Sti Policy in Asia: China

The story of economic growth in People’s Republic of China and India is a fairly popular subject of academic research and debates at various levels- national as well as international. These two Asian giants have brought a great turnaround through their bold steps in almost every sphere of their national lives and days of massive poverty are over. China has been progressing with high rate of economic growth since last three decades and is currently world’s second largest economy by nominal GDP and largest by Purchasing Power Parity (PPP). India, on the other hand, is progressing steadily from the last one and a half decades, except for a lull between 2012 to 2014, and is currently world’s sixth largest by nominal GDP and third largest by PPP. Both the countries represent opposite sides of political spectrum, India- a liberal democracy and China- a highly centralized communist country.

Both these nations have large populations, China is world’s most populace country while India is second most populace. However, it is this human resource whose better usage has generated positive results for both these countries. Science, technology and innovation (STI) has played a vital role in educating and training the large populace of these countries, to contribute effectively in the national growth. A holistic approach incorporating STI and other important aspects of the economy and national life has made the real difference in the growth story of these countries. Almost every sphere of national life has been affected by STI, whether agriculture or manufacturing or services. However, it has been a recent phenomenon to have a dedicated STI policy in both these countries. Developed nations were first have a targeted STI policy and developing nations like China and India followed them but altered the policy to cater to their specific national needs. International collaboration with various forums and organizations was also desired for these STI policies and guidelines.

China

Following three decades of an unprecedented high rate of economic growth, China seems to have entered into the so called “new phase of growth”, highlighting key transitions and shifts in policy focuses from fast growth to sustainable growth, from public sector to private sector, from investment to consumption and from manufacturing to services.

The long road to success will depend on this transition to a new growth trajectory but will require not only structural reforms but also to make STI a key engine for growth. China has been steadily increasing its STI investments, with its Gross Domestic Expenditure on Research & Development (GERD) reaching 2.05% of GDP in 2014.

After the launching of economic reforms and opening up to the world at large, China has set up numerous science and technology programmes and institutions, which have played a significant role in enhancing the country’s scientific and technological (S&T) strength while supporting economic and social development.

However, after accepting that there is significant level of duplication and inefficiency in these programmes and S&T resource allocation, China initiated an ambitious reform to transform its S&T system under the aegis of its 2012 policy of “National innovation driven development strategy’. It was revised in 2016. The 13th Five-Year Plan, launched in 2016, and under its ambit the 13th Five-Year Plan on STI was released in 2016 to establish a set of targets for S&T development for 2016-20 like R&D to reach 2.5% of GDP by 2020.

China has the world’s second largest economy in terms of GDP but its GDP per capita is still low. The STI system is undergoing changes from a Soviet-type science-based R&D system to a broader market-based innovation system. During past decades China’s reliance on foreign technologies has increased significantly as due to its “open door” policy under which it has accessed foreign capital and technologies, and which has also created pockets of knowledge-based activities. The national innovation system has marked regional disparities. Beijing has a strong science base, with many PRIs, including the Chinese Academy of Sciences (CAS), and top universities; these are national R&D centres with global connections. Shanghai has a large-scale, R&D-intensive industry base. Guangdong province has a foreign (manufacturing) firm-based innovation system and accounts for more than half of China’s PCT patent applications (almost two-thirds in ICT).

In contrast, China’s western regions lack the absorptive capacity needed to capture knowledge flows from coastal areas and abroad. Collaboration is weak across regions. China’s R&D output in terms of patents is low although Chinese firms are active both as R&D performers and contractors. The business sector accounts for 72% of GERD (1.30% of GDP). Business funds 11% of academic research (0.06% of GDP). China’s RTA has increased in ICT over the past decade but lost considerable ground in biotechnology and green technologies. Innovative entrepreneurial activities appear constrained by regulatory and administrative burdens. The dominance of state-owned enterprises, especially in public facilities, tends to reduce pressures to innovate. China’s ICT infrastructures have developed fast but, in per capita terms, ICT use and e-government readiness are still low compared to the developed nations.

