China’s Cutting Edge: Research

China today is much more than an industrial major power, since it fulfills an increasingly important role in the scientific and technological life of the world.  China’s aim is to catch up with the leading scientific major powers of the world by 2020.  

Introduction: the Official R&D Targets

The scientific and technological targets of the People’s Republic of China are included in two documents: the National Mid-to-long Term Programme for Science and Technology Development (2006-2020)i and the 12th Five-Year Plan (2016-2020) approved by the People’s Congress.ii According to the guidelines laid down, by 2020 China must rise as one of the world’s leading powers of innovation and establish the fundamentals of a knowledge-based society. Furthermore, President of the People’s Republic of China, Xi Jinping said that China should establish itself as a leading innovator by 2030 before realizing the objective of becoming a world-leading S&T power by 2050.iii
The goals of the leadership are extremely grandiose, especially if we regard the fact that until the early 1990s, China was a predominantly agricultural society. However, these goals are not new. The last development stage of the “fours” announced in 1978 included the scientific and technological catching-up with the leading powers of the world (after agriculture, industry and military defence). From the very beginning, the state has had a key role in the process through its responsible institutions (the leaders’ group under the State Council, and the Ministry of Science and Technology). In the following, we will examine what fundamentals China currently has to achieve its goals, with the help of the traditional indicators of research and development (R&D).

China’s R&D Activity as Reflected by Classic Indicators

In 2015, the value of Chinese research and development activities was RMB1.422 trillion (approximately $2.133 trillion, nearly $370 billion on purchase value). Annual growth was 9.2 percent, exceeding the annual GDP growth rate (6.9%).iv Calculating the value on purchase power, China’s R&D spending surpassed that of the European Union in 2014 and came second after the United States. Regarding per capita spending, China is still lagging behind developed countries, but it has a leading role within the group of BRICS countries.

Top nine R&D-performing nations and the EUv

China’s catching-up is especially spectacular if we look at expenditures on R&D since 2000. While Japan increased its expenditures on R&D by 32.5% from 2000 to 2014, the EU by 38.7%, the USA by 29.8% (from 2000 to 2013), China increased its expenditures on R&D by 838.8% from 2000 to 2014. According to a study published by OECD in 2014, China is expected to surpass the USA in 2019. China will certainly be able to meet the target set in the long-term plan, i.e. to catch up with the centres of world economy in terms of expenditures on R&D by 2020.vi

Gross domestic expenditures on R&D by the world’s four leading economic powers: 2000-2014 (US$billion)vii

If we examine the expenditures as a percentage of the gross national product, China’s expenditures exceeded 2.1% of the gross domestic product, still lagging behind such leading countries as South Korea, Israel, Japan, Finland. However, it has already surpassed the figures of another important centre of world economy, the EU, and is closing the gap with the USA. Although China somewhat lags behind the target set in the 12th five-year plan (expenditures on R&D should reach 2.2% of the GDP by 2015), the target set in the long-term plan, spending 2.5% on R&D by 2020 still seems achievable.


Gross expenditures for R&D and expenditures for R&D as share of gross domestic product viii

Research Types, Financing, Researches and Research Institutions

Within research, expenditures on both basic research reflecting the quality of R&D activities and applied research increased by 189% and 156% respectively from 2010 to 2014. Their joint aim is to obtain knowledge required for developing new products, procedures or services. In addition, a dynamic growth of 189% can be observed in the field of experimental development. There was a significant change in the funding of research in past years. The ratio of state funding has been reduced by the business sector, which is in line with the targets laid down in base documents. From 2010 to 2014, corporate R&D expenditures grew by 194%, while state funding did so slightly more moderately, by 155%.ix

