:
. . a model of national champions—large corporate groups consciously created with the idea that size is necessary to compete globally. An unspoken corollary is often that neither domestic nor foreign competition with these champions can be tolerated. China has been enamored of the champions concept for at least a decade, but the restructuring process was accelerated in 2002 . . .
In fact, Chinese policy has been clear since at least 2003. That we have companies and analysts discovering it in 2010 is news about them, but not news about China.