Recent changes in STI expenditures

China’s GERD has more than doubled in just five years (2005-10) to USD 179 billion. Since 2009, China has the world’s second largest R&D expenditure after the United States. GERD reached 1.77% of GDP in 2010. BERD as a share of GERD increased to the top level of OECD countries (GERD performed by the business sector figure), and firm self-funded R&D reached 93%.

Overall STI strategy

The Medium- and Long-term Plan for S&T Development 2006-20 (MLP) provides a blueprint for China’s transformation to an innovation-driven economy by 2020. R&D expenditures are meant to reach 2.5% of GDP. The 12th Five-Year-Plan for S&T Development (2011-15) played a central role in implementing the MLP and emphasises key technologies for strategic and emerging industries like manufacturing, agriculture and ICT, relieving the pressures on energy, resources and the environment, and accommodating the needs of an ageing population.

STI policy governance

China’s STI governance features strong central government leadership in setting strategic directions, objectives and policy frameworks. Provincial governments can adapt the national STI strategy to regional conditions for implementation.

Science base

Public research is strongly oriented towards applied and experimental R&D. In spite of a major reform that converted many PRIs to enterprises in the early 2000s, PRIs still dominate public research. In 2010, the CAS launched Innovation 2020, an extension of the Knowledge Innovation Programme, designed to improve CAS’s R&D capability and contribution to innovation by setting up a series of research centres in space, IT, energy and health sciences, as well as science parks in Beijing, Shanghai and Guangdong.

Business R&D and innovation

The government has adopted various policy instruments to foster enterprise-centred innovation emphasising indigenous innovation capacity. While direct public support to business R&D is limited, new tax incentives promote China’s technological development.

Entrepreneurship

The corporate tax and the value-added tax (VAT) have been significantly reduced for high-technology enterprises, SMEs and ICT firms in order to support development and technology transfer in software industries. New regulations allowing foreign investors to purchase local currency for investment in private equity partnerships were adopted in early 2011, and the central government appropriated USD 25 billion to strengthen credit guarantees and support the expansion of domestic demand.

Clusters and regional policies

China has a tradition of special economic and high-technology zones. Recent policy initiatives aim to strengthen linkages among them. To strengthen transport infrastructures, in particular to accelerate the construction of a high-speed railway network between Beijing, Shanghai and the Pearl River Delta. The Framework for Development and Reform Planning for the Pearl River Delta Region (2008-20) has been adopted to make the region an innovative centre in the Asia-Pacific area.

Knowledge flows and commercialization

Attention has been given to strengthening the regulatory framework for IPR protection and to facilitate the transfer and commercialisation of knowledge. A new National Intellectual Property Strategy, adopted in 2008, aims to achieve a relatively high level of producing, utilising, protecting and managing IP by 2020. A special fund was set up in 2009 to support international patenting, national interim provisions for intellectual property management of major projects were adopted in 2010, and an IP Protection Action Plan was launched in 2011.

Human resources

The Medium- and Long-term National Plan for Science and Technology Talent Development (2010-20) was adopted to promote highly skilled mobility, to implement innovative platforms for S&T talent, and to establish national research centres for high-level R&D personnel. Firms that invest in education and training programmes are granted tax incentives.

Green innovation

In 2009, the Ten Cities and Thousands Lightening Project aimed to promote the application of semiconductor lighting technology in 37 cities. In the same year, a demonstration programme involving 1000 energy-saving or new-energy vehicles in 25 cities was launched to turn the automotive market towards new-energy vehicles and to have 500000 of these vehicles in the market by 2015. The 12th Five-Year-Plan (FYP) has also devoted considerable attention to energy and climate change e.g. gradual establishment of a carbon trade market and has triggered a new wave of industrial policies in support of clean energy industries and related technologies.

