Re-innovation nation: the political economy of technology transfer policy in post-WTO China

This article examines China’s efforts to accelerate its economic rise using technology absorption policies, or measures that condition foreign market access on technology transfers to domestic firms. I argue bureaucratic fragmentation and China’s position in global value chains (GVCs) constrain its bargaining power over foreign investors, limiting the use of tech absorption policies even in highly strategic industries such as semiconductors. Case studies and analysis of a new industry-level dataset from 1995-2015 suggest centralizing reforms facilitated increased use of tech absorption policies in strategic industries over time. However, China’s reliance on foreign firms to drive export growth and associated employment undercuts tech absorption efforts in strategic industries in which it occupies an intermediate position in GVCs. My findings show how regulatory institutions and GVCs shape the political economy of bargaining over technology transfer between states and firms, and how position in production networks influences the strategic choices behind China’s rise.