US tech can use China as ‘listening post’ for global edge, Washington think tank explains

ITIF argues that regional sales help finance domestic R&D and block local rivals, while warning that a full exit would be a self-inflicted wound to innovation leadership

US technology companies should stay in China, despite persistent political pressure for their exit, to capitalise on revenue potential and stifle local competition while monitoring consumer trends, according to a Washington-based policy think tank.

Sales generated by American firms within China can be reinvested in research and development back in the United States, thereby helping “sustain US innovation leadership”, the Information Technology and Innovation Foundation (ITIF) said in a new report.

“The discussion of forcing companies to exit the Chinese market is an overreaction and fails to account for ways in which having American companies in China serves the US national interest,” ITIF author Rodrigo Balbontin said in the report, titled “US Technology Companies Should Keep Operating in China”.

“Having a presence in the Chinese market is valuable because it helps US companies increase revenue and gain market share, which would otherwise accrue to Chinese companies,” Balbontin added.

The world’s second-largest economy also serves as a strategic “listening post” where US firms can keep tabs on consumer trends, technological shifts, competitors and talent, according to the report, released on Monday.

“There is a reverse technology spillover effect – in which foreign investments by US companies serving local markets benefit the country where the company is headquartered – wherein the learning can be transferred back to America,” the ITIF said.

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