Fostering sustainable/green growth

The main priority is to enhance the contribution of STI to China’s transition to an ecologically sustainable mode of development. China’s green productivity was much lower than the EU level. China’s RTA in green technologies has slipped over the past decade, however. The government’s 12th Five-Year Plan (2011-15) set the target for green productivity growth at 17% over the five-year period, thereby focusing considerable attention on energy and climate change and triggering a new wave of industrial policies in support of clean energy industries and related low-carbon technologies. In the government’s 13th Five-Year Plan (2016-20), environment and ecological improvement are listed among the nation’s major tasks. By 2020, energy consumption per unit of GDP is to be reduced by 15% from the 2015 level and CO2 emissions by 18%.

Addressing societal challenges (including inclusiveness)

China faces serious societal challenges in terms of food security, public health and ageing, all of which will require contributions from STI. The National S&T Major Projects focus strongly on public health, ageing, food and drug safety, and disaster prevention, while the National S&T Plan has been adjusted to sharpen the focus on agriculture, energy resources, ecological environment and health. The energy and health areas are also among the four sectoral focuses of the Innovation 2020 Programme of the Chinese Academy of Sciences (CAS). China has been promoting “inclusive innovation”, i.e. innovation by and for low-income people. Existing initiatives include the Spark Programme, which promotes agricultural and rural development by facilitating peasants” access to relevant technologies and related training, as well as the S&T Programme for Public Well-being, which supports the commercialisation of technologies that can benefit social development.

Supporting R&D and innovation in firms

BERD as a share of GERD has risen to the top level of developed economies countries, with firm self-funded R&D reaching 94% of BERD in 2012. The review of the implementation of the Medium and Long Term National Plan for S&T Development (2006-20), carried out in 2010, noted that there was a need for greater vitality and drive with respect to business participation in technological innovation. There is recognition that close collaboration among enterprises, universities and research institutes is needed, that high-level innovative talents in S&T are relatively lacking, that the allocation of S&T resources needs to be more efficient, and that the implementation of the indigenous innovation policy should be enhanced. In April 2015, China launched a national strategy for mass entrepreneurship and innovation, which aims to enable more people to start their own business and become involved in innovation.

Improving the attractiveness of scientific and research careers

Although China has the world’s largest pool of human resources for S&T, the tertiary qualified share of the population is still extremely low. Furthermore, China lacks world-class researchers. Both the Thousand Talents Programme and the CAS 100 Talents programme aim to attract and retain top-tier academics, including from overseas. The National Plan for S&T Talent Development (2010-20) addresses the business sector’s need for innovative personnel by supporting mobility of the highly skilled and by investing in innovation platforms and national key labs to cultivate talented, leading R&D personnel.

Strengthening public R&D capacity and infrastructures

Although many PRIs became corporate entities as part of the reform of the S&T system in the early 2000s, PRIs still dominate China’s public research and are strongly oriented towards applied and experimental R&D. The government released the Implementation Plan on Deepening the Reform of the Scientific and Technological System in September 2015 to speed up the building of a national system of innovation, including reporting instruments and an advanced management system for research achievements. The latest round of PRI reforms aims to clarify the roles of the three types of PRIs (commercial innovation, social welfare and basic research) and to establish appropriate governance, management and funding mechanisms to help them fulfill their missions. The Medium- and Long-Term Plan for Key National Technology Infrastructure Construction (2012- 30) aims to develop research infrastructure in the life sciences, environmental science, materials science, space science and other fields.

New sources of growth

China’s competitive advantage as a global manufacturer is faced with a challenge, as Chinese labour costs have increased, and multinationals, including Chinese ones, are increasingly relocating their manufacturing activities to countries with lower labour costs. To address these challenges and to seize the opportunity of the “next production revolution”, China launched “Made in China 2025” in 2015, as part of a 30 year strategy to strengthen China as a manufacturing country. This is the first in a series of national ten year plans, and it focuses on enhancing innovation, product quality and environmental sustainability, optimising industrial structure and developing human resources in Chinese manufacturing. Ten key sectors were targeted for support, including ICT, robotics, agriculture, aerospace, marine, railway equipment, clean energy, new materials, biological medicine and medical devices. The core goal of “Made in China 2025” is upgrading industry through the greater use of digital technology. The “Internet Plus” initiative was launched in 2015 with a view to digitalising major sectors of the economy and building a service-oriented interconnected intelligent industrial ecosystem by 2025, thus making digitalisation an important driver of growth. It aims to develop intelligent factories, improve synchronization over production chains, better customize manufacturing and promote manufacturing as a service. Combined with other policies, this initiative is intended to bring about a “new industrial revolution”.

