Transcript Science, technology and innovation policy in China

New Direction of Science,
technology and innovation policy
in China
Second BRICS Project, April.25-27, 2007
Liu Xielin
Graduate University of Chinese Academy of
Science, Beijing, China
[email protected]
1
Outline
 Science
policy
 Technology policy
 Innovation policy
 Indigenous innovation Policy
2
A. Sciences Policy
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Basic science once was regarded as curiosity driven
research. Less government intervention.
Government research institutes (GRI) was the main
body for the research.
Reform:
University replaced GRI, company more and more
marginal.
973 to strengthen big science
Knowledge innovation program for Chinese
Academy of Science for excellence of centers
Talent people policy
3
curiosity research and NSFC
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The establish of NSFC in 1985 for curiositydriven research
From 2001-2005, about ten billion for
curiosity-driven research.
More money for excellence of centers and
senior scientists.
But science is more a national brand rather
than economic force, so, the budget for it is
limited.
4
Institutional reform
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Institutional change:
GRI once the main basic institution. Basic
research could be done by government plan.
Gradually, government encourage university
to replace GRI.
GRI:only CAS is left as the national institution.
company more and more marginal in basic
research.
5
University in 2003
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National science foundation of China: 67%.
National basic research program(973): 47%.
National Labs for basic research: 92, about
56.79% of total.
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Knowledge innovation engineering for
excellence of centers
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to survive the CAS in the rising of university.
1999, Knowledge innovation program: mainly
for CAS, it helps CAS greatly in facility and
key scientists research. About one billion a
year. This project makes CAS the largest
basic science center in China.
7
Paper publication by institutions (share)
GRI
company
others
university
SCI
EI
dome SCI
stic
EI
dome SCI
stic
EI
domes SCI
tic
EI
domes
tic
2002 73
82.5
63.7
25.5
16.2
13.3
0.3
1.1
8.3
1.3
0.2
14.6
2003 74.7
81.8
66.2
24.0
16.6
11
0.2
0.9
5.6
1.2
0.8
17.1
资料来源：《中国科技论文统计与分析2000年—2003年》，中国科学技术信息研究所。
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973: national basic science program: to
strengthen the role of government in science
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A national mission-oriented science program.
For big science and transnational cooperation.
From 2001 to 2005, they supported 143 key projects.
Health care: 29
IT: 18
Material: 18
Agriculture: 17
Energy 15.
Others: 27
Total money: 4 billion (MOST).
9
Talent people policy

