The Asia-Pacific Journal | Japan Focus Volume 6 | Issue 2 | Article ID 2661 | Feb 01, 2008

1

China's High Tech Industry and the World Economy:Zhongguancun Park

Yu Zhou

China’s High Tech Industry and the WorldEconomy: Zhongguancun Park [1]

Yu Zhou

Can Chinese companies innovate in cutting-edge technology? It is a question many havebeen asking in the last few years as the sizeand dynamism of China’s economy becomeapparent. This article focuses on thedevelopment of Chinese companies in theinformation and telecommunication sectors ofindustry, conventionally known as “InformationCommunication Technology” (ICT) [2], amongthe most dynamic, profitable and globalizedindustries.

It is often argued that China’s rapid economicgrowth and national competitiveness are drivenby its booming export industry, poweredprimarily by foreign affiliated companies. Inthis way, China appears to closely follow thefootstep of Japan, and other smaller Asiandragons, starting from labor-intensive industryand gradually moving up the value chain. Thisstory is not wrong, but it is incomplete — twoother factors are also at play in China: rapidlyemerging competitive domestic firms, and avast and dynamic domestic market. While thewestern business world is agog withenthusiasm about a Chinese market that ithopes to dominate, this study examines howthis market, in conjunction with China’s exportindustry, are creating powerful synergeticforces for indigenous companies. I approachthe rise of Chinese companies historically byretracing the footsteps of China’s mostprominent science park — Zhongguancun (ZGChereafter) in Beijing — where many of the most

dynamic indigenous companies were born. Thearticle concludes that the growth andcompetitiveness of China’s own technologicalcompanies may eventually create more lastingimpact on the future global landscape thanChina’s vaunted labor force.

What is Zhongguancun?

Nestled in the northwest part of Beijing andhome to many of China’s most prestigiousuniversities and research institutes, ZGC isknown as China’s “Silicon Valley.”

APJ | JF 6 | 2 | 0

2

Map of Zhongguancun Science Park in 2006

Since the mid-1980's, ZGC has transformedfrom a quiet suburb designated for scientificresearch and higher education into a bustlinghub of high-tech business and research anddevelopment (R & D) labs (Francis 1997). Thefollowing snapshots show the region’s startlingtransformation in a matter of years.

ZGC in the early 1980s. The peaceful are with wall-encircled universities or research institutes. Eachinstitute formed a residential compound with few

transactions outside. Haidian District archive.

By 2005, the area hosted over 17,000 certifiednew technology enterprises; nearly 60 percentwere in information communication technology(ICT) or related sectors [3].

ZGC in the mid-1980s. ZGC became known as the“Electronics Street”, with stores along the main

thoroughfare selling computer hardware andsoftware. Most were spin-offs from universities andthe nearby Academy of Sciences. Haidian district

archive.

ZGC in the late 1990s. Scattered office towers wentup along the thoroughfare, and large indoor

computer wholesale markets occupied the groundfloors.

ZGC in the new millennium. The core of ZGC hasbecome a corporate business center of high-tech

Chinese and multinational corporations.

Figure 1. shows four major indicators of ZGCgrowth from 1988-2004 in numbers of firms,employees, gross revenue and government taxincome. Although the patterns are somewhatdifferent, all show significant growth,especially since the late 1990s.

APJ | JF 6 | 2 | 0

3

Figure 1: Growth of Zhongguancun Science Park(1988-2004). Source: Annual report of Zhongguncun

Science Park, multiple years. (ä¸å…³æ�‘科技å›-区ç»�济å�‘展综述, å�„å¹´.)

ZGC is a different kind of technological regionfrom the more familiar booming export-oriented hubs in China, exemplified byShenzhen and Shanghai on the south andcentral coasts. Shenzhen and the surroundingarea, Dongguan, developed since the 1980s asChina’s first special economic zone, hostingChina’s earliest and one of the largest clustersof information communication and technology(ICT) companies. Some of China’s mostsuccessful high-tech firms are located theresuch as Huawei; though the vast majorityspecializes in labor-intensive assembly forexport. Shanghai and its environs such as cityof Suzhou emerged in the 1990's as a newcenter of high-tech production. It attracts morecapital-intensive and higher-end manufacturingestablishments, such as those making notebookcomputers and semi-conductors, thanShenzhen. Multinational companies from theUnited States, Europe, Japan and Taiwan playdominant roles in both Shenzhen and Shanghai.The majority of foreign investments there havetargeted export markets, although in recentyears investors have paid growing attention toChina’s rapidly growing domestic market(Figure 2).

