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Professor Song CHEN, Ph.D.
Deputy Dean, School of Economics & ManagementTongji University
E-mail: [email protected]. 7, 2013
The Changing National Innovation System
in China: Policies and Challenges
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Agenda
1. Introduction and NIS in China
2. The Changing Innovation Policy in China
3. The Challenges of Innovation for China
4. Implications for Developing Countries
1. Introduction and NIS in China
China’s Position in Global Technology Competition
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A Rising Technology Exporter
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1. Introduction and NIS in China
China’s Position in Global Technology Competition
In 2004, China became the world’s largest exporter of IT products (US$180 billion, vs US$149 billion for the US)
This shift has occurred entirely within the foreign invested companies
Some component manufacturing networks have shifted to China
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1. Introduction and NIS in China
China’s Position in Global Technology Competition
The huge Chinese market Low labor costs of R&D engineers Improved innovation and policy environment.
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1997 2000 2001 Feb. 2003 Jun. 2004 2006 2009
1. Introduction and NIS in China
Growing MNCs’ R&D Centers in China
Major MNC R&D Centers in China focus on product localization or develop new products for China market while some start shifting towards global innovation
Technical Support for Local Sales or Manufacturing
Product Localization or Develop New Product for Local Market
Monitor New Technology
R&D for Global Market
Tim
e
Tactical
Strategic
1. Introduction and NIS in China
Growing MNCs’ R&D Centers in China
Government
Coordinator
Companies
Development
Universities
Basic Research
Research Institutes
Applied Research
1.Introduction and NIS in China
Major Players of National Innovation System
Innovation network, with functional division of lalour in innovation.
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2012, China ranked 34 according to GII 2013 WIPO 2013, China ranked 35 out of 142 countries and economies
1.Introduction and NIS in China
Global Innovation Index Ranking
Institutions– Political Environment
– Regulatory Environment
– Business Environment
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1.Introduction and NIS in China
Global Innovation Index Ranking
2 Human Capital & Research
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1.Introduction and NIS in China
Global Innovation Index Ranking
3 Infrastructure
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1.Introduction and NIS in China
Global Innovation Index Ranking
Market Sophistication
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1.Introduction and NIS in China
Global Innovation Index Ranking
Business Sophistication
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1.Introduction and NIS in China
Global Innovation Index Ranking
Knowledge & Technology Outputs
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1.Introduction and NIS in China
Global Innovation Index Ranking
Creative Outputs
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1.Introduction and NIS in China
Global Innovation Index Ranking
2.1 National Strategy and Deregulation Policy– National strategy is to build an innovation-driven country by 2020
– Further Economic Reform• Market oriented Reform
• Deregulation by new Prime Minister LI Keqiang
– “Open Door” Policy• pilot Free Trade Zone in Shanghai in 2013
• Special Economic Zone at Shenzhen near Hong Kong in 1980
– Local Governments Competition• technology upgrading
• Competing to become a “Innovative City”
– Better Government Service
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2. The Changing Innovation Policy in China
2.2 Education Policy– Growing Government Expenditures on Education: 4% of GDP in 2012, 2 Billion
RMB a year, meeting the target of Education Law for the first time in 19 years.
– Culture tradition: “Knowledge changes your life”
– Internationalization• GMAT Scores: Ranked 7th in the world, while USA ranked 51st • GMAT takers: No. 1 in the world in term of numbers
– More than 6 million university graduates, most majored in engineering and technology in 2013
• Stronger Science Base
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2. The Changing Innovation Policy in China
2.3 Science and Technology Policy– Increased Fund for National Natural Science Foundation
– Stronger Government Support in Public Research Institutes• Chinese Academy of Sciences
– Public R&D Platform• Generic technology
• Enabling technology
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2. The Changing Innovation Policy in China
2.4 Policy for Innovation in Businesses– Preferential Policy for MNC’s R&D Centers in China
• Lower land price
• Tariff free for R&D testing equipment
• Local government incentives
– Tax Incentives• 150% of R&D expenditure as cost deduction in business income tax since
2008
• Accelerated depreciation for R&D equipment
• High-tech businesses in National High-tech Zones may enjoy two year tax-free after becoming profitable
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2. The Changing Innovation Policy in China
2.4 Policy for Innovation in Businesses
– IPR Protection Policy• Clear Strategy on IPR protection
• Incentives to Patent Application: local government subsidies for patent application
• China ranked the 4th in the world in patents application, with 18627 cases, 13.6% higher than 2011.
• ZTE, A Chinese ICT company based in Shenzhen, ranked No.1 in PCT patent application ( 3906) in 2012, the next is Panasonic and Sharp.
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2. The Changing Innovation Policy in China
2.4 Innovation Financing Policy– Private Banking
• To finance innovative SMEs and Start-ups
– Internet-based Financing
– Venture Capital and Equity Investment
– Government emerging Industry Development Fund• Joint investment with private equity fund
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2. The Changing Innovation Policy in China
3.1 Rising labour costs– Stricter Enforcement of Labour Law– Competition of MNCs
3.2 Higher Living Costs– Soaring Real Estate Price, preventing overseas Chinese scholars from
returning back to China– Air pollution
3.3 Constraints of Talents– Technology– Management talents with global perspectives
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3. The Challenges of Innovation for China
3.4 Infrastructures– Better Education system
• Student Loan
• Higher education costs for children
– Mass Transportation System to ease high price of real estate
– ICT infrastructure
3.5 Impartial Enforcement of Law– Pollution and Food Security
– IP Infringement in some rural areas
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3. The Challenges of Innovation for China
4.1 Stable and Open Economic Policy– FDI Policy
• Joint Ventures
– MNCs’ R&D Centers
– Holistic Economic Policy
– Stable Environment for Investment
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4. Implications for Developing Countries
4.2 Education Policy– Human Capital for Innovation
• More graduates in science and technology
• Technology Management and Entrepreneurship education
– Build up Science Base and Absorption Capability
– Global Sourcing for Talents, including technology and management talents
• Application of business model for local market
– International links: Global Innovation Networks
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4. Implications for Developing Countries
4.3 Better Infrastructures– ICT Infrastructure
• IT Gap
• Winner-take-all
– Transportation and Communication Infrastructure• Physical Infrastructure
– Social Security for better FDI environment
4.4 A Clear Government Innovation Policy– Strong support for innovation activities in universities, research
institutes and businesses.
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4. Implications for Developing Countries
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Thank You！Q & A
Further Reading: OECD Reviews of Innovation Policy: China, 2007
