Abstract
This chapter briefly discusses the knowledge economy and knowledge-based development in China. Despite its long tradition of respect for knowledge, China’s development is still based much more heavily on the advantages of low-cost labor. A central challenge posed by the global knowledge economy for China is to develop an industrial structure to better exploit rapidly growing global knowledge with a view to accelerating its own economic development and facilitating its transition to becoming a knowledge-based economy. For this purpose, China should further leverage its FDI inflows and focus more on attracting FDI with a higher degree of knowledge content. Foreign trade is another channel through which Chinese enterprises can tap into global knowledge and technology. While importing capital goods is a major way of acquiring foreign technology, management and knowledge support should also be acquired in order to maximize technology investment productivity.
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