Globalization of S&T in China: Current Status and New Policies

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1 Globalization of S&T in China: Current Status and New Policies Dr. Lan Xue, Dean and Director School of Public Policy and Mgmt, and China Institute of S&T Policy Tsinghua University March 25, 2009

2 Outline I. The context: China in transition II. The limitation of China s growth model III. The shift to a new growth model IV. Globalization of S&T in China: the status V. China s policy on globalization of S&T

3 I. The context: China in transition Economic system: From Central Planning to market

4 Industrial structure: global manufacturing hub Agriculture: 1980=30% => 2000=14.8% => 2007=11.3% Manufacturing: 1980=49% => 2000=45.9% => 2007=48.6% Service: 1980=21% => 2000=39.3% =>2007=40.1%

5 Society: Rural and closed=>urban and Open Rural =>Urban Urban population 1982=20.6% => 43%=2005 International Linkage Economy: Self-reliant=>major world trading partners FDI> $60 billion international trade as the percentage of GDP 1978=10% => 2005 =62% Overseas travel: 1998=8.43million => 2004=28.85 million

6 Governance structure: personal charisma and authority=>rule of law and broad participation Village election and township election experiments; Administrative and legal systems reforms; Broader public participation in the policy process (e.g. public hearing); The growth of non-governmental sector; Anti-corruption campaigns;

7 China in Transition: innovation system Three rounds of innovation system reforms 1985 reform--incentive reform for public research institutes to link with economic development; Late 1990s structural reform of research institutes and universities By the end of 2003, 1050 research institutes were transformed into business since 1999 government reform; 99 others were merged into universities or transformed into NGOs. Focused support for research universities 2006 median and long term S&T plan Support for strategic areas: such as energy, health, and environment; Focusing on enterprise-centered technological innovation system,;

8 II. Limitations of the manufacturing hub model Environmental pollution and resource constraints Exasperated by the recent financial crisis Regional and income disparity 1993= =0.47 (ADB estimates, August 2007) Inadequate regulatory regimes Horizontal appointment and budget vs. vertical technical directions Coordination among different regulatory agencies Capacity problems for regulatory agencies

9 Enterprise innovation lag Gaps in technology sophistication (see graph) FDI and export orientation=>technology dependency Semiconductor equipment=>100% imports Advanced technology product (ATP) trade (see graphs)

10 BTU/1990 US China s energy efficiency 110, , , 000 P rim ary E n ergy Con sum ption-gd P Ra tio (C hina and the U nited S ta te s) U n ite d S tat es (U. S. E nergy Inform ation A d m inist rat ion D at a) C h in a (U.S. E ne rg y In form at ion A dm in is tration D a ta) C h in a (C hina St atis tical Yea rb ook ) 80, , , , , , , , Year

11 Millions of U.S. Dollars 50,000 China s ATP Trade Surplus with U.S. : completely from processing exports 40,000 30,000 20,000 10, , Processing Normal Others Data Source: Working Paper, The Nature of U.S.-China Trade in Advanced Technology Products, Michael Ferrantino, Robert Koopman, Zhi Wang, and Falan Yinug

12 Millions of U.S. Dollars China s ATP Trade Surplus with U.S.: mostly generated by FIEs in China 35,000 30,000 25,000 20,000 15,000 10,000 5, ,000-10, Data Source: Working Paper, The Nature of U.S.-China Trade in Advanced Technology Products, Michael Ferrantino, Robert Koopman, Zhi Wang, and Falan Yinug SOE Joint Veture FIE Collective Private

13 III. The shift to a new growth model In recent years, Chinese government has adopted a new development model, which is often termed as Scientific Outlook on Development : The approach is to make China s development: Comprehensive Economic, political social, cultural developments balanced reducing disparity among different regions, adjust industrial structures, and etc. Sustainable Less dependent on resources, better protection of the environment, and etc.

14 Innovation as a major driver for the new growth model Objective-making China an innovation-based country in 2020; Increasing R&D spending to 2.5 percent of GDP; Increasing the contribution of S&T to the economic growth;. Reducing over-dependency on foreign technology; Stepping up the output of publications and patents in major fields. Approach-promoting indigenous innovation; Importation, assimilation, and innovation; Integration innovation Original innovation Key players-innovation system Enterprise-based technical innovation system; Knowledge innovation system;

15 IV. Globalization of S&T in China: current status In reaching the previous goal, China has been and will continue to embrace the trend of globalization: China s national innovation system is part of the global innovation system: China s international S&T publications (See graphs below) Global R&D institutions are important parts of China s innovation system: MNC R&D in China: investment as % of industrial R&D 2000=20.5%=>2004=27.1% (national) 2000=58.2%=>2004=73.0% (in shanghai) MNC R&D Centers in China

16 Number China s contribution to the global science literature has been increasing continuously 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Year 中国 WoS 文献按年代的趋势, 数据来源 : Web of Science( 清华大学镜像 ), 2007 年 3 月 10 日 ; 由袁军鹏进行数据挖掘分析得到

17 合作国家数量 # of countries having co-authors with Chinese scholars have also been increasing 年份

18 文章数量 China s joint international publications 中美中日中俄中 G 两国合著论文数量上的时间分布 数据来源 : Web of Science( 清华大学镜像 ), 2006 年 10 月 25 日 ; 由袁军鹏进行数据挖掘分析得到 年份

19 Multinational R&D in China During , over half of leading MNCs have set up R&D organizations in China or India; By different accounts, MNC R&D Centers in China: 2001<=200; 2005=750; 2007>980 Some leading companies have begun to consolidate its R&D organizations in China and established its China R&D system, such as Motorola, Microsoft, and etc.

