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The Rise of East Asia: Threat or Opportunity
The quality of cheap labor reduces the pressure of companies to develop new technology. Even though the Chinese have increased their expenditure on elite university and on R & D, their spending is still well behind the US, standing about 1% in comparison to 2.6%/2.7%. What's more, the lack of protection for intellectual property saps innovation.

There's a huge disparity between the number of patents which are registered in China and the number registered in OEC countries. But what China, despite all of this, has been doing is to climb the technology ladder by buying in technology or by persuading foreign partners to transfer technology as part of the price for giving access to China's large market. The car company Chery got the technology for building car engineer for an Austrian company, AVL. The Chinese got the technology for Code 5 generator from Allstar. They are trying to acquire western turbine from GE. Semens, Motorola and Microsoft have all transferred technology to China as part of their global research efforts.

Then, of course, Taiwan with Singapore, Japan and some European countries have been responsible for providing China with the technology for semiconductor. Indeed, Taiwan's role in China's overall economic modernization has been substantial. Taiwan was one of the original Asian Tigers, taking advantage in the wake of Japan's success, with Singapore, South Korea and Hong Kong, of political stability, opening of markets, especially in North America and Europe and of the Capitalist allocation of resources. Took advantages of these things in order to grow exponentially.

All the Four Tigers have had similar experiences. Not one of then have much in ways of natural resource. But they all have astonishing high growth rates, especially in the two decades before the Asian Financial Crash in the late 1990's.

Economic success in Taiwan has led to huge investments in China. Two-thirds of Taiwan's foreign investment is there. That foreign investment is reckoned to stand today at about $42 billion dollars. Though, my guess is that it is almost certainly an underestimated.

There are two rather obvious indicators of how intimate the relationship is between China and Taiwan. First, I was in Shanghai recently and was told of the substantial numbers of Taiwanese who are living in and around Shanghai. Second, and again it is a guesstimate, it is thought about 60% of China's hi-tech business represent joint ventures between mainland Chinese companies and Taiwanese.

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