1 a preliminary evaluation of indigenous innovation policy of china xielin liu, phd professor in...
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A Preliminary Evaluation of Indigenous Innovation Policy of China
Xielin LIU, PHD
Professor in Graduate University of Chinese Academy of Sciences
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Outline
Achievement of innovation and challenge New strategy for 2020: indigenous innovation Evaluation of indigenous innovation policy Implication of standard setting Conclusion
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Share of High-tech exporting of the world
USA
Germany
UK
Japan
China
Korea
India0.00
5.00
10.00
15.00
20.00
25.00
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: NSF: Science and Engineering indicator, 2006.
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Accelerated catch-up in R&D intensity
GERD as a percentage of GDP,1990-2006,%
Source: ECD MSTI database 2006/2.
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R&D Intensity in 2004 and Annual Average Growth Rate of R&D
Intensity*,1999-2004
Source: Euro stat, “R&D expenditure in Europe”, Statistics in Focus, European Communities,June,2006.
* R&D intensity is R&D expenditure as a percentage of GDP
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Surge in applications for Chinese patents
1995-2006
Source: Chinese S&T Yellow Book 2004, and MOST website most.org.cn
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The number of invention patents granted to Chinese actors has risen
rapidly
Source: Chinese S&T Yellow Book 2004, and MOST website most.org.cn
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Summing up: a simplistic input-output account,1995-2004/05
Source: China S&T Statistical Yearbook 2005, China Yellow Book on S&T 2004, China Foreign Investment Report 2005, and MOST website most.org.cn
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Challenge Cost driven strategy, limit profit margin, trapped by
IPR, standards and high royalty for licensing technology.
Poor innovation capability in industrial level. No internationally competitive company.
High reliance of foreign technology supply in key industry, such as chips, software, machine tool, engine etc.
Technological dominance of multinationals in domestic industry
No leading edge scientists and research in China
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Strategic goal of indigenous innovation policy for 2020
Solid improvement of capability of S&T to promote economic and social development.
To master the leading edge industrial technology and decrease the reliance to foreign technology
To promote the enterprise from cost-driven to innovation driven.
Achievement of S&T results with global impact. Make China of innovative countries in the world
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1999—2004 R&D/GDP
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2020
R&D/GDP（ % ） 0.76 0.90 0.95 1.07 1.13 1.23 1.34 1.42 1.49 1.52 2.5
Source: China S&T Database of MOST sts.org.cn
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16 Target technologies for 2020 General CPU New broad wireless mobile telecommunication High end digital machine tools Nuclear station New drugs Large Airplane Moon flight Trans-genetics products Anti-HIV and other dieses … Those project intend to start in a time before 2020 one
by one. But financial crises kicked off those mega projects earlier.
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Procurement to promote indigenous innovation
Priority for indigenous innovative products in public procurement
More than 30% of technology and equipments buying should go to domestic equipment if using public money
Giving indigenous products some price advantage in procurement
Identification needed before implementation of the policy.
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Improvement of Special tax policy 150% underwriting for R&D expenditure before tax
but with conditions 10% of R&D increase, a company in profit, cannot use the tax benefit to other year.
Now all the conditions are cancelled. No profit required No 10% increase is necessary Can write off the benefits in next three years. One income tax policy for domestic and foreign
companies in China High-tech company can enjoy free income tax for
the first two years and half for next three years after its profit year.
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Tax for high tech industry
Free income, operating, real estate and land tax in a given period for incubators and university science parks to encourage start-up firms.
For VC company, there will be tax reducing for investment revenue and income, but not specific this time, intending to promote VC in China.
Policy bank can invest in high-tech companies by using equity share.
Second board for SME, started from 2009.
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More support to IPR and standard setting Strongly Support TD-SCDMA: push China
Mobile to launch out TD-SCDMA. The effect is not yet sure.
Take standard and IPR as important indicator of achievement of government R&D project.
Direct support to enterprises for next generation technology and standards.
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Evaluation of indigenous policy
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Accelerating of R&D investments: yesNational R&D expenditure
2001 2002 2003 2004 2005 2006 2007 2008
National R&D expenditure
12.6 15.56 18.6 23.74 30.36 38.5 50.82 66.23
One billion of US dollar
Source: Data Bank of MOST. most.gov.cn, NBS, MOST and MOB (2009). Bulletin of national S&T expenditure
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More money for applied research and product development
Source: MOST, China Science and Technology Development Report, 2006.China S&T Literature Press.
