Innovation system of China Second BRICS in Brazil, April 25-27,2007 .

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Innovation system of China Second BRICS in Brazil, April 25-

27,2007.LIU XielinProfessor of Graduate University of Chinese Academy of ScienceNannan LUNDINÖrebro University & Research Institute of Industrial Economics, Sweden [email protected]

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The structure of Chinese Innovation System The roles of main actors in the system: from

a Government research institutes and university centered system to a company-centered system.

The linkages of the system---Industry-science linkages

Company system The country-specific factors in the system

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A.Traditional NIS of China Government research institutes and university had a

very important role in innovation. they are the main actor of Science and Technology for a long time.

Company was a product base with little R&D. Shortage of the economy, no competition and IPR

made the system lack of innovation motivation. Government plan was the key for the system. Lot of technology import to meets the demand of the

production

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Table 1 The relative importance of key actors in terms of R&D expenditure, %

  1990 1996 1997 1999 2000 2001 2002 2003

2004 2005

Research institutes 50 41 43 39 29 28 27 27 23 21

Universities 12 13 12 9 9 10 10 11 10 10

Enterprises 27 37 43 50 60 60 61 62 67 68

Source: China Statistical Yearbook on Science and Technology, 2004, 2006.

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B.Reform from 1980s on Introduce the competition to the S&T system. To reduce the number of GRI. in1998, the

State Council decided to transform 242 GRIs at the national level into technology-based enterprises or technology service agencies.

Setting up national science parks to commercialize the results of GRI and university.

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C.Science-industry linkage

From 1980s on, GRIs and universities were allowed and encouraged to set up their own spin-offs so that they could commercialize their technology directly.

Outsourcing of S&T to GRIs and/or universities has become an integral part of development strategy of industrial enterprises.

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Table 2 University spin-offs

Numberof spin-offs

Revenue（ Billion RM

B）

Profit(Billion RMB）

1999 2137 26.7 2.2

2000 2097 36.8 3.5

2001 1993 44.8 3.1

2002 2216 53.9 2.5

2003 2447 66.8 2.8

2004 2355 80.7 4.1

Sources: Statistics of University’s industry in 2004 in China, Center for S&T for Development, Ministry of Education, 2005.

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Table 3 S&T outsourcing of Industrial enterprises to Universities

20002001 2002

2003 2004

Total S&T funds (billion RMB)

16.7 20.0 24.830.8

39.2

Fromindustrialenterprises

S&T funds(billion RMB)

5.5 7.2 9.011.3

14.9

Share (%) 33.3 36.2 36.2 36.7 38.0

From government

S&T funds(billion RMB)

9.7 11.0 13.716.5

21.1

Share (%) 58.4 54.9 55.4 53.6 53.8

Source: Statistics of Science and Technology in Higher Education, 2000-2005.

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D.Company system

More making than buying of the technology. R&D spending is expanding quickly. SME is rising. Multinational play more and more important

role. Outsourcing and alliance become the new

strategy for innovation in company level.

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Their innovation capability is poor

Table 9 Chinese and Korean patent registrations in the U.S.

20002001 2002 2003 2004

China Number of Patent

119 195 289 297 404

Rank 26 24 21 22 20

Korea Number of Patent

3331 3546 3755 4198 4590

Rank 8 8 7 5 4

Youngrak Choi, Rise of New Asian R&D Forces ， paper for New Asian Dynamics in Science, Technology, and Innovation, Copenhagen, Denmark, September 27-29, 2006.