Figure 2: The number of ICT companies in the fivemost concentrated regions in China. Source: ChinaEconomic Census, 2004. The total numbers are the

sum of companies in computer equipmentmanufacturing, telecommunication equipment

manufacturing, electronic parts manufacturing,telecommunications, internet services, and computer

services and software. Source: National Bureau ofStatistics of China based on the 2004 Economic

Census.

Compared to regions in other developingcountries, ZGC also has unique features. Itsenterprises did not grow out of a historicallyrooted business structure such as those inIndia, South Korea and Japan, where large,privately funded business powerhouses havelong been in ex is tence . A l l Ch inesetechnological commercial firms had to becreated — from scratch — in the post-reformera that began in the 1980's. Further, ZGCdoes not feature multinational corporations(MNCs) as the dominant players, unlike inlarge Latin American countries such as Brazil(which also has a large domestic market),though MNCs have been welcomed as an

APJ | JF 6 | 2 | 0

4

integral part of the mix. And technologicalprogress in ZGC has been driven primarily bydomestic demand rather than export needs.Over 85 percent of ZGC’s revenue has comefrom domestic sales of products and services(Zhongguancun Administrative Committee2005 p. 10). Many of China’s well-known ICTcompanies are found in ZGC: Lenovo, the worldthird largest person computer manufacturer;Baidu, China’s leading Internet search enginecompany; UFIDA, China’s largest privatelyowned software company; Founder, China’slargest digital media company; Datang, one ofChina’s largest telecommunication solutioncompanies; Aigo, China’s leading portablestorage and digital entertainment productmaker, and Sina.com and Sohu.com, two ofChina’s most popular Internet portals. In otherwords, the advance of firms in ZGC is drivennot by China’s most prominent advantage inthe international division of labor — i.e.,inexpensive labor — but by the ability to wedadvanced technologies with the Chinesemarket.

Despite i ts prominence in China andpronounced global ambitions, ZGC remains aninternational enigma. Its origin in the centrallyplanned economy and its location in China’scapital invite skepticism over whether it will beable to compete with vibrant innovative centersin mature capitalist economies such asCalifornia’s Silicon Valley (Cao 2004). Inessence, ZGC is an audacious experiment by alate industrialized country. China is not contentwith be ing s imply a labor - intens ivemanufacturing workshop for foreign MNCs.Nor is it satisfied with technology acquisitionand upgrading through a gradual process,through the export commodity chain, as someSoutheast Asian countries have done. Whilethat process is running its course in coastalChina, China hopes that its enormous and fast-growing domestic market will also propel itsbest-endowed regions directly into theinnovative technology market, while being opento MNC investment and competition. ZGC thus

was designed as an incubator to create globallycompetitive technological leadership.

Thus far, ZGC has been relatively successful,though it is still far from reaching its ultimategoal. As one of China’s 53 national-level high-tech zones, ZGC generates about one-seventhof their total revenue (ZGC governmentwebsite). About a quarter of the companies inthe region derived more than half of theirrevenue from technology sales[4]. Of 25Chinese technology companies listed onNASDAQ by 2005, 13 were located in ZGC. By2007, about 100 companies in ZGC have beenpublicly listed in stock markets in China andabroad, easily a record among all China’s 52national high-tech zones.

ZGC and Theories of TechnologicalDevelopment

If viewed through the most influential theoriesof East Asian technological progress, ZGCwould appear to be an out l ier . FromSchumpeter onward, most theorists have heldthat technological changes constitute thedriving force in the advancement of societies(M. Castells 1996; Malecki 1991; R. R. Nelson1996). Yet how those changes occur undersystems other than mature capitalism remainscontentious. In the last three decades, theexperiences of East Asia, particularly Japan,South Korea and Taiwan, have inspired twodevelopmental theories.

The first holds that technological progress innewly industrialized countries is most likely tobe achieved through a learning processconsisting of borrowing, adapting, andimproving upon foreign designs rather thanthrough frontier innovation involvingformalized R & D (Amsden 1989; Cumings1987; M. Hobday 1995; M. Hobday 2001; Kim1980). Export industries are thus the bestcatalyst and vehicle for technological learning,the theory argues, as external markets providecompetitive incentives and require fiscal

APJ | JF 6 | 2 | 0

5

discipline of the producers.