2001 2002 2003 2004 2005 2006 2007 2008
973 Basic Research 71.2 82.8 96.6 108.3 121.8 173.6 225.5 275.4
Key Technologies R&D program
127.2 161.6 162.5 195.0 201.3 384.6 745.4 734.8
High-tech program (863) 301.9 305.9 1147.8 1122.3 1409.6
National Key Experimental Lab Program
15.7 15.7 15.7 15.7 16.6 27.7 21.9 23.3
Innovation fund for SME 94.6 65.2 80.2 99.9 122.5 108.1 172.1 211.6
National S&T programs
One million of US dollar
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More money for experimental development, Less money for basic
research
Basic
Research(%)
Applied Research(%)
Experimental Development(%
)of GDP
1995 5.18 26.39 68.43 0.57
2000 5.22 16.96 77.82 0.90
2005 5.36 17.70 76.95 1.34
2006 5.19 16.28 78.53 1.42
2007 4.70 13.29 82.01 1.49
2008 4.40*
Source: 2008 Statistical Yearbook of China's science and technology. *NBS, MOST and MOB (2009)
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Industry has taken a role in innovation system as counterparts
in developed countrySome countries’ R&D expenditure structure in 2006
Item China USA Japan Turkey Austria Czech Korea Russian
Financed by Industry(%)
69. 1 64. 9 77. 1 46. 1 46. 7 56. 9 75. 5 28. 8
Financed by Government(%)
24. 7 29. 3 16. 2 48. 6 37. 4 39. 0 23. 1 61. 1
Financed by Other Sources(%)
6. 2 5. 8 6. 8 5. 3 15. 9 4. 2 1. 5 10. 1
Source:2008 Statistical Yearbook of China's science and technology.
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All enterprises began to speed up their R&D investment, but the R&D investment gap between SOE and non-state enterprises is widening fast, why?
Source: China S&T Statistical Yearbook 2003-2008.
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Business R&D in China 1995-2005
Source: China S&T Statistical Yearbook 2003-2008.
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Chinese scientific publications are growing exponentially.
Chinese-authored publications included in Science Citation Index and Engineering Index, 1997-2005
Source: MOST online database, and China S&T Statistical Yearbook 2005.
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China’s emerging presence in nanoscience: papers.
Source: A comparative bibliometric study of several nanoscience ‘giants’ [J]. Research Policy,2007
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Patents granted in USA of China, Japan Korea and Taiwan
Year China Japan Korea Taiwan
1996 78 24355 1603 2477
1997 103 24498 2027 2678
1998 133 32543 3427 3911
1999 172 32928 3741 4664
2000 274 33387 3560 5976
2001 472 35417 3849 6685
2002 626 36860 4100 6883
2003 724 37744 4246 6846
2004 951 37568 4769 7435
2005 963 32243 4696 6172
2006 1621 39954 6634 8241
2007 1827 36452 7465 7759
2008 2653 37250 8924 8126
Source: Online database of United States patent and trademark office.www.patft.uspto.gov
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China India
USPTO Patenting by year for Various Nations,1963-2004
Source: Online database of United States patent and trademark office.www.patft.uspto.gov
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Conclusion and discussion: The government spends more on applied science,
experimental development and mega projects as ways of promoting innovation, in the same time, the share of expenditure for basic science has been decreased. But this will not lead more radical innovation and standard setting in long run.
Foreign related enterprises remain in key innovation performance indicators, even much faster to spend R&D in China from 2003 on. It means that after indigenous innovation policy, foreign company are not intended to leave, vice versa, they are determined to be more localized.
So, we can forecast that in near future, foreign company will continuously be the main actor in industrial standard setting.
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Conclusion and discussion 2The gap of needs and the power in standard setting SOEs have been accumulating their innovation capability,
but lots of indicator show that State-owned enterprises have lost their dominant position of innovation. Though the current innovation policy favors SOEs, but the regulation of SOEs and their monopoly position restrained them to be innovation driven. They have the power to implement standards, but do not have the incentive to get it.
Private enterprises are the fast runner to build innovation capability, though they enjoy less direct support from government. They need standards to win out in the market competition, but they are relatively weak to do so.
So, Chinese companies are the weak stakeholders in standard setting.
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Conclusion and discussion 3:market size Market size is the key for standard setting? Lots of scholars argue that the size of
Chinese market can nurture lots of standards if China is willing to in software, telecommunication, etc.
But the touch situation of TD-SCDMA shows that just market size is not enough to lead to standard setting and control.