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OECD REVIEW OF
CHINA’S INNOVATION SYSTEM
AND POLICY
Main findings
For presentation at the Seminar on “New Perspectives on Chinese innovation”
21 Feb., 2008 London,
by
Gang Zhang, Senior Economist
OECD Directorate for Science, Technology and Industry
Outline
• Background of OECD review s of innovation policy
• From sustained to sustainable growth: China’s need for innovation
• China’s innovation system: main features and performance
• China’s S&T and innovation policy and governance: an assessment and recommendations
• Headlines of the full report
• Implications for OECD countries
• It forms part of the new OECD programme of Country Reviews of
Innovation Policy, since 2005, reflecting the increasing priority given to
innovation by governments of OECD and non-OECD countries.
• Request by the Chinese Ministry of Science and Technology (MOST), an
observer of the Committee for Scientific and Technological Policy (CSTP),
since 2001.
• The other countries that have been reviewed so far are: Luxembourg,
Switzerland, New Zealand, South Africa and Chile.
• The reviews of Norway, Korea, Greece, Turkey, Mexico are under way.
Hungary, Japan, Russia will start later in 2008, while some others are
under discussion.
The Context of the Review
• The review does not attempt to address all issues which might arise in
building a stronger innovation system, but rather it focuses on the
contribution of the publicly funded research and of government policy to
promote innovation more broadly.
• Based on available indicators, and information gathered through filed work;
and underpinned by recent OECD work, especially on the links between
innovation and economic performance, and on best policy practice to foster
innovation…
• It makes an independent assessment on the current state, and near-term
potential of a country’s innovation system
The review formulates a set of policy recommendations in terms of policy
and governance of the NIS, but does not attempt at detailed policy tooling
design.
Nature, and scope of the Review
From sustained to sustainable growth
A call for a greater role of S&T and innovation
Real GDP growth, 1992-2005
FDI flows to China (billion USD) FDI stocks (2005)The expansion of
the Chinese private sector
Despite its success, the Chinese model of growth faces a number of
challenges which may endanger its sustainability:
GDP is distributed unevenly, notably between coastal provinces and
western regions and urban and rural areas.
Demographic change has far-reaching consequences – China may be
“ageing before getting rich” - implications for saving and investment.
Large migration flows exert pressure on the social fabric and the
environment, and infrastructure.
High consumption of energy and raw materials and urbanisation lead to
environmental degradation and are damaging health.
Challenges for the Chinese model of growth
China is now the leading exporter of ICT products … … but high tech imports are growing as fast as exports
… and high-tech exports are increasingly from foreign-owned firms which have a lower R&D intensity than domestic firms
China remains specialised in low-tech
Contributions of industries to trade balance as % of manufacturing trade by technological intensity, 2005
The Chinese authorities are well aware of the need to achieve a more
sustainable pattern of development and of the fact that science,
technology and innovation can contribute decisively to this objective
China has adopted a series of strategies (Revitalising the nation thru
sciences and education) and action plans (such as the 863 Plan),
aiming to strengthen increasingly the role of innovation in economic
growth in the past decades, and ,
Now it is under way to develop innovation as the engine for future
sustainable growth…
The role of science, technology and innovation
China’s innovation system
Main features and performance
The relative size and recent pace of development of the Chinese innovation system
China is now a major R&D player
R&D intensity of the Chinese economy is growing very fast
The Chinese science system emphasises increasingly nanoscience / nanotechnology
The growth of Chinese scientific publications is spectacular but their impact is still low
A massive investment in specialised S&T infrastructures
Foreign firms are a major actor of
R&D in the Chinese business sector
but their innovation-related linkages
with domestic firms remain very
weak, in contrast with their
relationships with universities which
are developing fast
Chinese indigenous innovation
capabilities are increasing …
The lack of basic and applied research
implies that little research
is likely to lead to patentable technology-
based inventions
… but remain limited due inter alia to
the fact that Chinese R&D
emphasises much more “D” than “R”
The expansion of the
Chinese higher education sector
is rapid since the mid-1990s
Enrolments in sciences and,
especially, engineering stand out
as exceptionally high by
international standards
+ A very dynamic economic environment
Government strong commitment to
support R&D and innovation
Fast learning of best practices throughout
the society and wide social acceptance of
S&T
Impressive rate of accumulation of key
inputs (R&D investment, HRST)
Large specialised infrastructures (e.g.