The second theory maintains that the activeengagement of states is indispensable inin i t ia t ing and promot ing industr ia ldevelopment and technological upgrades indeveloping countr ies . Sk i l led s tateinterventions through timely subsidies,targeted industrial policies, capital investment,tax and regulatory incentives, and strictfinancial standards can speed up technologyacquisition, this theory asserts (Amsden 1989;B. P. Evans 1995; Haggard 1990; Wade 1992).

The first theory tends to place least emphasison the role of domestic markets in thetechnological trajectory of local enterprises indeveloping countries, as the previous regime ofimport-substitution was discredited asineffective. If the domestic markets of the fourAsian “dragons” are too small to merit muchattention, the same cannot be said of themarket of mainland China, one of the largest inthe world (OECD 2006). The impact of such amarket on domestic enterprises should not beunderestimated.

China is also often said to support the theorythat state intervention is essential forpromoting technological development. Butwhi le the state has indeed played anindispensable role in developing ZGC’stechnological programs and policies, it is only apart — and not necessarily the dominant part —of the regional quadrangular innovation systemthat has been taking shape since the 1980s inZGC. That system consists of the state, MNCs,research institutions and local firms. Eachshould be understood as a reflexive actor in atransitional political economy facing thegrowing influence of globalization. The story ofZGC thus challenges the most influentialwisdom on East Asian technologicaldevelopment by revealing how indigenousmarkets shape technological changes in arapidly globalizing industry, and howinstitutional transformation takes place in

technological sectors within a transitionaleconomy.

The quadrangle system of innovation inZhongguancun, Beijing.

Beyond the International Division of Labor

Since the 1980s, an enormous stream ofliterature has been produced based on a closeexamination of the development experiences ofLatin America and East Asia. Consequently, aseismic shift has occurred in developmentaltheories. They now consider participation in theinternational division of labor as a prerequisitefor development, while largely ignoring theroles of domestic markets and marginalizingthe contribution of indigenous firms in such amarket. Modernization theories in the 1960sand 1970s, in contrast, whatever theirshortcomings, at least put more emphasis ondomestic market development (Rostow 1971).

For developing countries, participating in theinternational division of labor means prizingexport activities, starting from the bottom ofthe technological hierarchy with the hope ofgradually moving up. Export industry is viewedas generating a path for technologicalacquisition. Stephan Haggard, for example,holds that the “crucial difference” between theEast Asian and Latin American newlyindustrialized countries (NICs) is “the

APJ | JF 6 | 2 | 0

6

difference between industrialization throughexport and import substitution” (Haggard 1990p.27). In a detailed comparative study of the“four dragons” — Taiwan, Hong Kong,Singapore and South Korea — Hobday (1995)presents a general model of technologicallearning through interaction with foreign firms.He emphasizes the importance of export, and inpar t i cu lar the Or ig ina l Equ ipmentManufacturer (OEM) system [5] as a learningplatform — “an enduring technological trainingschool for later comers” (p. 192).

In contrast to the successes of East Asianexport-oriented economies, the import-substitution policies adopted by largedeveloping countries such as Brazil, India, andChina between the 1950s and 1970s largelyfailed. Import substitution typically depends onprolonged protection of domestic industries,with high tarif fs for imported goods.Protectionism leads to persistently weakperformance by the firms in the internationalmarket. Scholars argue that import substitutionalso fails to reduce import dependency, achievesufficient economic diversification, andalleviate social inequality in developingcountries (P. Evans 1979; Haggard 1990; E. M.Porter 1990; Wade 1990). Based on thesefindings, the World Bank promotes exportindustries as a standard policy for economicdevelopment (World Bank 1993).

Yet, critics of export-oriented policies point outthat export industry in many countries oftenamounts to labor-intensive assembly with littletechnological value (Dickens 1998). Not only doMNCs have little incentive to transfer coretechnology to developing nations, but even ifthey do the transfer often includes “know-how”(production engineering) but not “know-why”(basic design, research and development) (Lall1984, p. 10; Dickens 1998; Porter, W. Philipand Sheppard, Eric S. 1998). These transferstherefore often reinforce the dependency of thereceiving countries. Research on China’s tradeand export sectors finds a profound dualism,

with highly competitive industry in Chinadominated by imported technology and foreignaffiliates. These firms are segregated fromother domestic sectors and thus have a limitedimpact on local production and the diffusion oftechnology in China (Huchet 1997; Lemoine,Francoise and Deniz Unal-Kesenci 2004).

