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China’s growth pattern is currently changing, with a reduction in the rate of growth and an attempt to rebalance the economy from exports and investment towards private consumption. Innovation plays an increasing role, as illustrated by the fact that China spent 1.98% of GDP on R&D in 2012, closing the gap with the EU28.
Hot Issues are major national STI policy priorities, as self-reported by countries in their responses to the OECD STIO 2014 policy questionnaire.
Encouraging innovation in firms and supporting entrepreneurship and SMEs
The business sector accounts for 74% of GERD (1.51% of GDP, 2012), and Chinese firms are active both as R&D performers and contractors (Panel 1d, o). Although the number of patent applications by Chinese residents has soared in recent years, Chinese innovation output is still lagging in terms of international patenting and trademark registration (Panel 1f, g) by OECD standards. There is a lack of venture capital and the business environment is difficult for innovative start-ups. The dominance of state-owned enterprises (SOEs), especially in public utilities, tends to mitigate the pressures to innovate that normally arise from competition. Improving the business sector’s innovation capability is therefore a key challenge. Various policy instruments foster an enterprise-centred innovation system and emphasise the indigenous innovation capacity of Chinese firms. The tax incentive was revised in 2013 to expand the range of eligible R&D costs and make not-for-profit R&D organisations eligible for tax allowances on imported R&D equipment.Tax incentives are granted to firms investing in education and training programmes. The corporate income tax and the value added tax have been reduced for high-technology enterprises, SMEs and ICT firms in order to support their development.
Innovation to contribute to addressing social challenges (including inclusiveness)
China faces serious social challenges in terms of food security, public health and ageing, all of which will require contributions from STI. The National S&T Major Projects therefore focus strongly on public health, ageing, food and drug safety, and disaster prevention. Energy and health are among the four sectoral focuses of the Innovation 2020 Programme of the Chinese Academy of Sciences. China has also promoted “inclusive innovation”, i.e. innovation by and for low-income people. Existing initiatives include the Spark Programme, which promotes agricultural and rural developments by facilitating peasants’ access to relevant technologies and related training and the S&T Programme for PublicWellbeing, which supports the commercialisation of technologies that can benefit social development, both implemented under the Ministry of S&T.
Innovation to contribute to sustainable/green growth
The main priority is to enhance the contribution of STI to China’s transition to an ecologically sustainable mode of development. China’s green productivity, at USD 1.3 (GDP per unit of CO2 emitted, 2011), was much lower than EU27’s at USD 4. At 4.1% a year, however, it grew faster than the OECD median at 1.8% over 2007-11. The government’s 12th Five-Year Plan (2011-15) sets the target for green productivity growth at 17% over the five-year period. The present 12th Five-Year-Plan for S&T Development therefore focuses considerable attention on energy and climate change and has triggered a new wave of industrial policies in support of clean energy industries and related low-carbon technologies. Yet, China’s RTA in biotechnology and green technologies has slipped considerably (Panel 3).
Strengthening public R&D capacity and infrastructures
Although many PRIs became corporate entities as part of the reform of the S&T system in the early 2000s, PRIs still dominate China’s public research and are strongly oriented towards applied and experimental R&D (Panel 4). The government issued “Opinions on Deepening the Reform of the Scientific and Technological System and Speeding up the Building of a National Innovation System” in September 2012. The new round of PRI reforms aims to clarify the roles of the three types of PRI (commercial innovation, social welfare and basic research), and to establish appropriate governance, management and funding mechanisms to fulfil their missions.
Although China has the world’s largest pool of human resources for S&T, the tertiary-qualified share of the population is still extremely low (Panel 1t). Furthermore, China lacks world-class researchers. Both the Thousand Talents Programme approved by the Organisation Department of the Chinese Communist Party and the 100 Talents of the Chinese Academy of Sciences aim to attract and retain top-tier academics, including from overseas. The National Plan for Science and Technology Talent Development (2010-20) addresses the business sector’s need for innovative personnel, by supporting mobility of the highly skilled and by investing in innovation platforms and national key labs to cultivate talented, leading R&D personnel. Living allowances and funding for postdoctoral research in enterprises are provided as well.
A leading group of the S&T system reform, involving some 20 ministries and national agencies was set up in 2012. A mid-term evaluation of the S&T Development Plan 2006-20 was launched in 2014, and the methods and standards for evaluating the Industry- Research Strategic Alliance for Technological Innovation were issued in 2012. The management of main S&T programmes have been revised to simplify the application process; scientists applying for projects funding run by MOST do not have to conduct the Q&A session in person, as most of the application and evaluation procedures can be done through the Internet, while the budget management system was improved by building the project library and S&T programme information system.
While ICT infrastructures have developed rapidly in China, ICT use per capita and e-government readiness are still very low by OECD standards (Panel 1l, m, n). China has been investing in S&T infrastructures through the R&D Infrastructure and Facility Development Programme since 2005, with an estimated budget of USD 1.5 billion (CNY 5 billion).
Technology transfers and commercialisation
In 2013, the Legislative Affairs Office of the State Council started to revise the Law on Promoting theTransfer of Scientific andTechnological Achievement. The number of Industry-Research Technology Strategic Alliances for Technological Innovation increased from four in 2007 to 146 in 2013.
China’s national innovation system features marked regional disparities. The government has used the innovation demonstration zones as an important policy instrument to spearhead innovation in regions with relatively advantageous innovation capabilities. So far three zones have been set up in Zhongguncun in Beijing, East Lake inWuhan and Zhangjiang in Shanghai. Enterprises located in these zones enjoy preferential policies and public support for their innovative activities. Furthermore, the Framework for Development and Reform Planning for the Pearl River Delta Region (2008-20) aims to make the region an innovative centre in the Asia-Pacific area. By 2012, China had 105 high-technology zones, hosting about half of the national technology incubators, and 132 Economic and Technological Development Zones, which have in recent years expanded from the fast-growing coastal cities to other regions. To boost the development of the western region, the GreatWestern Exploration Strategy supports investments in research infrastructure, research collaboration and human resource mobility between the eastern and western regions.
China’s science and innovation systems are weakly linked to global networks, as shown by its very low share of co-authorship and co-invention (Panel 1q, r). The government seeks to improve the openness of the STI system through continued government co-operation on S&T and diversification of the ways in which Chinese enterprises and PRIs interact with foreign counterparts. In recent years, China has also increased its participation in large-scale international collaborative projects, such as the EU 7th Framework Programme, and has engaged in annual bilateral dialogues with key partner countries, such as the United States and Germany, on STI co-operation.
China’s R&D intensity has tripled since 1998, reaching 1.98% of GDP in 2012, approaching the level of EU28 as a whole. BERD as a share of GERD rose to the top level of OECD countries and firm self-funded R&D reached 95% of BERD in 2012.