China’S Five-Year Plan,

CHINA’S FIVE-YEAR PLAN, INDIGENOUS INNOVATION AND TECHNOLOGY TRANSFERS AND OUTSOURCING

HEARING
BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION _________ JUNE 15, 2011 _________

Printed for use of the United States-China Economic and Security Review Commission Available via the World Wide Web: www.uscc.gov

UNITED STATES-CHINAECONOMIC AND SECURITY REVIEW COMMISSION WASHINGTON : 2011

U.S.-CHINA ECONOMIC AND SECURITY RE VIEW COMMISSION

Hon. WILLIAM A. REINSCH , Chairman DANIEL M. SLANE , Vice Chairman Commissioners: CAROLYN BARTHOLOMEW DANIEL A. BLUMENTHAL PETER T.R. BROOKES ROBIN CLEVELAND Hon. C. RICHARD D’AMATO

JEFFREY L. FIEDLER Hon. PATRICK A. MULLOY Hon. DENNIS C. SHEA MICHAEL R. WESSEL LARRY M.WORTZELMICHAEL R. DANIS, Executive Director KATHLEEN J. MICHELS, Associate Director The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Public Law No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C.§ 7002 (2001), as amended by the Treasury and General Government Appropriations Act for 2002 § 645 (regarding employment statusof staff) & § 648 (regarding changing annual report due date from March to June), Public Law No. 107-67, 115 STAT. 514 (Nov. 12, 2001); as amended by Division P of the "Consolidated Appropriations Resolution, 2003," Pub L. No. 108-7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of Commission); as amended by Public Law No. 109-108 (H.R. 2862) (Nov.22, 2005) (regarding responsibilities of Commission and applicability of FACA); as amended by Division J of the “Consolidated Appropriations Act, 2008,” Public Law No. 110161 (December 26, 2007) (regarding responsibilities of the Commission, and changing the Annual Report due date from June to December). The Commission’s full charter is available at www.uscc.gov .

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CONTENTS
_____WEDNESDAY, JUNE 15, 2011

CHINA’S FIVE-YEAR PLAN, INDIGENOUS INNOVATION AND TECHNOLOGY TRANSFERS AND OUTSOURCING
Opening remarks of Commissioner Patrick A. Mulloy (Hearing Co-Chair)………………………1 Prepared statement……………………………………………………………………………………………………..3 Opening remarks of Commissioner Daniel M. Slane (Hearing Co-Chair)…………………………4 PANEL I: CHINA’S 12TH FIVE-YEAR PLAN Statement of Dr. Eswar S. Prasad,Nandlal P. Tolani Professor of Trade Policy, Cornell University, Ithaca, New York, and Senior Fellow, Brookings Institution, Washington, DC….5 Prepared statement………………………………………………………………………………………………………..8 Statement of Dr. Willy C. Shih, Professor of Management Practice, Harvard Business School, Boston, Massachusetts………………………………………………………………………………………….25 Preparedstatement………………………………………………………………………………………………………..28 Panel I: Discussion, Questions and Answers………………………………………………………………………34 PANEL II: INDIGENOUS INNOVATION AND INDUSTRIAL POLICY Statement of Dr. Dieter Ernst, Senior Fellow, East-West Center, Honolulu, Hawaii…………59 Prepared statement………………………………………………………………………………………………………60 Statement of Dr. Adam Segal, Ira A. Lipman Senior Fellow for Counterterrorism and National Security Studies, Council on Foreign Relations, New York, New York………………..68Prepared statement………………………………………………………………………………………………………71 Statement of Mr. John Neuffer, Vice President for Global Policy, Information Technology Industry Council, Washington, DC…………………………………………………………………77 Prepared statement………………………………………………………………………………………………………80 Panel II: Discussion, Questions and Answers……………………………………………………………………87 PANEL III: TECHNOLOGY DEVELOPMENT AND TRANSFERS TO CHINA Statementof Dr. Ralph E. Gomory, Research Professor, New York University Stern School of Business, and President Emeritus, Alfred P. Sloan Foundation, New York, NY…..108 Prepared statement………………………………………………………………………………………………………..111 Statement of Dr. Philip I. Levy, Resident Scholar in Economics, American Enterprise Institute, and Adjunct...