However, even within this state activist paradigm, there has been a gradual shift in China away from an emphasis on wholly government centric projects into industry funding, with the importance of smaller and medium sized enterprises being given greater recognition in policy planning and private sector lending, although ongoing issues remain in the way the domestic banking system reviews risk and evaluates SME value propositions, and there also persists a severe lack of private venture capital across domestic sectors (OECD, 2008a). The National Program for Medium and Long-Term Scientific and Technological Development 2006 – 20 (hereinafter S&T Strategy) was launched by the Chinese government with the promise of substantial state-backed investment drives to bring China into the forefront of research led nations and to provide a platform for moving away from an assembly hub model of low-tech manufacturing-based development (Zhang Gang, 2008). In particular, the policy spells out explicitly that innovation is to be categorised upon three broad themes that should progress in harmony to bring about effective synergies, and that enterprises are to be seen as the core of nurturing successful nationwide strategies. The three themes to be embraced in this policy are: i) ii) iii)
Original scientific discovery and invention. Integration of related technologies for new products and services. Better absorption of available worldwide technological resources.
There now exists in China a determination to deploy its resource to create indigenous intellectual property and replace the perceived dependence that high value production centres continue to have on foreign funded enterprises and imported know-how (State Council, 2006; Wu, 2006). Some of the China’s S&T Strategy’s key characteristics include: • • • • •
Qualitative increases in R&D intensity, from 1.43% in 2006 to 3% in 2020. Provide a challenge to the EU’s R&D intensity average of 2%. Lift-off point for China of US$38 billion gross expenditure in R&D for 2006 at current exchange rates, making it 6th largest worldwide and equivalent to US$86.8 billion, in terms of current purchase power parity (OECD, 2008a: 11). Growth rates in Chinese R&D intensity of 19% year-on-year for period 2001 – 06. Drive SME innovation through expansion of clusters and incubators.
One example of an innovative success story in the domestic sector is telecoms company Huawei. Still privately owned and operating from its massive science park in Shenzhen, south China, its holds the largest number of invention and utility patents for any Chinese firm. It has sought imaginative ways to counter perceived shortfalls in management skills and lower than required propensities towards innovative thinking by creating its own “university” within the organisation, operating as more than simply a training base, it is led by overseas educated Chinese returnees and seeks to induce the key disruptive thinking characteristics and innovative risk taking that has led to American and European success in high technology markets. Moreover, the company has also recently established its own overseas research institutes, in Sweden, United States and India, and the firm is now seen as a genuinely global innovative Chinese enterprise, active in international markets. There is no reason to believe that such success cannot permeate elsewhere within the domestic economy, and that would certainly appear to be the objective of the Chinese government’s radical policy framework.
Asia’s Innovation Challenge
Page 14 of 80 February 2009: Paul Irwin Crookes