Editor’s Note: Edison T. S. Tse (Tse), an associate professor at the Department of Management Science and Engineering, Stanford University, was interviewed by 21st Century Business Herald (21st) on the development and transformation of China’s high-tech industry. Tse believes that this transformation can be simply referred to as a change from "Made in China" to "Made for China".

21st: How do you assess the ability of China’s current high-tech industries in international competition?

Tse: China’s competitiveness is still relatively weak. Currently, China’s IT companies engage mainly in upstream industry and are rarely found as downstream sellers. Upstream here refers to the parts or materials, downstream refers to products provided to customers for ultimate use.

However, the major clients of IT businesses are enterprises. As long as many domestic enterprises are still not accustomed to using IT, there won’t be a big domestic market for China’s IT industry. They have to go for the outside market.

As things stand, it will be difficult for the Chinese IT industry to be competitive because the upstream works will never be very profitable. Chinese IT enterprises must manage to find ways to control the downstream industry. In other words, China’s traditional enterprises must be strong. Only in this way may China’s high-tech industry be able to control the downstream industry.

21st: Do you mean that the high-tech industry is very difficult to develop when a country’s traditional industries are not strong?

Tse: Yes. In my opinion, there is no place for the high-tech industry when traditional companies are not strong.

The development of the technology industry in foreign countries took a very long time even after traditional enterprises gradually became stronger. IT was introduced mainly to help them to enhance productivity at that time. The trend of these things is just like the development of personal computers; the ultimate customer is neither you nor me but the companies.

However, I think there may be an imbalance between the benefits that IT can bring and the costs. A small company, for example, can improve its productivity by 20 percent through buying a new piece of software, but the initial outlay may be high. If it were about a large company, it would be thankful with even a 2 percent increase in its productivity, while the cost of which is totally affordable.
                                                                                               Source: Global Times