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Returnee: With special policy to attract
overseas Chinese back, more and more of
them return. This quickly narrow the gap in
some science fields.
From 2001-2005, CAS has attracted 422
scientists from the world with special money
for their research and labs.
10
overseas via returnee
万
overseas students
returnee
14
r/o
12.5
11.7
12
10
%
11.5
8.4
8
6
3.9
4
2
2.2
2.1
0.7
2.4
1.8
0.7
0.7
0.8
0.9
1.2
1.8
2.0
2.5
0
1996
1997
1998
1999
2000
2001
2002
2003
45
40
35
30
25
20
15
10
5
0
2004
11
Transplant of some research institute from
USA
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A institute called Beijing Institute of Biology
was established and operated by whole
returnees.
They got special and heavy support from
government.
They enjoy special governance for their
operation like a total institute operated in
USA.
But this policy arises new problem: local
PHDs feel more and more pressures
12
performance
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Budget for basic research has been a small
proportion of total R&D in China. because the
company spend little money on basic science,
so, the share of basic science in China is
quite low comparing to other countries.
Limited areas: Biology, nanotechnology were
given the strong weight in those national
programs.
Science is catching up quickly.
13
Share of R&D for basic research is increasing
gradually.
Type of research
R&D
expendit
ure Basic (%)
applied
Experimen
tal
develop
ment
2000
895.7
46.7(5.2)
151.9
697.0
2001
1042.5
55.6
184.9
802.0
2002
1287.6
73.8(5.7)
246.7
967.2
2003
1539.6
87.7
311.4
1140.5
2004
1966.3 117.2(5.9)
400.5
1448.7
14
More scientists for basic research
2000
2001
2002
2003
2004
R&D people
（10,000/year）
92.21
95.65
103.51
109.48
Basic research
7.96
（8.6
%）
7.88
8.40
8.97
Applied research
21.96
22.60
24.73
26.03
27.86
Experimental
development
62.28
65.17
70.39
74.49
76.33
115.26
11.07
（9.6%）
15
Government targeted limited area for catch-up.
Biology and nanotechnology.
％1999-2003 growth rate of papers in different fields
35 29.61 28.69 27.66
30
24.44 23.98
25
19.37
20
15.04 14.87
11.59 9.73
15
10
5
0
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tr
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s
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em
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ie
sc
s
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ys
ph
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on
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ma
e
th
nc
ma
ie
sc
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co
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si
hy
..
op
n.
ge
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en
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ch
al
ri
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ma
y
og
ol
bi
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International SCI is increasing
论文数（篇）
1600
1400
1202
1200
1000
800
600
868
645
697
1996
1997
1263
1365
1443
1084
786
400
200
0
1998
1999
2000
2001
2002
2003
2004
年份
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1. Growth of Science and Technology Sector
Total Academic Papers
(SCI)
1990
1995
1997
2000
2001
2002
2003
2004
Number
8,131
13,270
17,370
30,499
35,685
40,800
49,800
57,377
Share (%)
-
-
-
3.15
3.57
4.18
4.48
5.43
Rank
-
15
12
9
8
6
6
5
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B. Technology policy
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Transformation of applied GRI into technologybased companies.
Market for technology: In lots of industries, we need
FDI to upgrade the industry, China asked the
multinationals to set up R&D center and do
technology transfers as way to get the latest
technology for them to enter in Chinese market
before WTO.
Support R&D centers in large companies.
Special industrial policy
Target program---863 and breakthrough program
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Transformation of GRI
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To reduce the number of GRI. in1998, the
State Council decided to transform 242 GRIs
at the national level into technology-based
enterprises or technology service agencies.
Some of them became the leading
companies in their industry. But some of them
worse than before.
After this policy, thousands of regional GRIs
were transformed into companies.
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Market for technology
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Government use the market to press foreign
companies to transfer the technology to local
companies. For example, In IT and
automobile industry. the specific policy tools
is licensing. Only the local companies can
sell their products to customers in China.
Joint venture became the main way for
foreign companies to come to China.
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Reason for the policy
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Joint venture is not a good entity for long
term cooperation.
Multinationals do not like to transfer the key
technology to help potential competitors.
Multinationals can make money just by
selling parts.
.
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critics
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A bad policy? Scholars criticize the policy as
multinationals do not transfer the technology.
in automobile industry, the industry
dominated by multinationals such as GM,
Volkswagen and Japanese companies. But
the local companies still very weak.

Market protection sometimes do bad for the
industry, such as automobile industry. they
can enjoy high profit with no innovation.
23
Encourage multinationals set up R&D center in
China
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Both central and local governments try to
attract multinationals to set up R&D centers
in China or their regions with special policy.
But the spillover is not easy to see. Need
more time to see the positive results.
24
Number of new establishments of foreign R&D
labs in China, (1987-2003 )
25
20
15
10
5
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
0
25
Subsidy to R&D lab in big companies
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For large companies, government select
about 512 for special support.
Now they select more than two hundreds
company as leading innovative company and
give them direct support.
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863: national high-tech program
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From 2001-2005, about 15 billion RMB were
spend on civil technology. it is the most
important national program in China.
It mainly focuses high-technology.
Most of local high technology owned to its
support.
It spread the seeds of high-tech industry in
China and is deeply related with the
development of high-tech zones in China.

