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Data suspicions threaten to tear China and west apart

Applications by Chinese companies see 200-fold increase since 1999

Analysts say that if Beijing's security organizations want an individual's data, they will get it, despite personal privacy laws. (Source photos by Wataru Ito and Kosaku Mimura) 

China is shooting for the sky in its ambitions to secure patents for innovative technologies and products. But even as it unveils world-beating goals, analysts in the West are asking with increasing urgency whether they can trust Chinese technology in a networked world.

In the latest statement of intent, Ge Shu, a director at the State Intellectual Property Office, was quoted this week as saying that China aims to register 12 "high-value innovative" patents per 10,000 head of population by 2025, up from 6.3 in 2020 and 3.9 in 2015.

The motivation behind the goal is clear. "This will mean that the innovative capacity of our country is greatly improved and the gap between [China] and the U.S. and Japan is narrowed," Xinhua, the official news agency, quoted Ge as adding.

Judging by the current trajectory, China may well achieve its aim. In 2020, Chinese companies led the league table of applications for international patents at the World Intellectual Property Organization, a UN agency.

But more impressive than the overall number of patents that Chinese companies applied for was a growth rate in applications of 16.1% from a year ago -- by far the quickest rate of any major economy. Since 1999, Chinese companies have registered more than a 200-fold increase in patent applications to WIPO, a much faster rate of increase than the companies of any other country.

The same trend is evident in Europe. Data from the European Patent Office shows that patent awards to Chinese companies rose 10% in 2020, faster than for any other large economy. On its current trajectory, China could challenge Germany and Japan to rank second to the U.S. in seven years in terms of annual patent applications to the EPO.

All of this reveals an unambiguous shift. Centuries after falling behind, the country that once gave the world the "four great inventions" -- gunpowder, papermaking, printing and the compass -- is now close to reasserting leadership in global innovation.

But just as this happens, deepening suspicion over data privacy and cybersecurity is hampering the uptake of Chinese innovative technologies in the West. This is potentially damaging to China's prospects because the majority of the patents it has won from international bodies in recent years are in networked technologies that collect user data.

"Critical and strategic technology sectors include areas like smart cities and smart cars where the data collection involved can be so pronounced that who is doing the collecting matters more than ever," said Danielle Cave, deputy director of the international cyber policy center at ASPI, an Australian think tank.

Cave added that a fundamental bifurcation may emerge in the world between technology and vendors that are trusted to safeguard data privacy and those that are not. In such a climate, increased consideration is likely to be focused on the rules, laws and norms that govern a company's home environment, she added.

This is where China is particularly exposed. Its domestic laws require companies to hand over data whenever the state requires it. The National Intelligence Law, for example, says that "any organization or citizen shall support, assist and cooperate with the state intelligence work in accordance with the law."

Although China is planning to adopt a Personal Information and Protection Law to provide safeguards on individual data privacy, it is unclear how watertight this may be. Several analysts said that if Beijing's security organizations wish to access an individual's data, they will have no trouble in doing so even after the law is passed.

Such suspicions inform a hardening attitude in the U.S. toward global communication networks. "The United States and China are competing over who designs, builds, and sets the standards for global networks," wrote Jonathan Hillman and Laura Rivas in a new report for CSIS, a Washington-based think tank.

"The next decade could be decisive," the authors added.

Such attitudes pose a particular challenge to countries and companies in Asia. Almost all large Asian tech companies have a presence in China and sell products and services into the booming Chinese market. The technologies they have developed are as applicable to China as to anywhere else.

Disentangling a mass of overlapping linkages between China and the outside world in intellectual property, capital markets, sales networks and other systems may not be possible. More likely is a decade of stops and starts characterized by messy delinking in some areas, cooperation in others and mutual suspicion in still others.

James Kynge is editor of #techAsia, a newsletter on technology in Asia that combines the best reporting from Nikkei and the Financial Times. He is also the FT's Global China editor, writing about China's growing footprint in the world, and won the Wincott Foundation award for the U.K.'s Financial Journalist of the Year in 2016. His prizewinning book, "China Shakes the World," has been translated into 19 languages.

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