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More making than buying of the technology now

R&D expenditure and technology importation (unit: 100 million RMB)

Expenditure onR&D

Expenditure ontechnology import

1995 141.7 360.9

1998 197.1 214.8

1999 249.9 207.5

2000 353.6 245.4

2001 442.3 285.9

2002 560.2 372.5

2003 720.8 405.4

2004 954.4 367.9

2005 1250.3 296.8

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Table 7 Ratio of R&D/sales in large and medium sized companies, %

Year1995 2000 2001 2002 2003 2004 2005

R&D/sales 0.46 0.71 0.76 0.83 0.75 0.71 0.76

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The SME is risingTable 10 A simplified comparison between small and large S&T-based firms,% , (2004)

Small S&T based enterprisesLarge S&T based enterprise

R&D/Sales

Export of new

products /sales

Tech import/sales

Patent/100

persons

R&D/Sales

Export of new

products/sales

Tech import/sales

Patent/100

persons

SOE 1.19 0.29 0.19 0.51 0.91 1.55 0.32 0.06

Joint venture: HTM 0.97 4.22 0.21 0.37 1.01 23.01 0.40 0.41

Joint venture: Foreign

1.64 4.22 0.64 0.42 1.30 6.44 1.18 0.74

Foreign 1.44 6.61 0.22 0.79 0.99 24.37 0.15 0.25

Private 1.55 3.21 0.13 0.66 0.74 5.90 0.05 0.90

Source: Lundin et .al, 2006a.

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Table 12 The importance of FDI firms in the manufacturing sector, 1998-2004(Share in the manufacturing sector, %)

Year

Number of FDI firms

Share of number of LMEs

Value-added

R&DExpenditure

Tech import Export Employment

1998 3489 22 26 21 20 58 14

1999 3764 23 28 23 16 61 16

2000 4221 25 30 20 19 63 18

2001 4585 27 31 23 28 66 20

2002 5327 29 33 23 24 68 23

2003 6512 31 36 25 27 71 27

2004 8745 36 40 29 48 76 34

Source: Lundin et. al, 2006b.

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Outsourcing and alliance strategy is very popular Lenovo, Huawei, Haier, all those companies

used widely the strategy of alliance with foreign companies in the world.

From automobile industry to IT industry, some already got return (Lenovo). Some fell

in trouble (BOE).

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Table 18 Selected M&A deals by Chinese firms ( 2001-2005)

Source: Wu (2005), The Boston Consulting Group (2005) and various press reports.

Chinese bidder Target foreign firm / Unit Industry

Holly group Philips Semiconductors, CDM hand-set reference design (US), 2001

Telecommunication

TCL International Schneider Electronics AG (Germany), 2002 Electronics

TCL international Thomson SA, Television manufacturing unit (France), 2003

Electronics

BOE Technology Group Hyundai display technology,(South Korea), 2003

Electronics

Shanghai Auto Industry Corporation (SAIC)

Ssangyong Motor (South Korea), 2004 Automotive

Lenovo group IBM, PC Division (US), 2004 IT

Nanjing Automotive MG Rover Group (UK), 2005 Automotive

Source: Wu (2005), The Boston Consulting Group (2005) and various press reports.

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E.Country specific factors

Government play a very important role in in industrial innovation. Deferent layers of the government always try to interfere innovation process.

Regional gap is widening.

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150.5128.9

103.883.079.475.268.054.840.438.137.534.232.732.430.127.817.417.015.812.811.211.07.96.43.82.42.41.2

179.8

0.3

256.3

050100150200250

BeijingGuangdongJiangsuShanghaiShandongLiaoningSichuanZhejiangShaanxiHubeiT ianjinHebeiFujianHenanHeilongjiangAnhuiHunanJilinChongqiJiangxiShanxiGansuGuangxiYunnanGuizhouInnerXinjiangNingxiaQinghaiHainanTibet

R&D Expenditure (100 million yuan)

1.321.21

2.060.84

1.381.46

0.802.83

1.011.65

0.540.72

0.490.740.82

0.651.10

0.770.600.64

0.980.410.450.58

0.300.20

0.620.62

0.18

7.00

0.17

0 1 2 3 4 5 6 7

R&D/GDP(%）

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Country-specific factors

Lack of IPR Too strong merit-based evaluation make the

system little capability to encourage risk activity in science and innovation

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F. Conclusion

The system has been in big transition. Company is still weak but in getting more and

more power. The system is very open and make

innovation here more global sense. Government still matters in lots of area, from

technology standards to large project. The ecology here is still poor for radical

innovation.

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