20 Findings from our study in st phase study in ; 2nd phase study carried out in ; Phone interviews with 289 of MNCs in China 117 companies have set up R&D facilities in China; 215 R&D centers were set up by them; 107 are autonomous R&D labs; 59 are R&D units in the local subsidiaries; 49 joint centers (with universities and so on)

21 Findings-Types of organization Out of the 289 companies we phoned, 117 companies have set up R&D facilities in China; 215 R&D centers were set up by them; 107 are autonomous R&D labs; 59 are R&D units in the local subsidiaries; 49 joint centers (with universities and so on)

22 Findings-industrial distribution: Figure 1 The industrial distribution of autonomous R&D labs settled by Business Week 1000 MNCs in China 6% 6% 5% 4% 3% 2%1% 23% 7% 7% Software 5% 13% Semiconductors Automobiles Biotechnology&Drags Other IT Products Food and beverages Others 18% Telecommunications Industrial Equipments and components Commodity Chemicals Household Electronics Chemicals Industrial Conglomerates

23 Findings-country distribution Figure 2 The country distribution of autonomous R&D labs settled by Business Week 1000 MNCs in China 11% 6% 5% 1% 54% 23% North America Japan UK, France and German North Europe Other European Countries Other Countries

24 Findings-location choice: Figure 3 The regional distribution of autonomous R&D labs settled by BusinessWeek 1000 MNCs in China 2% 7% 5% 6% 47% 33% Beijing Shanghai Tianjin Guangdong Jiangsu Other regions

25 What attracts these R&D centers to China (Beijing)? The importance of different factors which have impacts on MNCs' R&D investing decision in China Acquirement of high quality human resources Level of Chinese economy development, market scale and chances Level of science and education development of China Status of protection of knowledge right of China Level and resources of technology of Chinese related industries Chinese favorable policies attracting R&D investment Level of infrastructures of China Working efficiency of government departments Extent of being a native the R&D organization enjoys Mean

26 The importance of different factors which have impacts on MNCs' R&D investing decision in China Acquirement of high quality human resources Level of Chinese economy development, market scale and chances Level of science and education development of China Status of protection of knowledge right of China Level and resources of technology of Chinese related industries Chinese favorable policies attracting R&D investment Level of infrastructures of China Working efficiency of government departments Extent of being a native the R&D organization enjoys Mean

27 Globalization of S&T in China: challenges How to provide a better and facilitating environment for overseas R&D institutions? The mobility of global R&D centers How to mitigate the negative impact of MNC R&D centers to the local innovation system? Creaming talents from local R&D institutions How to link knowledge generation to value creation? Innovation and entrepreneurship environment How to build a global knowledge governance system? IPR, Standards, international joint projects and etc.

28 V. Government strategies and policies to future promote international S&T cooperation Major objectives and approaches: Broaden the scope of international cooperation: Encourage international cooperation in China s national S&T programs, such as national S&T Key projects, hightech programs, and etc; Encourage international cooperation in S&T programs initiated at the local and industrial level; Encourage international cooperation by research institutes, universities, industrial enterprises; Encourage international exchange and cooperation by scientists and scientific associations;.

29 To achieve major progress in the following areas: To accelerate cooperation in key research fields and technology and include such cooperation in bilateral and multilateral agreements; To place special emphasis on establishing joint R&D institutions; To promote technology export and outward transfer and encourage research institutes and enterprises go out ; To actively participate in mega-international projects; To actively participate in international S&T organizations and play active roles when possible;

30 To achieve tangible outcome in the following areas: To generate important innovations where Chinese entities also share their IPRs and the improve the status of China s S&T system in the international arena; To take advantage of the global innovative resources to promote commercialization of high-tech in China; To promote the export of high-tech products and IPRs and to facilitate high-tech based enterprises to go out to international markets; To foster a new generation of world class S&T talents; To achieve some breakthroughs in some major international S&T projects where China is playing a major role, including International Cooperation projects in Chinese Medicine and International Cooperation Project in New Energy.

31 Major transitions in S&T cooperation Transition from generic S&T exchanges to cooperation based on specific need; Transition from over-emphasis on project cooperation to cooperation where projects human resources research bases are all involved; With regard to the content of cooperation, transition from over-emphasis on inward technology transfer to technology transfer both ways, encouraging scientists to attend international S&T projects and to have greater impacts;

32 Transition from government and research institutes-led cooperation to a situation where government is only providing some general guidance and creating conditions. The major players have to be enterprises, universities, research institutes, and other private entities. Enterprises should be particularly encouraged; Transition from top-down to bottom-up with regard to project identification and selections.

33 Thank you!