International -- Readers Report
China: Cheap Labor and Foreign Investment Aren't Enough
"High tech in China" (Cover Story, Oct. 28) is important and timely. China's strategy of upgrading its technology through massive foreign direct investment and price competition based on comparative advantage in labor cost seems to have worked well. But further development of China's high-tech industry, which has been viewed as an answer to China's economic woes, will depend on an indigenous technological capability, as the experiences of Japan and South Korea indicate. Many Chinese companies have scant financial resources to carry out innovative research and development activities. The nation's expenditure on R&D has been low by international standards.
In pursuing a quick and short-term payoff, almost all the Chinese enterprises are keen to import as the way to upgrade production technology. And equipment purchases usually prevail over software, such as patents, knowhow, blueprints, and so on. Once the equipment is imported, almost no financial resources are given to absorption, assimilation, and innovation, which has resulted in a vicious cycle of importing, lagging behind, importing again, and lagging behind again.
It is also a well-known phenomenon that first-rate college graduates go abroad--the second-rate get employed in multinational corporations, joint ventures, and the third-rate work for institutions of research and learning.
China's goal of exchanging its market for advanced technology has proved to be wishful thinking.
Cong Cao
Singapore
Although China's technology benchmarks are comparable to those of other large economies, the country's scientific output is way below that of others because most of the technology is either borrowed or stolen. Should future U.S. government policy legitimize and facilitate such exports of technology, brace yourself for an exodus of intellectual property. Take one last good look around, and we may as well kiss Silicon Valley good-bye.
Exports of sensitive technology should be restricted to democracies and those who demonstrate their willingness to become democracies--or else we will be encountering situations such as Afghanistan, Iraq, North Korea, and Pakistan over and over again. China will prove to be no exception.
Nagesh Kuppuraju
Robbinsville, N.J.
As a supplier to the electronics manufacturing industry in both Asia and North America for 25 years, we have seen a cataclysmic shift of high-technology electronics manufacturing to mainland China in the past five years, which has accelerated since the World Trade Organization accession.
The top tier of the U.S. electronics industry has systematically exported both basic and value-added manufacturing; both of which are fundamental vehicles for the creation of wealth. As a result, more than 200,000 jobs in electronics have been lost since 2000, not only in the U.S. but also in Mexico. If an Intel Corp. or Motorola Inc. abandons North America for lower costs, where will the ability to develop the next generations of technology come from?
Matthew Holzmann
Newport Beach, Calif.
When I picked up your magazine and looked at the front cover, an unsmiling Asian male face and the word "threat" popped out. I thought you were covering a terrorism story. Then I realized that it was a story about technology competition from China. That picture is a biased and unfavorable portrait of people of different color.
E. Shih
Holmdel, N.J.
The View from the Top of Citigroup's Board
Citigroup does not belong on the table "Boards that need work" ("The best & worst boards," Cover Story, Oct. 7). As you note, we have taken important steps to ensure that our board of directors adheres to the highest standards of corporate governance, including our company's announcement on Oct. 1 that I would eliminate interlocking directorships.
At 16 members, Citigroup's board of directors is not too big; the fact is, we need a large board to provide the attention and review required, given our company's size and complexity. Also, we have never had a problem with our audit committee, whose members always have devoted the time necessary to ensure rigorous review of our procedures and results. As you noted, Citigroup's board "is loaded with top-flight CEOs," and the ones you mention all sit on our audit committee.
Sanford I. Weill
Chairman and CEO
Citigroup
New York
The Urge to Merge Isn't Always Misguided
Mergers that have been successful are mostly those involving smaller businesses with real potential growth ("Mergers: Why most big deals don't pay off," The Corporation, Oct. 14). The losers were "dot bombs" and "M&A for survival" companies.
Was a merger necessarily wrong for America Online? If its stock price was overvalued, sooner or later the market would notice. AOL's losses might have been much greater if the merger with Time Warner Inc. had not taken place.
Chumvit Chumchaivate
Bangkok
Post-bubble bulletin: Earnings anemia
Can bring on corporate bulimia.
Can't keep down everything that you
bite off?
Spin off! Sell off! Kill off! Write off!
Reflex responses to burning question:
How to cure asset indigestion.
Andrew Sprung
South Orange, N.J.
Setting the Record Straight on Megawati
In "Heavy damage" (Asian Business, Oct. 28), you state that Megawati Sukarnoputri has been President for three years. In fact, she inherited the Presidency on July 23, 2001. Before that, she was Vice-President in Abdurrahman Wahid's government for two years.
Folkert Muller
Haarlem, The Netherlands
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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