27
The budget of six national programs （in 0.1 billion RMB）
1996
Basic
research
863
1997
1998
3
4.5
5.054
1999 2000
4
5
2001
2002
2003
2004
6
7
8
9
25
35
45
55
breakthrou
gh
torch
5.2
5.372 10.37
11.6
6
10.3
2
10.63
10.63
4
12.46 16.144
4
0.51
0.51
0.51
0.51
0.5
0.5
0.5
0．5
spark
0.39
0.39
0.39
0.4
0.4
1
1
1
Diffusion
0.19
0.19
0.2
0.2
0.2
0.2
0.2
0.2
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C. Innovation policy
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Innovation policy has been initiated in 1980s
to better use of S&T for commercial purpose.
Spill-off: China introduced this policy very
early to push university and GRI to contribute
more to economic growth.
IPR: given university and inventor the rights
to commercial use of their invention.
Subsidy to R&D lab in big companies
Science park and high-tech zones
Special industrial policy
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Spin-off policy
Table 2 University spin-offs
Number
of spin-offs
Revenue
（Billion RMB）
Profit
(Billion RMB）
1999
2137
26.7
2.2
2000
2097
36.8
3.5
2001
1993
44.8
3.1
2002
2216
53.9
2.5
2003
2447
66.8
2.8
2004
2355
80.7
4.1
Sources: Statistics of University’s industry in 2004 in China, Center for S&T for Development, Ministry of Education, 2005.
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Results of Spin-off policy
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Lenovo, Founder and lots of other companies are
the results of spin-off policy.
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But the policy gradually met more challenge:
Spin-off companies do not have a good regulation
for further innovation.
The conflict between the profit-seeking and public
goal of the university.
Put the university and GPI more risky position.
New policy: not clear cut from but separate the
business with university.
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IPR: coping the practice of USA
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Firstly, inspired by the Bay-Dole model form the U.S.,
the first step taken by the Chinese government is to
allow IPR resulting from government-funded R&D
projects to be commercialized.
Secondly the ownership of IPR resulting from
government-funded R&D projects could be
transferred to the university or GRI who conducted
the projects, instead of being government-owned
intangible assets.
Thirdly, since 1998 individual inventors involved in
government-funded R&D projects are allowed to
obtain a royalty of at most 35% of the license fee
when the research results are transferred.
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High-tech zones
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To establish well-functioning infrastructure so that
the high-tech zones serve as a platform for
innovation activities and interactions. Zhongguancen
is the first and now there are 53 national high tech
zones in China.
To provide preferential treatments to high-tech firms
in forms of a broad range of tax incentives.
To create a new governance model, which is
characterized by “small government, but big service”
to reduce transaction costs.
To establish cluster structure in order to promote
active interactions and close co-operation among
the firms.
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High-tech value added/GDP is increasing and thanks
the contribution of multinationals
5
％
4
3
4.6
3.5
3.6
4.0
2
1
0
2001
2002
2003
2004
34
Special industry policy
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2000- policy for integrated circuit and software
industry in China
for software industry
Value added tax: for general company, 17%, for
software industry, 3%.
Income tax: general firms: 35%, for software firms:
10%.
For IC industry
Value added tax: for general company, 17%, for
software industry, 6%.
For company with investment of 8 billion and
technology in 0.25 , they can enjoy the other tax
advantage as foreign firms.
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Follow-up of the policy
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Lot of foreign companies criticize the policy
for too strong support local companies
against foreign policy.
It seems that too good protect of local
companies killed their motivation to innovate.
36
SME innovation fund
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For small companies, national SME
Innovation fund was set up. Each year is
about 0.6 billion a year.
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D. New innovation policy followed the
Long range S&T Programming(2006-2020)
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Demand driven
Indigenous innovation: More independent
domestic S&T supplier to control the
overwhelmingly relying on foreign sources.
Innovation has been promoted as national
strategy.
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Demand driven
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Demand driven: for a long time, most of government
project are technology-driven, that is, scientists and
government official are the main decision makers.
In this long range S&T Programming, politicians
realized that a new direction is needed for S&T to
solve problems in economic and social development.
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Ecology, security and health care are the important areas
for scientists to do the research.
Public procurement
Key project: large airplane,
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Indigenous innovation
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The “National Plan 2006-2020 for the
Development of Science and Technology in
the medium and long term” is the current
long-term S&T policy framework of China.
The most interesting element of the new plan
is the declared intention to strengthen
“independent” or “indigenous” innovation.
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Why indigenous
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Firstly, the economic growth of China has been
strongly dependent on foreign technology and
foreign invested firms. Since 2000, foreign-invested
enterprises accounted for more than 85% of all hightech exports (China Statistics Yearbook on high-tech
technology industry, 2004- 2006). In recent years,
there has been an increasing frustration among
domestic actors, caused by the factor that “market
for technology” policy has not resulted in the
immediate
and
automatic
knowledge
and
technology spillovers from foreign to Chinese
enterprises that policymakers had hoped for.
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Secondly, a culture of imitation and copying is
common not only in product development and
design, but also in the field of scientific
research. Hence innovations from domestic
knowledge bases and intellectual property
rights are acutely needed in China.
Thirdly, the high growth rate of the Chinese
economy during the last twenty years will not
be sustainable without a change in the
development strategy. China needs, for
example,
more
energy-efficient
and
environment-friendly
technology, new
management skills and new organizational
practices to ensure sustainable growth in the
near future.
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Policy tools for indigenous innovation
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Firstly, the government plans to increase
R&D by 2020 to 2.5 % of GDP (from the
current level of 1.3%). Since GDP growth is
projected to increase at a similar pace as in
the past two decades, the increase of R&D to
GDP ratio implies a huge increase of R&D
expenditure in absolute terms.
Threat of science take-off?
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Tax policy