Technology transfers and commercialization

While a significant share of China’s public research is funded by industry, signalling the existence of sound industry-science co-operation, China’s universities and PRIs are not very engaged in patenting activities. In order to foster collaboration between academia and industry, the government supports the China Industry Technology Innovation Strategic Alliance by financing research- and IP-pool. Under the Law on the Promotion and Transformation of Scientific and Technological Achievements (revised in 2015), the government encourages R&D institutions and higher education institutions to transfer S&T achievements to enterprises or other organisations by assignment, license, investment as a trade-in, and other means.

Clusters and regional policies

In 2011, a programme for the construction of innovative industry clusters was launched in order to coordinate the development of science and technology enterprises with the local economy, on the one hand, and with the national strategic orientation, on the other hand. The programme aims to foster the technological upgrading of the traditional economy and the growth of regional industries, and to accelerate regional economic development. The programme also supported the development of both SMEs and large firms in local industrial fields, as well as the development of new skills.

STI policy governance

In 2014, two significant policies were announced, i.e. the Opinions on Improving and Strengthening the Management of National Government-Funded Projects and Funds and the Scheme of Deepening Management Reform of National Science and Technology Programmes (Special Projects and Foundations, etc.). According to the latter, about 100 national S&T programmes will be classified into five categories and will no longer be directly managed by departments and ministries. An open and unified national S&T management platform will be established, which consists of a new unified evaluation and inspection mechanism. A programme to evaluate National Engineering Technology Centres has been designed using a new set of indicators. China has also started making use of the results of STI evaluation exercises to improve S&T management and enhance the national innovation policy design at the level of programmes, institutions and the system. In 2014, the China Publishing and Distribution Trading Cloud Platform was established, serving the publishing industry chain, based on cloud computing technology. The Ministry of Science and Technology (MOST) also established the National S&T Information System, a public information service platform to access reports and information, including on resources and data about publicly financed R&D projects.

Globalisation

China’s science and innovation systems are weakly linked to global networks, as is reflected in a low-level of international co-authorship and co-invention. The government is trying to make the STI system more open through continued government co-operation on S&T and through diversification of the ways in which Chinese enterprises and PRIs interact with their foreign counterparts. In recent years, China has also strengthened its participation in large-scale international collaborative projects, such as the EU 7th Framework Programme, and has engaged in annual bilateral dialogues on STI co-operation with key partner countries, such as the United States and Germany. For example, financial support continues to be made available under the Sino-EU Science and Technology Cooperation Programme, which aims to promote and support both China and EU S&T innovation and industrial cooperation.

ICT and Internet infrastructures

China has significantly improved its RTA in ICT in past years. Patent data also show that China is a top world player in new technologies related to the Internet of Things and Big Data, and that it holds the third-largest portfolio – after Japan and the United States – of patents in bursting technologies for wireless communication monitoring. According to the Ministry of Industry and Information Technology, the total sales revenue of China’s ICT industry increased 10.4% in year 2015, to USD 4.3 trillion, with an annual increase of 17.3% in domestic sales being the key driver. The Internet Plus initiative addresses the integration of ICT technologies with China’s industry. It also aims to make China a leading player in certain technology areas, such as 5G internet and integrated circuits. However, the relatively higher price and lower speed of China’s Internet have been openly criticized and still have room to improve, as does its network readiness. New infrastructure, such as the Internet of Things, mobile Internet, industry cloud and big data, is also considered necessary and yet to be fully developed.