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Innovation-Driven Country: Gap Years Ahead

Nov 24-2020   



China aims to realize socialist modernization by 2035 and join the ranks of leading innovation-driven countries. Zheng Shilin, an associate researcher with the NSD, examines the gaps to cross and offers some policy suggestions in a commentary. He specializes in China’s economic governance, industrial economics, technological economics, and macro-economics.

 

China still lags in three aspects: innovation quality, fundamental research, and innovation institutions. From 1991 to 2017, China’s total R&D outlay shot up from US13.44 billion to USD442.72 billion, close to the 483.68 billion of the US. Yet in terms of research intensity, China only reached 2.13% in that year, trailing the US, Japan, Germany and South Korea, at 2.79%, 3.20%, 3.02% and 4.55% respectively. Another yardstick of innovation quality is patent quality. In as early as 2011, China overtook the US to become the biggest patent applicant in the world. However, among the three types of patent, its patent for invention – the most important one - only accounted for 37.4%, far behind the US (93.3%), Japan (89.5%), Germany (77.3%), and South Korea (74.5%). Such focus on quantity over quality is also glaringly evident in science papers. And one more way to examine innovation quality is the density of researchers, which is relatively low in China.

 

For years, fundamental research only took up around 5% of China’s total R&D expenditure, far below innovation-driven countries. Institutes of higher learnings are the bastion of fundamental research, but Chinese universities are confronted with insufficient investment in general and low investment in fundamental research in particular. On the corporate side, Chinese companies poured in USD343.5 billion in R&D in 2017, or 97.1% of their US counterparts. The problem was that new technologies and products with commercial prospects were prioritized, at the expense of fundamental research.

 

In terms of innovation institutions, two issues are noteworthy: the insufficient protection of IPR and the weak level of cooperation between industries, universities and research institutes. According to the Global Competitiveness Report, China scored 4.5 in IPR protection in 2017, behind the US, Japan, Germany and the UK, at 5.8, 5.8, 5.7 and 6.2 respectively. Its score for cooperation between companies and universities also trailed behind.

 

Will China achieve its goals in 2035? Zheng Shilin estimates that on quantitative benchmarks, China will surpass innovation-driven countries. Measured by overall national R&D expenditure intensity and corporate R&D intensity, China can be expected to be on a par with innovation-driven countries. However, challenges still loom large when it comes to closing the gap in fundamental research and patents for invention.

 

Therefore, the major policy suggestions are to shift the focus from innovation quantity to quality by optimizing assessment mechanism and incentive system, ram up investment in fundamental research by treating it as a strategic investment in the nation’s future competitiveness, and strengthen IPR protection by actively getting involved in the making of international rules and promoting the formation of a fair international system. 

Innovation-Driven Country: Gap Years Ahead

Nov 24-2020   



China aims to realize socialist modernization by 2035 and join the ranks of leading innovation-driven countries. Zheng Shilin, an associate researcher with the NSD, examines the gaps to cross and offers some policy suggestions in a commentary. He specializes in China’s economic governance, industrial economics, technological economics, and macro-economics.

 

China still lags in three aspects: innovation quality, fundamental research, and innovation institutions. From 1991 to 2017, China’s total R&D outlay shot up from US13.44 billion to USD442.72 billion, close to the 483.68 billion of the US. Yet in terms of research intensity, China only reached 2.13% in that year, trailing the US, Japan, Germany and South Korea, at 2.79%, 3.20%, 3.02% and 4.55% respectively. Another yardstick of innovation quality is patent quality. In as early as 2011, China overtook the US to become the biggest patent applicant in the world. However, among the three types of patent, its patent for invention – the most important one - only accounted for 37.4%, far behind the US (93.3%), Japan (89.5%), Germany (77.3%), and South Korea (74.5%). Such focus on quantity over quality is also glaringly evident in science papers. And one more way to examine innovation quality is the density of researchers, which is relatively low in China.

 

For years, fundamental research only took up around 5% of China’s total R&D expenditure, far below innovation-driven countries. Institutes of higher learnings are the bastion of fundamental research, but Chinese universities are confronted with insufficient investment in general and low investment in fundamental research in particular. On the corporate side, Chinese companies poured in USD343.5 billion in R&D in 2017, or 97.1% of their US counterparts. The problem was that new technologies and products with commercial prospects were prioritized, at the expense of fundamental research.

 

In terms of innovation institutions, two issues are noteworthy: the insufficient protection of IPR and the weak level of cooperation between industries, universities and research institutes. According to the Global Competitiveness Report, China scored 4.5 in IPR protection in 2017, behind the US, Japan, Germany and the UK, at 5.8, 5.8, 5.7 and 6.2 respectively. Its score for cooperation between companies and universities also trailed behind.

 

Will China achieve its goals in 2035? Zheng Shilin estimates that on quantitative benchmarks, China will surpass innovation-driven countries. Measured by overall national R&D expenditure intensity and corporate R&D intensity, China can be expected to be on a par with innovation-driven countries. However, challenges still loom large when it comes to closing the gap in fundamental research and patents for invention.

 

Therefore, the major policy suggestions are to shift the focus from innovation quantity to quality by optimizing assessment mechanism and incentive system, ram up investment in fundamental research by treating it as a strategic investment in the nation’s future competitiveness, and strengthen IPR protection by actively getting involved in the making of international rules and promoting the formation of a fair international system.