12.02.2016 - Natural Sciences Sector

China: taking stock of progress towards becoming an innovation-driven nation

© Beijing Aerospace Command and Control Center. The Chang’e 3 probe landing on the Moon in December 2013.

On 4 February 2016, Reuters news agency reported a US$43 billion bid by the state-owned China National Chemical Corp (ChemChina) to take over the Swiss agrochemical giant Syngenta. China is seeking to improve crop productivity by acquiring Syngenta's portfolio of quality chemicals and patent-protected seeds. Should the two companies seal the deal, it will be the biggest foreign purchase by a Chinese firm since the China National Offshore Corporation purchased the Canadian oil and gas company Nexec Inc in 2012 for US$ 15 billion.

‘Knowledge transfer is evidently embedded in China’s foreign direct investment,’ observes the chapter on China in the UNESCO Science Report: towards 2030. ‘With few exceptions, Chinese enterprises still depend on foreign sources for core technologies.’ The report cites a World Bank study published in 2012 which claimed that ‘China had a US$ 10 billion deficit in 2009 in its intellectual property balance of payments, based on royalties and license fees.’

‘The current political leadership wishes to reduce this dependence on foreign core technologies,’ observes the UNESCO Science Report. ‘It has set up an expert group under Vice-Premier Ma Kai to identify industrial ‘champions’ capable of concluding strategic partnerships with foreign multinationals. This resulted in Intel acquiring 20% of the shares in Tsinghua Unigroup, a state company emanating from one of the country’s most prestigious universities, in September 2014.’

‘China’s new political leadership has placed science, technology and innovation at the core of the reform of its economic system,’ observes the UNESCO Science Report, ‘as innovation can help not only with restructuring and transforming the economy but also with solving other challenges that China faces – from inclusive, harmonious and green development to an ageing society and the “middle income trap.”’

The aim is to turn China into an innovation-driven country by 2020. The blueprint for achieving this ambition is the National Medium- and Long-Term Plan for the Development of Science and Technology (2006–2020). To facilitate implementation of the Plan, government ministries have designed policies to help build an enterprise-centred national innovation system: tax incentives for innovative enterprises, prioritizing of domestic high-tech enterprises for government procurement, encouragement of assimilation and re-innovation based on imported technology, stronger protection of intellectual property rights, etc..

This is not a new trajectory. ‘For the past two decades, there has been a policy focus on experimental development, to the detriment of applied research and, above all, basic research,’ observes the report. ‘The bias in favour of experimental development has become even more pronounced’ in the past decade, accounting for 85% of all research expenditure in 2013, compared to 74% in 2004. The share of basic research has, meanwhile, dropped from 6% to 4.7%. This has resulted in Chinese enterprises performing more than three-quarters of all research expenditure.

China well on the way to reaching its quantitative goals

The mid-term review of the Plan is still ongoing but it is clear that China is well on the way to reaching the Plan’s quantitative goals. One target, for instance, is to raise the contribution of technological advances to economic growth to more than 60% by 2020. Technological advances are already contributing more than 50%. Another target is for China to become one of the top five countries in the world for the number of invention patents granted to its own citizens. The number of Chinese grantees has tripled to more than 143 000 since 2007; China’s State Intellectual Property Office received more than half a million applications for innovation patents in 2011, making it the world’s largest patent office. A third target is to limit China’s dependence on imported technology to no more than 30% by 2020. This dependence should drop to about 35% by 2015.

China is making rapid progress for a range of other indicators. It recently overtook the USA for the number of researchers: 1.484 million full-time equivalents in 2013, compared to 1.265 million for the USA (in 2012). When it comes to researchers per million population, however, China, with 1,071, is close to the global average (1,083) and has some way to go to rival the USA (3,984).

China is on track to overtake the USA by 2016 for the number of scientific publications catalogued in Thomson Reuter’s Web of Science. China’s traditional strengths lie in materials science, chemistry and physics. According to the Institute of Scientific and Technical Information of China, the country contributed about one-quarter of all articles published in materials science and chemistry and 17% of those published in physics between 2004 and 2014, compared to just 8.7% of those in molecular biology and genetics.

China is also on target to raise domestic expenditure on research and development (R&D) to 2.5% of GDP by 2020. This ratio rose from 1.40% to 2.09% of GDP between 2007 and 2014. Although China still trails the USA for this indicator (2.73% for the USA in 2013, according to provisional data), Battelle and R&D Magazine predicted in December 2013 that China’s R&D budget ‘will surpass that of the USA by about 2022.’ The UNESCO Science Report observes that ‘several ‘convergent factors cast doubt over the accuracy of Battelle’s prediction: the deceleration in China’s rate of economic growth since 2014, the considerable drop in industrial production since 2012 and the major stock market slide in mid-2015.’

Some dissatisfaction with the pace of progress

The Chinese political leadership itself is dissatisfied with the current performance of the domestic innovation system, according to the UNESCO Science Report. ‘Despite a massive injection of funds, better-trained researchers and sophisticated equipment, few research results have been turned into innovative and competitive technology and products. The commercialization of public research results has been rendered difficult, if not impossible, by the fact that these results are considered public goods, thus disincentivizing researchers engaged in technology transfer.’

Chinese scientists and engineers have, nevertheless, chalked up some outstanding achievements since 2011. In the field of strategic high technology, for instance, Chang’e 3 became the first spacecraft, in December 2013, to land on the Moon since the Soviet Union’s craft in 1976. China has also made breakthroughs in deep-ground drilling and supercomputing. Its first large passenger aircraft, the ARJ21-700 with a capacity for 95 passengers, was certified by the national Civil Aviation Administration on 30 December 2014.

A broad reform in the offing

Once the mid-term review of the National Medium- and Long-Term Plan for the Development of Science and Technology (2006–2020) is complete, its findings will feed into the launch of a broad reform of China’s science and technology system. At this stage, it would appear that the review ‘will re-affirm the so-called “whole nation approach,” by which the nation’s resources are channelled towards select prioritized areas.’ This approach has been used in the past, such as when the nation’s resources were concentrated on the training of athletes who showed promise for winning medals at the Olympic Games.

The reform may also adopt a ‘top-level design.’ This would be a departure from the current practice of consulting experts and the public on the formulation and implementation of science and technology policy. More than 2,000 experts were consulted on the design of the Outline for the National Medium- and Long-Term Plan for the Development of Science and Technology (2006–2020), for instance, and more than 8,000 domestic and foreign experts have been invited to assess China’s mega-engineering programmes in the current mid-term review. The UNESCO Science Report predicts that, ‘along with the introduction of “top-level” design into the formulation of reform initiatives, [the “whole nation approach”] may become a hallmark of innovation in China in the years to come.’

Source: adapted from various chapters in the UNESCO Science Report: towards 2030, including that on China (pdf)




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