Learning From China

8/13/2019 Learning From China

1/36

Learning from China: "AdaptingChinese Technology Transfer,

Innovation and

> Diffusion Model to Pakistan"

Dr. Mansoor Shahab

COMSATS Institute of Information Technology Abbottabad

nthDecember 2013, China Study Center CIIT Islamabad


2/36

Presentation Outline

The Role of Science, Technology and Innovation inthe context of China

Main features of Chinas national innovation system

Chinas policies for promoting science, technology

and innovation Learning from China


3/36

Framework Conditions:well-functioning

markets, sound

corporate governance

and financial

institutions

Main Features of the Chinese Innovation

System

An innovation system is defined asthepurposeful combination of market and non-market mechanisms to

optimize the production, deployment and use of new knowledge for

sustainable growth, through institutionalized processes in the public

and private sector

Higher Educationresearch

Private SectorR&D

Public SectorR&D

Institutional Fabric:

Policies to

encourage science

and technology,

legal protection of

intellectual property

rights and

technologicalstandards

Knowledge Commercialization

Diffusion

Transfer

Acquisition

Creation


4/36

The Chinese Context

An average GDP growth rate of around 10% a yearover the past 20 years

Macroeconomic performance remains very strong

A Significant increase in income per capita

An impressive reduction in poverty levels

A major destination for foreign direct investment

(FDI)

Worlds largest exporter of manufactured goods

Challenge: ensuring further progresseconomic,

social and environmental


5/36

Macro Economic Indicators


6/36

Sources of Output Growth

Output growth has largely been driven by capital accumulation,

Total factor productivity growth, (improvements in the overall efficiency of the

utilisation of labour and capital), has been high by international standards.

The increasing average level of education and the resulting higher quality of

the labour force have also boosted output growth.


7/36

Structure of the Economy

Structural change in the Chinese economy is broadlycharacterized by a shift from agriculture to services

(Sectoral breakup by GDP, by Employment)

compared to developed nations,

Unlike some developing countries, including someemerging economies, China has not started to de-

industrialize but has strengthened its manufacturing

base.


8/36

FDI Inflows


9/36

Ownership and Productivity


10/36

China has relied heavily on technology imported from abroad

development of scientific and technological capability has until recently

lagged behind its economic growth


11/36

Growth has been underpinned by

economic reform

Beginning with agriculture, the reform process was subsequently

extended to industry and recently to major parts of the servicessector.

Economic reform has contributed to far-reaching deregulation andthe creation of new framework conditions which have helped toimprove the functioning of markets and to create a unified domesticmarket.

These changes, induced by economic policy decisions, havegradually transformed China into a more market-based economy andprovided the basis for the emergence of a thriving private sector.

New actors have been allowed to emerge alongside the state-ownedenterprises (SOEs), further expanding the space for private firms.

However, SOEs still record much lower levels of productivity than

other firms (Figure 1.5), often appear to be less efficient knowledgeproducers and often lack the basis for R&D.


12/36

international openness to foreign trade

and investment

Chinas open door policy has been an integral part ofeconomic reform. Adopted in 1978, it has resulted in aprogressive opening to foreign trade and investment andculminated in Chinas accession to the World TradeOrganization (WTO) in 2001

openness has helped China make better use of its

comparative advantages and become a major trading nation

a major export platform for multinational enterprises, inparticular for manufactured goods (workshop of the world)

greater competition in product markets and increasingly inmarkets for services

vigorous competition exerts discipline on Chinese firms,helping to lower prices and ensure better quality and variety ofgoods


13/36


14/36

Technological knowledge can be transferred via imports

of intermediate and capital goods. FDI projects and theoperations of foreign-invested firms have also helped toimprove Chinas access to advanced technologies, tomanagement practices and to a wide range of skills.

a major channel of technology imports but have

performed little technological innovation or productdesign in the country

Core technologies mostly remain controlled by theforeign partners in joint ventures

Current patterns of specialisation, a lack of absorptive

capacities in Chinese firms and shortcomings inframework conditions, such as a lack of effectiveintellectual property rights (IPR) protection may havelimited the amount of spillovers.


15/36

Are Chinas exports high-technology or

not?

The structure of exports has changed fundamentallyover the past 20 years.

share in total exports increased from 5% in the early

1990s to over 30% in 2005

Today, the composition of Chinas exports resemblesthat of countries with a significantly higher GDP per

capita and is more sophisticated than that of

countries with similar endowments.

Office machinery and TV, radio and communicationequipment; high-technology exports such as

pharmaceuticals are relatively weak


16/36


17/36

The Chinese model of growthsuccesses

and challenges

the current pattern of growth may not be sustainable.