Even in the most successful export-orientedeconomies--upon closer examination—scholarshave found that import-substitution has playedcritical roles during the take-off phases ofseveral East Asian countries (Chang 2002,Webber and Ridgy 1996). Economic historian,Ha-Joon Chang (2002) portrays the newcollective disregard of the domestic marketstrategies as “kicking away the ladder,” giventhat tariff and state subsidies for domesticindustries have played crucial roles in theearlier development of western industrialpowers. This suggests that the relationshipbetween the dynamic of a domestic market andthe development of domestic companiesdeserves more scrutiny. Export may only beone piece of a more complex puzzle of nationaltechnological capacity building.

China faces additional geopolitical limits torely ing exclusively on export -baseddevelopment. There are long-standingregulations banning U.S. firms from exportingcertain potentially dual-use high technology toChina. Due to its size, China is also susceptibleto criticism of its successful export drive to theUnited States as a result of the large balance oftrade gap. China therefore faces heavypressures to open its own market to othercountries, which Japan and South Korea wereable to avoid from the 1960s to the 1980s.

Yet, large countries such as China have largeand growing markets in their own right. OECDranked China as the world’s sixth largest ICTmarket in 2005 (OECD 2006) and among thefastest growing. The Chinese home market thusallows domestic companies the opportunity tomove directly into own-brand manufacturing

APJ | JF 6 | 2 | 0

7

rather than moving progressively frommanufacturing others’ brands to creating theirown. Indeed, quite a few Chinese companiesdeveloped their own brands only a few yearsafter start-up, often without moving throughthe OEM phase. Yet, with many foreigncompanies competing to market their productsin China, indigenous companies need to findways to become competitive. This is no smallchal lenge for under-capital ized andinexperienced indigenous companies facingMNC giants. Whether they can meet thischallenge depends on their technical andmanagerial capacities. But an additional crucialfactor is the presence of world-class export-processing facilities in China. With easy accessto competitive, reliable, and high-qualitycomponent suppliers — the same suppliers forMNCs in the global industry — Chinesecompanies can target the Chinese market withspecial designs and pricing, given theirintimate understanding of the market, as wellas build their own distribution networks. If themarket for their products also grows at thistime, they have a good chance to best theforeign competition. Export challengesessentially reduced the learning curve forlatecomers by helping them improve theirtechnical competence and competitiveness,without requiring them to accumulate detailedengineering and processing skills in morecomplex components. As their design andmarketing abilities improve, indigenouscompanies are able to progressively replaceforeign products in the Chinese market, fromthe low to higher end. This process has createdsome of the fastest learners in the industry.Lenovo is among them.

Consequently, technological change in Chinamay differ from that of other developingcountries. The path of building Chinesecompanies’ competitiveness is best describedas a synergetic model between importsubstitution and export upgrades. As shown infigure 9, China’s export industry and domesticmarket growth are two distinct processes

driven by different global and domesticimperatives. When these two processes occurin the same or closely related sectors at thesame time, one finds the most favorableconditions for technological learning andbusiness competitiveness of China’s companies.

Synchronization of export upgrade and domesticmarket growth in China

Synchronization allows the entry and rapid riseof new manufacturers of mature technologicalproducts, as newcomers can tap into theexisting global supply chain. The economies ofscale enjoyed by the global parts supplierstogether with the mass demand in China’smarket enable the competitiveness in finalproducts by Chinese companies. What’s more,intimate knowledge of the consumptionpreferences of a large domestic market mayspur technical innovation and thus thedevelopment of products different from those inadvanced markets. A high-quality export facilitymay help turn these innovative ideas into aviable commodity chain in a short time. ThoseChinese companies that are able to locate theintersections of these two processes are in astronger competitive position.