Increase of expenditures spent on research types (RMB100 million)x

In past years, the number of researchers increased spectacularly (by 45.2% from 2010 to 2014) in the fields of basic and applied research as well as experimental development. In terms of the specific indicator of researchers per million inhabitants – which is traditionally one of the most important indicator of the quality of researches – China (2,715 researchers/million inhabitants)xi   is still lagging behind leading countries (e.g. Denmark: 7,265; Finland: 7,188; or the USA 4,019 researchers/million inhabitants), but obviously, a fast catching-up can be observed here as well.xii The number of research institutes has been stagnating in past years, which means an increase in quality research (e.g. often more capital intensive basic researches) as well as greater financial expenditure. The centrally managed research institutions are slowly rising which enables a more concentrated spending of R&D, indicating quality changes. As for research projects, a slow decrease can be observed. In 2015, a total number of 3,574 projects under the National Key Technology Research and Development Program and 2,561 projects under the Hi-tech Research and Development Program (the 863 Program) were implemented.xiii Until the end of 2015, there were altogether 132 national engineering research centres and 158 national engineering laboratories. They typically received 70% of the support spent on state R&D, which is in line with the goals of active state participation laid down in the base documents.xiv The role of the state is strengthened by the transformation of 206 investment companies, under the support of State Venture Capital Investment Plans for Emerging Industries, in order to promote industries representing the new technology. Within the scheme, 1,233 venture businesses received RMB55.7 billion. The stagnation of the number of projects, with growing funding, suggests a quality change. The same trend is reflected by large central projects, suggesting the increase of efficiency.xv

Increase of state and corporate R&D expenditures (RMB100 million)

Publications and Patents

The number of Chinese publications increased dynamically in the past, now being ahead of European countries and Japan, closing the gap with the USA. However, the quality indices of the publications (citation/paper; H-index) do not reach the level of developed countries.xvi Regarding the number of scientific publications on engineering topics, considered as a quality index of publications, China has caught up with the USA. China’s surge in the IT field is especially significant; in these indices, it is ahead of most developed countries.xvii
As for the absolute number of patents, China has had a leading role in the world for years. Some 2.8 million patent applications were accepted by the State Intellectual Property Office, and a total of 1.7 million patents were authorized (an increase of 31.9 percentage points compared to 2014).xviii Within the number of patents, domestic patents grew extremely dynamically even in an international context.xix

 Increase of the number of domestic and foreign patents in an international context xx

Although the government‘s attention is mainly focused on the increase of the number of patents (see the targets laid down in the base documents), there is also progress in quality. Insufficient incentives, censorship, and a rigid, test-based school system are regarded as the reasons for the lack of innovation. The number of registered inventions, which can be conceived as a quality index of patents, was 359,000 in 2015, which increased by a rate exceeding the dynamic expansion of the number of inventions (54.1%). The number of patents per 10,000 people was 6.3, which is almost the double of the target set in the 12th five-year plan, valid from 2010 to 2015 (3.3/10,000 people). Although the number of domestic registered inventions increased by 62.5% in 2015, the ratio of registered invention of foreign companies is still high (28.9%), demonstrating the important role of foreign R&D activity within the Chinese economy.xxi A similarly significant progress can be observed in the surge of corporate patents, but the private sector still cannot fulfill the needs of China, therefore the role of the state, e.g. university R&D, laboratories, remain important. Accumulatively, 206 venture investment enterprises were established under the support of State Venture Capital Investment Plans for Emerging Industries, with a total fund size approaching 55.7 billion yuan, and an investment to 1,233 venture businesses.xxii

High-tech Industry

The traditional indicator applied to assess the technological standard of a country’s economy is the performance of the high-tech industry. In 2014, China was second in global high-tech -manufacturing (27%), just slightly behind the USA (29%).xxiii China exports high-tech products of especially high values; in this respect, it is absolutely number one in the world. The distinguished aim of the Chinese government is to further strengthen the high-tech industry in order to catch-up with the technological standard of the leading industrial major powers. The state development plan was named “Made in China 2025” (Zhongguo zhizao 中国制造 2025), which was compiled by including the recommendations of the “Industry 4.0” programme focusing on creating a new generation of the German industry. The characteristics of the development stage regarded as the fourth stage of industrial revolution include smart industrial manufacturing, that is, the combination of IT and production. The key sectors of the “Made in China 2025” programme, which receive significant state subsidy, include: new information technology; numerical control tools and robotics; aerospace equipment; ocean engineering and high-tech ships; railway equipment; energy-saving and new-energy vehicles; power equipment; new materials; biological medicine and medical devices; and agricultural machinery. State companies and the companies of the private sector which conduct activities in line with the state’s guidelines and are selected play a key role in carrying out the new industrial revolution. In order to accelerate their development, these companies are artificially promoted by the Chinese state, to the detriment of society (tax allowances, state orders, etc.) so that China should proceed successfully with its modernisation plan.xxiv

