Remember when US businesses heavily lobbied Congress to pass Most Favored Nation trade status for China? Supposedly this was going to open up China for American business. But the Chinese are very mercantilist. The Chinese government wants a domestic Chinese smart phone operating system.
Having long memories, China's Ministry of Information Industry officials recall their selection of GSM, the 2G European digital standard, under the brilliant former MII Minister Wu Ji-chuan, as the Chinese mobile standard in the mid-1990s. The GSM selection ushered into China foreign network equipment and mobile phone vendors (Ericsson and Nokia, by holding important GSM patents, occupied an advantageous position for GSM network and handset development, which left Chinese firms in catch-up mode). MII grudgingly worked with foreign suppliers, which made possible the enormous increase of Chinese mobile subscribers, and also concluded that a domestic mobile industry was strategically important for the Chinese state and economy. So this nationalist outlook led to MII adopting a Chinese 3G standard — TD-SCDMA — which became a long saga for network deployment.
Crucially, all current mobile smart phone platforms – Android, Symbian, iOS 4, Windows Phone 7, WebOS, BlackBerry, and others – pose a problem to Chinese authorities: like the 1990s GSM and CDMA network standards, all are foreign-made. Foreign firms, according to MII, take revenues from Chinese enterprises (like carriers’ networks) and consumers, as well as having the potential to embed socially “harmful” software apps into handsets, including mobile search for politically sensitive topics. Ultimately, a China-domestic smart phone operating system (with Chinese-made apps) plus a domestic mobile search engine will be the best strategic 3G smart phone combination for MII. Hence, MII will certainly lobby China Mobile, China Unicom and China Telecom (the three Chinese mobile carriers) to push handset suppliers like Lenovo and Huawei (plus other OEMs for new tablets, auto apps, TV set-top boxes) to adopt new Chinese mobile platforms.
Microsoft, Google, and other big lights of American software have dim future prospects in China. The Chinese government will see to that.
China has a big enough internal market that it can pursue the same trade policy the United States followed in the 19th century: protect domestic industries from foreign competition so that domestic markets are serviced by companies that have their loyalties firmly for the nation and so that the elites that profit from economic growth will be domestic elites. This policy worked well for the United States, btw.
Contrast this with the free trade globalism of our own elites which admits to no doubts in Ricardo's fairly simple model of comparative advantage (or am I being unfair to Ricardo?). Which will do better in the long run?
|Share |||By Randall Parker at 2010 August 03 08:53 PM China|