Major challenges include:

GDP is unevenly distributed, between the wealthiercoastal provinces and the less developed western partsof the country as well as urban and rural areas

a rapidly ageing population, China might be ageingbefore getting rich

Unsustainable low-wage manufacturing utilizing importedcomponents, equipment and technology

rapid urbanization, resulting in serious social andenvironmental problems

high demand for energy and raw materials, and seriousenvironmental degradation


18/36

The role of science, technology and

innovation policy

building a harmonious society and high-performingenterprise-based innovation system

government policies play a significant role in

fostering science, technology and innovation

Framework conditions like well-functioning markets,sound corporate governance and financial

institutions

legal protection of intellectual property rights and the

setting of technological standards Due to market or systemic failures, provision of

financial support for R&D


19/36

Innovation support in Chinese Context

Greater proclivity to market failure, mainly in SMEs

Wider disparities

Distortions of incentives for research and innovationin the business sector

interpretation and enforcement of legislation esp. inthe area of IPR protection

Development of market driven institutionalarchitecture of a national innovation system

Insufficient interaction among innovation systemactors and various parts and layers of government

A shortage of advanced specialized infrastructure incertain areas of science and technology


20/36


21/36

Framework conditions for innovation

Chinas education system needs to give more attention tofostering students innovative thinking, creativity andentrepreneurship

market imperfections like administrative interventionsillegal conduct and local protectionism interfere with the

normal functioning of markets stronger intellectual property rights requires a modern,

properly enforced anti-trust law

Corporate governance in SOEs, give managementinsufficient incentive to undertake long-term, riskyinvestment in R&D

lack of competent professionals with experience inmanaging R&D projects


22/36


23/36

China joined the WTO and signed the Agreement onTrade-Related Aspects of Intellectual Property Rights(TRIPS agreement), the Chinese patent system is inline with international standards and conventions

Weaknesses are in the enforcement of IPR

regulations Foreign firms hesitate to transfer technology to

China

sound IPR policies facilitate the transfer of research

results from public research organisations tobusiness enterprises and from foreign firms to theChinese economy


24/36


25/36

China is striving to promote its own technology standardsand to transform Chinese standards into internationalstandards, a goal that requires improving the ability ofChinese actors to take part in international standard-setting processes.

Promoting innovation via public demand (PublicProcurement)

The volume of government procurement has beenexpanding rapidly, although, at about 2% of GDP

China joining the WTO Government Procurement

Agreement (GPA) would open up Chinas publicprocurement markets to foreign companies and viceversa


26/36

Chinas Innovation System: Main

Features and Performance

Origin of the Present day Chinese Innovation system

Reform of the science and technology (S&T) system included in thebroader agenda of economic reforms (mid-1980s)

The Torch program as a new infrastructures to encourage industry-science relationships, and

spin-offs from public research organizations (PROs)

S&T industrial parks,

university science parks and

technology business incubators

Accelerated in the 1990s through continued international opening (e.g. accession to the World Trade

Organization [WTO] in 2001),

improvement of corporate governance and key framework conditions for innovation (e.g. protection of intellectual

property rights [IPR]),

further reforms of the university and public research sectors


27/36

Chinese innovation system; its structure, Size, heterogeneity

and complexity, Lack of internationally comparable indicatorsand statistics, Idiosyncratic institutional features and Rapidand ongoing transformation

main findings,

mobilising resources for science and technology on an

unprecedented scale and with exceptional speed, and is nowa major R&D player

the capabilities for making productive use of accumulatedinvestment

in R&D, HRST and the related infrastructure have developedat a much slower pace

Foreign investment in private R&D is expanding rapidly

Chinese firms have developed a global brand and tapping intoforeign pools of knowledge through mergers and acquisitionsand the establishment of overseas R&D


28/36

a wide gap between a relatively small basic researchsector and massive technological development activities

very large number of innovative islands with limitedsynergies between them and, above all, limited spilloversbeyond them

current regional patterns of R&D and innovation activitiesare not optimal from the perspective of the efficiency ofthe national innovation system

rapid growth of all components of the HRST pipeline,from university enrolments in undergraduate studies to

PhD programmes

shortages in the specialised human resources that areneeded at various stages of innovation processes


29/36

Benchmarking the size, growth and

potential of Chinas innovation system

The national dimension

The relative size of the Chinese innovation

system


30/36


31/36


32/36


33/36


34/36

a snapshot of the Chinese innovation system, comparing

its size and growth to certain OECD countries using amix of input and output indicators

number of researchers

R&D spending has increased at a stunning annual rate ofalmost 19% since 1995 and reached USD 30 billion

smaller when considered from the output side, growingmuch faster, increasing systemic efficiency, leapfroggingefforts in focused areas (e.g. nanotechnology)

The R&D/GDP ratio has more than doubled in a decadeand reached 1.34% in 2005 compared to only 0.6% in

1995 already on a par with those of OECD countries which

have a similar R&D intensity of production


35/36

the social and economic returns to R&D investmentare currently lower in China than in advanced OECD

Much more D than R mainly oriented towardsexperimental development

24% of gross domestic expenditure on R&D (GERD)

is devoted to basic research and (6%) appliedresearch; more than 70% corresponds toexperimental development

building the hardware of the innovation system

Renewed equipment and facilities on a large scale the stock of intellectual capital does not grow as

quickly


36/36

The regional dimension

In general, the provinces and municipalities with

provincial status on the east coast are more

innovative than the provinces in the central and

western parts of China. Regional levels of

innovativeness are highly correlated with their GDP

per capita and their contribution to high-technology

exports, but less with their shares in national R&D

expenditures

Documents

Learning From China