The synergy of the external and internal marketmay even foster a movement toward a moreautonomous technological path than wouldotherwise be possible. Although China is not an

APJ | JF 6 | 2 | 0

8

advanced technological power, the Chinesestate and Chinese firms have already started todevelop technical standards that may haveglobal significance. Thus far, technicalstandards have been the exclusive domain ofthe most powerful western or Japanesecorporations and their counterparts inadvanced countries. An export-orientedindustry could only follow western technicalstandards to sell abroad. A closed import-substitution regime can impose domesticstandards, but it is almost certain to be left outof the global mainstream. However, a combinedimport-substitution and export regime in al a r g e m a r k e t m a y c r e a t e a m o r einterdependent relationship between MNCsand local firms, making it possible to establishalternative standards. In short, the trajectory ofChina’s technological development needs to beunderstood not by treating export-oriented anddomestic market-oriented activities asalternatives, but considering them as jointstrategies for industrial development.

Institutional Evolution and the Role of theChinese State

Studies of East Asia, and China in particular,tend to view the state as the paramount playerin determining policy and political-economicoutcomes. However, the relationship betweentechnological development in ZGC and theChinese state suggests a more complicatedpicture. ZGC is better characterized as aproduct of institutional evolution underglobalization, in part tolerated and assisted butlargely unanticipated by the state.

The role of the state and public policies intechnological development, especially in EastAsia, has been a subject of heated debate.Castells (1996) argues that the state plays apivotal role: “If society does not determinetechnology, it can, mainly through the state,suffocate its development. Or alternatively,again mainly by state intervention, it canembark on an accelerated process of

technological modernization able to change thefate of economies, military power and socialwell-being in a few years” (p. 7). Evans (1995)crafts a more refined model, situating the statein the institutional structure of societies.Depending on the degree of autonomy of statesfrom different social interest groups, Evansdivides states into two categories: predatorystates, exemplified by Zaire, which extractresources with little service to citizens inreturn; and developmental states, like SouthKorea, which can formulate coherent andeffective developmental programs and guideenterprises in technological development.

While emphasizing the embeddedness of thestate in society, Evans clearly privileges thestate in state-society relations. In contrast,institutional economists have long argued thatinstitutions make the difference in economicperformance. According to North (1990 p. 3):“Institutions are the rules of the game in asociety or, more formally, are the humanlydevised constraints that shape humaninteraction. In consequence, they structureincentives in human exchange, whetherpolitical, social, or economic. Institutionalchange shapes the way society evolves throughtime and hence is the key to understandinghistorical change.” North argues thatinstitutional changes are overwhelminglygradual and evolutionary. Through a searchand selection process, the established“routines” which govern behavior at aparticular time gradually give way to changesstarted at the margins (Malecki 1991; Nelson,Richard R. and Winter, Sidney G. 1982).

Institutional evolutionary theory sheds morelight on ZGC than a state-centered approachdoes. Looking closely, the most prominentfeature of the role of the state in China’stechnological development is not its leadershipbut its high variability. In the People'sRepublic, technological policies swung fromdefense-led projects to civilian sectors, fromself-sufficiency to foreign dependency and then

APJ | JF 6 | 2 | 0

9

to autonomous innovation, from centralplanning to market driven, then to stressingstate regulation and control. It is clear that itcontinues to search for a workable model fortechnological development.

The dramatic shifts in state policies over thelast few decades, however, reveal a uniquefeature of the Chinese state compared to thestates studied by Evans (1995): China’s centralgovernment is anything but stable in its policyframework. Ever since the reform and open-door policies beginning in the 1970s, newactors partially or largely beyond state controlhave been emerging, and the rules of the gameare forever being contested and redefined.Actors are forced to adapt to an environment ofheightened uncertainty. The development ofZGC illustrates this institutional instability.Rather than following a state issued blueprintof transformation, the region’s growth has beencyclical, evolutionary, and often chaotic andhaphazard. The actors including state, MNCs,local firms and local research institutions arelocked in a quadrangular innovation system inwhich each sees its influence wax and wane,and each is challenged by others and by thechanging pol i t ical and inst i tut ionalenvironment (figure 8). New institutions haveemerged, only to become inadequate a fewyears later. In short, like a reptile shedding itsown skin, ZGC grows by generating and testingnew identities, organizations, and strategiesand by accumula t ing knowledge ontechnological management and innovation.

Far from being results of Chinese state policies,the institutional changes in ZGC are complexproducts of confrontations, bargaining, andconciliation among the actors in the regionalquadrangular innovation system. The state’sactions and the effectiveness of its strategiesare contingent upon their context. The samestrategies that worked in one place at one timemay not work in another place and time. Deng’sfamous metaphor, “Cross the river by feelingthe stones,” or Naughton and Segal’s

“muddling through” (2003, p. 186) seem still tobe the best ways to describe this untidyprocess.