The new tax policy will make R&D
expenditure 150 % tax deductible, thus
effectively constituting a net subsidy, as well
as accelerated depreciation for R&D
equipment worth up to 300 000 RMB
44
Public procurement of technology
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the public procurement of technology will be
adopted to promote indigenous innovation
activities.
The purpose of current public procurement
practice is to cut costs rather than promote
indigenous innovation. The new public
procurement policy aims to give priority for
indigenous innovative products in public
procurement in terms of price and volume in
various forms.
Learning from best practice in South Korea
45
PPT in China
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In 2002, the Law on Government Procurement was
proved by the Standing Committee of Chinese
Congress. The volume of government procurement
has been expanding very quickly from a level of 3.1
billion RMB in 1998 to 213.6 billion RMB in 2004.
This volume of government procurement equals now
about a level of 2% of GDP, and thus is still far lower
than the levels in more developed countries, for
which different estimates exist. Shen and Xu report
on 10% for the developed countries (Shen and Xu,
2006), Wilkinson et al. (2005) claim about 16% for
the EU countries.
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What is indigenous innovative products

Article 22: Establish a system of procurement
of innovative products in the current finance
base, including a certification of what is
innovative product; put innovative products
on priority in the procurement list; in national
key projects with government’s money,
domestic equipments purchase should not
less than 60% of total value.
47
Price deduction for indigenous Innovative
products

Article 23: In the price-based bidding, even if
the price of indigenous innovative products is
higher than other ones, they can get some
price deduction in the real bidding. If the price
of the indigenous products is not higher than
other products, they will be selected – given
the quality is appropriate and comparable to
the foreign products.
48
Catalyst
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Article 24: Establish a system of procurement
of innovation. It means that the government
should purchase the first vintage of
innovation products created by domestic
enterprises or research institutions if the
innovative products have proven to have
potential big markets. This gives government
the space to purchase R&D projects for
commercial purposes
49
Local purchase or foreign purchase

Article 25: Establish a cognizance system of
domestic products and an evaluation system
of purchasing foreign products. In the
purchasing process, domestic products have
priority over foreign products. Only those
products that are not available in China can
be purchased from abroad. For purchasing
products of foreign companies, those
companies that are willing to transfer
technology and assimilation to local
companies, will be listed as priority ones
among other candidates.
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E.Reflection of new innovation policy
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How to coordinate indigenous innovation and
open innovation in today’s world.
It may lead to tech-nationalism following open
to the world for a long time.
It sends a message of technical determinism
to solve lots of social as well as economical
problems.
51