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China closing the tech gap?

Country is becoming a center of innovation, according to some experts. Another view is that China is likely to be stuck as follower.

STANFORD, Calif.--China is rapidly becoming a major force in developing new technology, posing a significant economic threat to the United States.

Alternately, the authoritarian country faces key hurdles in its quest to transform into an innovator, including its lack of free speech.

Both arguments were made here on Thursday at a meeting of the U.S.-China Economic and Security Review Commission, a 12-member panel set up in 2000 to advise the U.S. Congress.

A group of Silicon Valley business leaders and academics from around the country gave varied accounts of China's high-technology development and how the United States should respond to maintain its tech leadership.

Former U.S. Secretary of Defense William Perry expressed doubts that China's rise as a tech powerhouse will carry over to it making its own breakthroughs. Perry, now a senior fellow at the Hoover Institution, told members of the commission that it appears China is not engaging in fundamental research and lacks a culture that encourages innovation.

Trained like the Taiwanese
"What I see from China today is product development," Perry said.

Carl Everett, a partner at venture capital firm Accel Partners, offered a different view. He argued that Chinese technologists are gaining expertise in much the same way the Taiwanese did prior to becoming experts in semiconductor manufacturing. "In the future, China will provide a substantial amount of innovation in our industry," Everett said. "They are being trained today just as the Taiwanese were trained in the 1970s."

In the past few years, China has emerged as a major player in the computer industry. Chinese companies such as Lenovo, which is buying IBM's PC division, are seeking to expand their presence in the world market. In addition, many U.S. tech companies are establishing research centers in China. China's growing technology economy is part of a broader pattern of tech work being shipped abroad that worries some U.S. labor advocates.

Although China's economy has been expanding quickly, doing business there has its hazards, according to Alan Wong, senior counsel for chipmaker Nvidia. Wong, a former U.S. State Department official who stressed that he was not speaking on behalf of Nvidia, said he has heard that China requires companies to use an encryption system to which the government retains a key. The result, he suggested, is that corporate intellectual property may be at risk when data is zapped in and out of the country. "My assumption is anything you put in there, the government can have," Wong said.

Wong also suggested national security may be a real issue in reviewing China's technological growth. "In an effort to assure Western companies that power sources and road access to a given site will be plentiful and well-maintained, Chinese promoters sometimes let slip that infrastructure in the area will receive consistent support and priority because the government wants to attract certain technologies that can be used in the Chinese defense and military industries," Wong said in written testimony to the commission.