US Firms, China Are Locked in Major War Over Technology

A titanic battle is under way between US business and China, a battle reflected in President Barack Obama's State of the Union address last week and destined to dominate relations between the two countries for years. At issue: Innovation.

China's bureaucrats have been rolling out an array of interlocking regulations and state spending aimed at making their country a global technology powerhouse by 2020. The new initiatives—shaped by rising nationalism and a belief that foreign companies unfairly dominate key technologies—range from big investments in national industries to patent laws that favor Chinese companies and mandates that essentially require foreign companies to transfer technology to China if they hope to sell in that market. To hear US business executives describe it, Beijing's mammoth new industrial policy is like the Borg in "Star Trek" -- an enormous organic machine assimilating everything in its path, in this case the inventions of other nations.