Conclusion

What can we learn from ZGC’s experienceabout technological progress, not only in Chinabut also in other developing countries? For onething, we need to realize that indigenouscompanies are indispensable agents forcultivating and developing technology markets.Developing countries, in their pursuit of hightechnology, have a track record of attractingMNCs while paying little attention to theirdomestic companies. The story of ZGC showsthat while MNCs can introduce advancedtechnology, they typically have standardizedpractices that are insensitive to local marketsor inappropriate for them, especially whenpurchasing power is low. Left to their owndevices, MNCs also lack the incentives,flexibility, and local knowledge to react tomarket changes. In contrast, indigenous firmsunderstand their home court and have greatercommitment and flexibility to bring appropriateand affordable technology to domesticconsumers. However, MNCs, despite theirdrawbacks, are necessary partners forcollaboration and potential role models to learnand perhaps importantly, deviate from.

Second, ZGC’s experience shows us that theroles of the state are necessarily multi-faceted.The state’s crucial jobs are not just providingspecif ic pol icies or R & D capital butcol laborat ing ef fect ively with othertechnological agents and learning to reformregional inst i tut ions under changedcircumstances. In other words, the state mustbe willing and able to adapt and respond tochanges and demands by other agents.Institutional transformation has to be a learnedprocess, as entrepreneurs, businesspeople,professionals, bureaucrats, scientists, andconsumers learn to cooperate while the newrules of the game are being negotiated,

APJ | JF 6 | 2 | 0

10

established, and observed. In the long run, thetechnological trajectory of ZGC is neithermagical, random, nor deliberately scripted.Rather, it is a dynamic adjustment processinvolving multiple actors negotiating throughdrastic and systematic shocks that often comeat short intervals.

Yu Zhou is associate professor of Earth Scienceand Geography, Vassar College. She haspublished extensively on the Asian immigrantsand their transnational business networks inNew York and Los Angeles.

This article is a slightly revised version of achapter in The Inside Story of China’s High-Tech Industry: Making Silicon Valley in Beijing.(â€�http://www.rowmanlittlefield.com/isbn/0742555801â€�)

Posted at Japan Focus on February 9, 2008.

Sources

Amsden, Alice. 1989. Asia's Next Giant: SouthKorea and Late Industrialization. New York:Oxford University Press.

Cao, Cong. 2004. Zhongguancun and China'shigh-tech parks in transition: "growing pains"or "premature senility"? Asian Survey 44, no. 5:647-668.

Castells, Manuel. 1996. The rise of networksociety. Malden, MA: Blackwell Publishers.

Chang, H. K ick ing away the ladder :Development Strategy in Histor ica lPerspective. London: Anthem Press, 2002.

Cumings, Bruce. 1987. The origins anddevelopment of Northeast Asian politicaleconomies: industrial sectors, product cycles,and political consequences. In The PoliticalEconomy of the New Asian Industrialism,edited by Frederic C. Deyo. Ithaca: CornellUniversity Press.

Dickens, Peter. 1998. Global shift: theInternationalization of Economic Activity. NewYork: Guilford Press.

Evans, B. P. 1995. Embedded Autonomy: Stateand Industrial Transformation. NJ: PrincetonUniversity Press.

Evans, Peter. 1979. Dependent Development:the Alliance of Multinational, State, and LocalCapital in Brazil. Princeton, NJ: PrincetonUniversity Press.

F r a n c i s , C o r i n n a - B a r b a r a . 1 9 9 7 .Commercialization without privatization:government spinoffs in China's high-techsector. In Commercializing High Technology:East and West, edited by Judith B. Sedaitis.New York: Rowman & Littlefield Publishers,Inc.

Haggard, Stephan. 1990. Pathways from thePeriphery: the Politics of Growth in the NewlyIndustrializing Countries. Ithaca, NY: CornellUniversity Press.

Hobday, M. 2001. The electronics industries ofthe Asia-Pacific: Exploiting internationalproduc t ion ne tworks fo r economicdevelopment. Asian-Pacific EconomicLiterature 15, no. 1:13-29.

