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Europe in technologicial cut-and-thrust with China
PARIS (AFP) Dec 05, 2005
European companies are increasingly willing to transfer their know-how to China in return for big contracts but at the same time are taking care to preserve their technological edge.

On Monday, European aircraft manufacturer Airbus signed a deal worth a possible 9.7 billion dollars (8.3 billion euros) to supply six Chinese airlines with 150 mid-range planes.

As part of the transaction, the France-based group signed a "cooperation protocol" agreement that includes the possibility of Airbus building an assembly plant in China to manufacture single-aisled planes such as its its A320 model.

"There's a lot of competition to get into the Chinese market to win contracts and at the moment and the transfer of technology is a determining factor," says China expert Francoise Lemoine, a researcher at France's leading international economics institute CEPII.

China has long insisted that foreign companies collaborate with Chinese partners when manufacturing in China, and Beijing is now able to impose special conditions when placing orders because of its extraordinary market power, experts say.

The country has "a strong position, which a lot of other buyers in developing countries do not have," says a member of the French economic delegation in Shanghai.

With the domestic economy growing by more than 10 percent per year and a low-cost and abundant labour force, China is able to make demands of its suppliers that help to close a yawning technological gap between itself and its developed trading partners.

The companies that have refused to play by the rules have suffered through a loss of market share in the world's most populous country, says Lemoine, who cites Japanese car makers as an example.

Japanese car makers "were reticent for a long time because they were fearful that China would develop its own competitive capacity", she says.

While Japanese auto leaders hesitated, German, US and French manufacturers stole a march and have invested billions of euros (dollars) in the country.

For Lemoine, the key element for European companies working with partners in China is to ensure that "the heart of their technology is always managed in the European side".

The chief executive of Airbus, Gustav Humbert, said on Sunday that Airbus wanted to deepen its collaboration with Chinese partners and was looking at both parts manufacturing and assembly.

He played down fears about the loss of commercially vital technology and underlined that close collaboration would be necessary to improve the quality of production in China.

Airbus believes China will need 2,000 single-aisled aicraft in the next 20 years.

Lemoine also points out that exporting technology is a way of winning contracts in the short-term, but it also helps to create future dependency which is of strategic importance.

"It's about a dependency vis-a-vis the chosen technology. One creates a dependency," she said.

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