Technology Slump and the limits of China’s Economy: China's Technology Level in light of the Semiconductor Industry  

Kim Kisoo 

(kskim@sejong.org)​

Senior Research Fellow, the Sejong Institute

Executive Summary

○ Like those of other developing nations, China’s economy has faced a phenomenon of declining capital marginal efficiency since 2008. In other words, In other words, the comparative input ratio calculation ratio has begun to decrease significantly compared to the past.

○ To overcome the challenge, a higher level of technology is needed (high added value), but the Chinese economy is having a hard time developing or acquiring the technology it needs.

    - In order to maintain the appropriate growth rate, investment had to visibly increase compared to that of the past. This led to a rapid increase in debt and a conspicuous decline in the growth rate.

○ Recently, it has been revealed that China's technology level is generally inferior, but the Chinese authorities and companies have not found a clear solution.

    - The reality is that despite the huge investment of funds based on the massive plan of "China Manufacturing 2025," no clear results have been made.

○ The shocking fact that the development of semiconductor manufacturing technology, which the Chinese authorities invested about 1 trillion yuan, failed has been revealed recently, and dark clouds are hanging over China’s prospects for future technology development. 

    - After all, it has become clear that government-led technology development is limited and that the private sector should lead the development of technology, based on basic science. However, it remains unclear whether China's economic, social and political structures can accept this.

○ The growth momentum of China's economy is expected to continue to weaken as it will be difficult to overcome the phenomenon of capital marginal efficiency decline, as it clearly will not be easy to acquire or develop advanced technologies necessary in the future.