Hobday, Michael. 1995. Innovation in EastAsia: the Challenge to Japan. Brookfield, VM:Edward Elgar.

Huchet, Jean-Franscois. 1997. The China circleand technological development in the Chineseelectronics industry. China circle: economicsand electronics in the PRC, Taiwan and HongKong. Washington, DC: Brookings InstitutionPress. 254-289.

Kim, Linsu. 1980. States of development ofindustrial technology in a developing country: amodel. Research Policy 9, no. 3:254-277.

APJ | JF 6 | 2 | 0

11

Lall, S. 1984. Transnationals and the thirdworld: changing perceptions. NationalWestminster Bank Quarterly Review no. May:2-16.

Lemoine, Francoise and Deniz Unal-Kesenci.2004. Assembly trade and technology transfer:the case of China. World Development 32, no.5: 829-850.

Malecki, Edward. 1991. Technology andEconomic Development: the Dynamics of Local,Regional and National Change. Essex, UK:Longman scientific and technical.

Naughton, Barry, and Segal, Adam. 2003.China in search of a workable model:technology deve lopment in the newMillennium. In Crisis and Innovation: in AsianTechnology. Cambridge, UK: CambridgeUniversity Press.

Nelson, Richard R. 1996. The Sources ofEconomic Growth. Cambridge, MA: HarvardUniversity Press.

Nelson, Richard R. and Winter, Sidney G. 1982.The Evolutionary Theory of Economic Change.Cambridge, MA: Belknap Press.

OECD. OECD Information Technology Outlook:Information and Communication Technologies,2006.Porter, W. Philip and Sheppard, Eric S. 1998.The World of Difference: Society, Nature,Development. New York: The Guilford Press.

Rostow, Walt. 1971. The Stages of EconomicGrowth, a Non-Communist Manifesto. 2nd ed.Cambridge: Cambridge University Press.

Wade, Robert. 1990. Governing the Market:Economic Theory and the role of Governmentin East Asian industrialization. Princeton, NJ:Princeton University Press.Webber, Michael J. and David Rigby. 1996. TheGolden Age Illusion: Rethinking Postwar

Capitalism. New York: Guilford

World Bank Group. ICT and millenniumdevelopment goals: a World Bank groupp e r s p e c t i v e . 2 0 0 3 ](�http://info.worldbank.org/ict/assets/docs/mdg_Complete.pdf).World Bank. 1993. The East Asian Miracle:Economic Growth and Public Policy. New York:Oxford University Press.

Endnotes:

[1] In 2005, Zhongguancun adopted a newEnglish name: Z-park. The simple name isdesigned to help ZGC’s internationalrecognition. This article will use its originalChinese name-Zhongguancun (ZGC), which hasbeen associated with the region’s identity thelongest in China.

[2] The information communication technologysector is defined by the World Bank asconsisting of hardware, software, networks,and media for the collection, storage,processing, transmission, and presentation ofinformation (voice, data, text, images) (WorldBank Group 2003, p. 1). Under the Chinesec lass i f icat ion system, ICT inc ludestelecommunication equipment, computer andother electronic equipment manufacturing,electronic information equipment sales andleasing, electronic information communicationservices and computer services and software(National Bureau of Stat ist ics, GB/T4754-2002). Many services focusing on the ICTindustry, such as venture capital, consultingfirms, legal offices, and so on, may not be partof the official Chinese statistics on the ICTindustry. Accordingly, I include data from othersources.

[3] The Zhongguancun AdministrativeCommittee provides certification for firms thatare deemed high-tech enterprises based on R &D inputs, shares of exports, and so on. Thosethat are certified are exempt from paying

APJ | JF 6 | 2 | 0

12

corporate income taxes for three years and paya reduced tax rate for another three years. Thereview process is supposed to take placeannually, and hundreds of firms may lose theirstatus as certified high-tech firms every year.S e e “ Z h o n g g u a n c u n R e g u l a t i o n(â€�http://www.zgc.gov.cn/cms/template/item_english.html?did=73&cid=73\3985â€�).”

[4] Income from technology sales includes

licensing fees, technological transfer charges,patent fees and income from technicalcontracts and services. It does not includerevenue from selling manufactured goods.

[5] OEM is the dominant system of export inTaiwan and Southeast Asian countries, wherethe manufacturers in developing countriesproduce products for multinational name-brandcompanies to sell abroad.