state of art labs, S&T parks and incubators)
The potential of the restructured public
research sectors, including the quality of
the leading research universities
Fast increasing R&D investment by
foreign firms
Emerging Chinese outward investment in
R&D-intensive activities
Some framework conditions are not
underdeveloped and insufficiently
supportive
Lack of depth of R&D activities
Relatively low innovation capabilities of
domestic firms
Weak innovation-oriented linkages
between public research and domestic
firms
Regional innovation systems are
unevenly developed and insufficiently
interconnected
Current and prospective bottlenecks in
the HRST pipeline
Weaknesses in public governance
Main strengths and weaknesses
China’s S&T and innovation policy
Assessment and recommendations
China’s innovation policy: institutional reform and learning curve
Public governance of the innovation system as an institutionalised learning process
Main issues and challenges – hindrances in the learning
process
• Evidence-based policy analysis remains to be strengthened in terms
of analytical capacity, and provision of statistical information
• Defining policy strategy and priorities:
A high-technology myopia
The lack of inter-agency co-ordination,
A lack of clarity in the division of labour in policy making between
the central and sub-national governments
A limited and weak involvement of wide range of stakeholders
A lack of experience and competence on innovation policy
issues
Main issues and challenges – hindrances in the learning
process (continued)
• Designing policy instruments
Proliferation of R&D programmes - A strong path dependency in
the design of policy instruments
Top-down approach in priority setting
Proliferation of partially overlapping measures, programmes,
duplicative investments (cross dept and levels of government)
• Implementing instruments
Limited capacity of government agencies: MOST and NSFC
Lack of openness, fairness and transparency in programme
management
• Evaluation: lack of evaluation culture, capacity and independence of
evaluation
Policy recommendations
First, an endorsement of the Chinese government’s current strategy to strengthen own S&T and innovation capabilities, which should be combined with tapping into the global knowledge system…
A priority is to further improve the framework conditions for innovation, importantly with respect to the environment and infrastructure for financing R&D, for entrepreneurship and SMEs, for cooperate governance, and for the protection of intellectual property rights (IPRs).
Policy recommendations
The government will need to
move away from a top-down approach,
reduce the overreliance on public R&D funding programs
adopt a broader vision on innovation that goes beyond high-tech sectors.
And manage the public R&D programs in arm’s length
innovation governance and system efficiency could
benefit from an improved coordination, both between the central and regional levels and across agencies.
The full OECD report on Chinese innovation system and policy to be released soon
Main Headings of the Report
Synthesis Report
+
thematic chapters
Business innovation
Public research
Industry-Science interface
Regional innovation systems
Human resources for S&T
Globalisation of R&D
Framework conditions for innovation,
History of reforms
Policy and governance
R&D programs
Implications for OECD countries
Major Issues for OECD countries
Will China’s emergence as a major innovation hub pose threat to OECD countries?
How to ensure a smooth integration of China into the global system for knowledge creation, knowledge protection and knowledge use?
What domestic adjustments can help OECD countries benefit from China’s emergence, and better cope with the challenges that it may pose?
Potential frictional issues
IPR protection
Forced technology transfer
Procurement policy for innovation
Technology standards
Anti-monopoly legislation
Competition for talents in human resource
OECD Countries’ response
• CIC strategy: Competition, Integration and Cooperation
Competition: Get ready for a new round of competition, among
OECD members and vis-à-vis China, by moving up the value
chain
Integration: participate in the expansion of the Chinese economy
- the more a country participates the more it can benefit from it.
Cooperation: cooperation with China on S&T and innovation
through various platforms: bilateral and multilateral, OECD
(policy dialogues), EU (Framework Programs), and new
platforms need to be created.
Contact:
Thank you for your kind attention
www.oecd.org/sti/innovation/reviews
Web Resource:
