Technology Transfer and Early Industrial Development: Evidence from the Sino-Soviet Alliance

This paper studies the long-term effects of technology and know-how transfers on structural transformations. In the 1950s, the Soviet Union supported the construction of 156 Projects, large-scale capital-intensive industrial clusters in China, and sponsored a physical capital transfer providing state-of-the-art machinery and equipment; and a know-how transfer through training for engineers and production supervisors. We use newly-assembled data that follow these plants for over four decades, combined with natural variation in the transfers they eventually received. We find that know-how transfer had permanent effects on output quantity and quality, increased domestic technology development, and exports to the Western world when China engaged in international trade. By contrast, receiving only Soviet capital goods had smaller effects that faded out over time, especially after China’s opening to trade. The intervention generated horizontal and vertical spillovers, as well as production reallocation from state-owned to privately owned companies since the late 1990s.