How China plans to engineer its way out of technology ‘strangleholds’
26 Sep 2022|

For more than four years, Chinese President Xi Jinping has been giving speeches and going on inspection tours throughout China delivering an important message—China needs to become less reliant on key technologies imported from abroad. At a meeting in 2020, Xi implored researchers to work towards breakthroughs in ‘choke point’ or ‘stranglehold’ technologies. These are important technological domains that China can’t readily produce domestically. They are often referred to, especially in Chinese official media, as ‘controlled by others’.

After the imposition of export controls on Chinese corporate champions such as Huawei and the globally coordinated sanctions on Russia after its invasion of the Ukraine, China’s leadership is worried. China could be cut off from more imports. Chokepoint technologies make China vulnerable.

At the time of Xi’s 2020 speech, the government was well into a process of sifting through China’s vast set of labs, centres, institutes and companies to assess which ones were conducting work that would help the country steer through this increasingly unpredictable geopolitical environment.

Five years ago, the Chinese government decided to consolidate a group of engineering labs and centres that help companies develop new products from research done at various research institutions, often universities. These institutions, called national engineering research centres or NERCs, have now been reorganised to meet the challenge of technology self-reliance. Earlier this year, the Chinese government announced a new list of 191 NERCs that were selected from 131 national-level engineering centres and 217 national-level engineering laboratories. Almost half didn’t make the cut.

One centre that made the new list is the National Engineering Research Center for Electronic Design Automation. The centre is not as well known as the company it is attached to. Empyrean Technology has recently emerged to challenge foreign, primarily American, global leaders in software needed to design computer chips. The company has backing from a Chinese state-owned company and received central government funds aimed at transforming new technologies into commercial products. If things go according to Empyrean’s plans, by 2025, it will have ‘fully substituted’ foreign makers and by 2030 will sit alongside Cadence and Synopsys as a global market leader. Whether it will reach these goals is another story.

This centre and its host company do work that corresponds to an area that has been identified as a choke point elsewhere. In a report published by the Center for Security and Emerging Technology, Ben Murphy synthesises 35 articles first published by the Chinese state-run newspaper Science and Technology Daily in 2018 that identify specific sets of technologies as chokepoint technologies. These 35 technologies are often referenced by heads of Chinese research organisations, Chinese innovation experts and industry insiders in China as a way to explain how their work is guided.

Centres like those affiliated with Empyrean are now governed by an updated set of rules that add a special focus on stabilising supply chains and addressing ‘bottlenecks’. A new set of pilot guidelines for evaluating NERCs asks centre leaders to submit a 2,000-Chinese-character narrative describing how their work contributes to the development of chokepoint technologies.

Inspired by research organisations such as the Argonne National Lab in the US and the Helmholtz Association in Germany, Chinese leaders published plans in 2017 in which they described the need to establish three types of ‘national science and technology innovation bases’. The categories are ‘scientific and engineering research’; ‘technological innovation and the transformation of achievements’; and supporting efforts that provide the conditions for success for the first two bases.

NERCs fall into the second category—achievement transformation or technology transfer. National and state key labs are meant to focus on the first category. They are expected to conduct research of a more fundamental nature ‘aiming at international frontiers’ while bearing in mind ‘national strategic goals’. The National Science and Technology Resource Sharing Service Platform, for instance, conducts work in the third category. This includes things like data sharing and storing experimental materials.

NERCs are mandated to serve as a ‘bridge between industry development and technological and scientific innovation’. The reorganisation of NERCs aims to ‘firmly implement the innovation-driven development strategy, serving economic and social development, [and] supporting the research and development of key core technologies’. The innovation-driven development strategy is a signature policy promulgated in 2016 aimed at strengthening China’s industry through innovation. By evaluating engineering centres based on their contribution to breaking ’chokeholds’, the Chinese government includes supply-chain security as a feature of this larger industrial upgrading effort.

It is at places like NERCs where we would expect the development of technologies on their way to market readiness. Earlier this year, Chinese official media reported that the National Engineering Research Center for Communication Software and Application-Specific Integrated Circuit Design had developed a domestic version of a RapidIO interconnect. Interconnects or switch chips play an important role in the transfer of data in wireless and avionics applications. RapidIO is an open-standard architecture from the late 1990s whose development has been dominated by non-Chinese companies such as Texas Instruments and Ericsson. This NERC’s chip is being touted as a challenge to their dominance.

In addition to supporting civilian industrial development, NERCs also play a role in dual-use technologies. In his book Innovate to dominate: the rise of the Chinese techno-security state, Tai Ming Cheung identifies 11 NERCs (from the group prior to reorganisation in 2021–22) as being based within entities with ties to China’s military–industrial complex. Several were included in the new sequence. For example, the NERC that developed the RapidIO prototype is hosted at the China Electronics Technology Group Corporation No. 54 Institute. This institute sits on a US entity list.

The work of NERCs directly challenges the so-called dependency myth that continues to hold currency in public debates. This myth says that most Western countries are dependent on China because of Chinese imports of critical manufacturing inputs and raw materials. However, China is just as acutely aware of its own dependencies, especially in certain high-tech areas. More importantly, China’s leaders are reorganising parts of its innovation system to alleviate its dependencies.

Policymakers, especially in the United States, Europe and East Asia, should be aware that these larger systematic efforts are underway and take stock of their dependencies on China as well as China’s dependencies on them.