China’s heavy-duty gas turbine industry offers a more complex story than the familiar narrative of “forced technology transfer” — one shaped by commercial bargaining, market access and negotiated interests. As the EU and China navigate growing competition.
Debates over China’s industrial advancement are often framed around the narrative of “forced technology transfer.” The history of China’s heavy-duty gas turbine sector—a cornerstone of global power generation—tells a more nuanced story. Rather than administrative coercion, it reveals a process shaped by calculated risk management, strategic bargaining, and negotiated asymmetry. As the European Union and China deepen their engagement in clean technologies such as wind power, photovoltaics, energy storage, and hydrogen, this history offers pragmatic insights for building resilient partnerships grounded in mutual interests, beyond reductive ideological framings.
Commercial Drivers and Negotiated Outcomes
Beginning in 2001, China sought to address a technological gap in heavy-duty gas turbines following decades of underinvestment. To facilitate this, the National Development and Reform Commission (NDRC) implemented a "bundled bidding" (打捆招标) mechanism, consolidating fragmented provincial demand into substantial orders—totaling over 50 units and approximately 20 gigawatts of capacity between 2001 and 2007. These contracts supported three major consortia: Harbin Electric with GE, Dongfang Electric with Mitsubishi Heavy Industries, and Shanghai Electric with Siemens.
While often viewed through the lens of market access requirements, the internal dynamics of these Joint Ventures (JVs) reflect standard international commercial practices. Foreign partners structured the deals to retain decisive control. A notable example is the Shanghai Electric-Siemens joint venture established in 2005, in which Siemens held a 51 percent majority stake against Shanghai Electric’s 49 percent. This equity structure translated directly into operational authority. Crucially, the scope of technology transfer was explicitly defined and contractually ring-fenced from the outset.
Foreign entities maintained distinct control over several key areas. Software designing, controlling system source codes, and core algorithms remained the exclusive property of the foreign parent company. Chinese engineers were granted production licenses—the right to manufacture to specification—while the underlying design rationale remained protected. Manufacturing processes for critical components, including single-crystal turbine blades and combustion chambers, were generally excluded from transfer agreements, with these items typically sourced from facilities in Germany, the United States, or Japan. Foreign firms also retained oversight of maintenance, repairs, and overhauls (MRO), utilizing proprietary diagnostic systems.
This structure allowed multinationals to capture significant lifecycle value through licensing fees, component sales, and service agreements. Rather than reflecting a unilateral concession, these arrangements enabled multinational firms to protect high-value intellectual property while leveraging China’s manufacturing capacities. The available evidence indicates these were calculated business decisions balancing market access against competitive preservation.
At the same time, Western firms faced strong commercial incentives. During the early 2000s, China represented a primary growth market for power generation. Investments such as GE’s Qinhuangdao Energy Service Center in 2004 underscore the commercial rationale behind local partnerships. The technology shared was largely mature, enabling firms to extend the profitability lifecycle of existing designs. For Chinese stakeholders, these agreements offered a pathway to acquire advanced manufacturing qualifications and accumulate engineering experience, even if core IP remained protected. The resulting arrangements represented a negotiated trade-off: market access in exchange for manufacturing know-how, with both sides accepting asymmetry to secure their respective strategic objectives.
The Strategic Pivot to Indigenous Innovation
The gas turbine experience also exposes the limitations of relying solely on joint ventures for acquiring core technological mastery. By the late 2000s, it became apparent within China’s industrial planning that while manufacturing capabilities had improved, fundamental competencies in materials science and aerodynamic design remained elusive through commercial partnerships alone.
Recognizing these limitations, China gradually shifted its strategy from acquiring manufacturing capabilities through joint venture toward strengthening indigenous innovation. In 2012, China launched the "Aero Engine and Gas Turbine" Major National Science and Technology Project (the "Two Machines" project). This initiative signaled a shift toward substantial, state-supported indigenous R&D.
Subsequent developments, such as Dongfang Electric’s announcement in 2024 regarding the full-load operation of its independent F-class 50-megawatt gas turbine, illustrate progress in domestic capability. Additionally, Shanghai Electric’s 2014 acquisition of a 40 percent stake in Italy’s Ansaldo Energia provided access to an alternative Western technology stack. These trajectories suggest that while joint ventures offer a double-edged sword—providing immediate industrial capacity but potentially limiting access to core secrets—long-term technological sovereignty often necessitates autonomous innovation pathways.
Toward a Collaborative Clean Tech Framework
Today's clean technology sectors differ significantly from the gas turbine industry two decades ago. However, the underlying challenge remains the same: how to balance market access, intellectual property protection, industrial competitiveness, and long-term innovation. The gas turbine experience therefore provides a useful historical lens through which current EU-China cooperation can be reassessed.
As the EU and China expand cooperation into wind, solar, storage, and hydrogen, the gas turbine precedent offers constructive parallels. Moving forward, the focus might shift from ideological debates toward institutional design that acknowledges mutual dependencies.
Clear and well-defined intellectual property arrangements remain essential. Future frameworks could explicitly distinguish between background IP, foreground IP generated through collaboration, and process-related knowledge. Establishing clear parameters for data governance and technology usage upfront can mitigate misunderstandings. Furthermore, recognizing that successful cooperation requires balancing technological openness with the protection of legitimate commercial interests can foster more sustainable partnerships.
Collaboration in third-country markets presents another avenue. By combining European technological depth with Chinese manufacturing scale, EU-China consortia could undertake renewable energy projects in emerging economies. Such "third-market" cooperation aligns with both the EU’s Global Gateway and China’s Belt and Road Initiative, transforming potential bilateral friction into shared commercial and developmental opportunities.
Conclusion: Navigating Trade-offs for a Net-Zero Future
While economic security concerns are reshaping industrial policies on both sides, the gas turbine experience suggests that commercial cooperation and strategic competition need not be mutually exclusive. Characterizing technology exchange solely through narratives of coercion or victimhood overlooks the agency of all parties involved. Similarly, expecting joint ventures to automatically bridge profound technological gaps underestimates the protective instincts inherent in competitive markets.
As the EU and China pursue a net-zero future, moving beyond adversarial framings is crucial. By prioritizing equitable, risk-sharing models and transparent contractual frameworks, both sides can cultivate a clean tech ecosystem that drives innovation while respecting commercial realities. The objective is not to eliminate competition but to manage it through rules that incentivize investment and protect legitimate interests. The gas turbine legacy demonstrates that technology cooperation is a dynamic process involving continuous negotiation and trade-offs. Applying these lessons to today’s clean technology sectors can help transform potential friction into a productive partnership that supports the global energy transition.
This article is part of a series on “EU-China relations: Bound by Clean Tech or Divided by it?”. The articles reflect the opinions of their respective authors and should be read in the context of this series.