Conclusion

China’s R&D activity has been developing extremely dynamically recently, and in the middle term it seems to be capable – with active participation of the state – to meet the challenges stemming from its earlier undeveloped status, such as encouraging innovation in private enterprises, reducing the volume of foreign R&D activity, and moving towards quality research. Against this background China’s large-scale plan seem realistic: to rebalance the economy from the earlier export-driven model based on cheap manpower to an innovation-based one. Although China can become beyond doubt the most important centre of innovation in the world in the coming years, improving R&D indicators alone will not be sufficient. The government’s intention is to translate the results of academic research into products that can be produced by the industry and utilised in economy. Accordingly, they attempt to render the low and middle technological level Chinese industry of the past competitive with the high-tech industry of the world’s most developed economies, in which the distinguished support of R&D activities of potentially emerging sectors by the government plays a key role (“Made in China 2025”).

References
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Notes
  1. 国家中长期科学和技术发展规划纲要, (2006━2020年) 中华人民共和国国务院, 新华社北京2月9日电.Jegyzetek
  2. 中华人民共和国国民经济和社会发展.第十三个五年规划纲要, 中央政府门户网站, 2016年03月17日.
  3. Xi sets targets for China’s science, technology progress, Xinhua, 30 May, 2016.
  4. Statistical Communiqué of the People’s Republic of China on the 2015 National Economic and Social Development, National Bureau of Statistics of China2016 February 29, 2016.
  5. OECD Science, Technology and Industry Outlook 2014, November 12, 2014.
  6. Ibid.
  7. Ibid.
  8. China’s Program for Science and Technology Modernization: Implications for American Competitiveness, Prepared for the US-China Economic and Security Review Commission, CENTRA Technology, Inc., 2011. 22-24.
  9. China Statistical Yearbook-2015, 2016.
  10. Ibid.
  11. Ibid.
  12. Researchers in R&D (per million people), World Bank, 2016.
  13. 财政部 科技部 总装备部关于印发《国家高技术研究发展计划(863计划)专项经费管理办法》的通知, 2006年.
  14. Statistical Communiqué of the People’s Republic of China on the 2015 National Economic and Social Development, National Bureau of Statistics of China2016 February 29, 2016.
  15. Ware, Mark & Mabe, Michael: The STM Report. An overview of scientific and scholarly journal publishing, March, 2015. 37.
  16. Junying Fu, Rainer Frietsch, Ulrike Tagscherer:  Publication activity in the Science Citation Index Expanded (SCIE) database in the context of Chinese science and technology policy from 1977 to 2012, Fraunhofer ISI Discussion Papers Innovation Systems and Policy Analysis, 35. 2013.
  17. Journal & Country Rank, SCImago, 2016.; Ware & Mabe, 2015. 38.
  18. Statistical Communiqué, 2016.
  19. Patent applications, nonresidents, World Bank, 2016.; Patent applications, residents, World Bank, 2016.
  20. Ibid.
  21. Statistical Communiqué, 2016.
  22. World Intellectual Property Indicators, World Intellectual Property Organization, 2015.
  23. High-Technology Manufacturing Industries, Science and Engineering Indicators 2016 (Indicators), National Science Board, 2016.
  24. Made in China 2025,The State Council of the People’s Republic of China, https://www.google.hu/#q=made+in+china+2025

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