The best tech strategy is to 'co-develop in China,' says senior French defense executive

Key Points
  • "The new rule of success is to co-develop in China, it's to generate technology from China together with Chinese partners," said Laurent Guyot, CEO of Thales China.
  • An effective tech development strategy in China involves having the right partnerships with a "true business-oriented relationship," he said.
'We want to localize R&D in China': Thales China CEO

An executive for a French defense giant that operates in China said that safeguarding the company's technology is important, but the effort is no barrier to his firm's success there.

Speaking to CNBC at the China Development Forum in Beijing, Laurent Guyot, CEO of Thales China, reframed the issue to place it outside the hot-button topic of "technology transfer."

"The new rule of success is to co-develop in China," he said. "It's to generate technology from China together with Chinese partners. In that case, we don't talk about transfer of technology — we talk about building value in China, for China and also for the group."

"When you follow this kind of approach, good partners, localization of technologies, I think you can get all the benefits of being there," he said.

Thales makes everything from warship electronics and unmanned aerial vehicles to satellite communications equipment and radar technology. It has operated in China for more than 30 years.

New concerns about technology transfer

President Donald Trump signed an executive memorandum last week that would impose retaliatory tariffs on up to $60 billion in Chinese imports.

The new measures are designed to penalize China for doing things like requiring U.S. companies to hand over technological know-how if they want to do business in China.

The U.K.'s new aircraft carrier, HMS Queen Elizabeth. The largely French-designed ship was built by a joint venture between BAE Systems, Babcock International, and Thales.

According to Chinese state media, Vice Premier Liu He told U.S. Treasury Secretary Steven Mnuchin on Saturday that an eight-month, U.S. investigation into whether China engages in unfair trade practices was in itself a violation of international trade rules.

On Sunday, China pledged to undertake market reforms, treat domestic and foreign firms equally, and protect intellectual property rights.

Asked whether he's concerned that China will stop working with Thales once it has gained the know-how it needs and can develop technology on its own, Guyot brushed aside such worries.

"This is a very interesting question. Why do you ask it for China? You can ask it for any country in the world."

— CNBC's Kevin Breuninger and Kayla Tausche contributed reporting.