ds of market-driven reforms needed to make this happen. The Chinese government is investing heavily in research
and development, but it should be noted that the R&D spending as a percentage of GDP is still lower than that of the US.
Nobody likes competition against themselves. So, it must be admitted that China’s transiti
on to a high-tech, high-value-added economy will come as a shock to many companies around the world.
The US economy, which has about 7 percent of GDP in high-tech manufacturing, will be lightly affected by this change.
On the other hand, advanced manufacturing contributes around 20 percent of GDP in South Korea, Japan, Ge
rmany and a few smaller European countries. They will be much more directly affected.
China’s transition over the next 10 years will not be painless for its compa
nies or for foreign competitors. But, reform and opening-up policies that create more com
petitive companies and markets are the only way to achieve a richer and more productive world economy in the long term.