Innovation system of
China
Second BRICS in Brazil, April 25-27,2007.
LIU Xielin
Professor of Graduate University of Chinese Academy of
Science
Nannan LUNDIN
Örebro University
&
Research Institute of Industrial Economics, Sweden
[email protected]
1
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 companycentered system.
The linkages of the system---Industryscience linkages
Company system
The country-specific factors in the system
2
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

3
Table 1 The relative importance of key actors in terms of R&D expenditure, %
1990
1996
1997
1999
2000
2001
2002
200
3
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.
4
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.
5
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.
6
Table 2 University spin-offs
Revenue
Number
（Billion RMB）
of spin-offs
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
7
Sources: Statistics of University’s industry in 2004 in China, Center for S&T for Development, Ministry of Education, 2005.
Table 3 S&T outsourcing of Industrial enterprises to Universities
2003
2000
Total S&T funds
(billion RMB)
From
industrial
enterprises
From
government
16.7
2001
2002
20.0
24.8
S&T funds
(billion RMB)
5.5
7.2
9.0
Share (%)
33.3
36.2
36.2
S&T funds
(billion RMB)
9.7
11.0
13.7
Share (%)
58.4
54.9
55.4
30.8
11.3
36.7
16.5
53.6
2004
39.2
14.9
38.0
21.1
53.8
Source: Statistics of Science and Technology in Higher Education, 2000-2005.
8
D.Company system


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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.
9
Their innovation capability is poor
Table 9 Chinese and Korean patent registrations in the U.S.
2001
2002
2003
2004
2000
China
Korea
Number of
Patent
119
195
289
297
404
Rank
26
24
21
22
20
3331
3546
3755
4198
4590
8
8
7
5
4
Number of
Patent
Rank
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
10
More making than buying of the
technology now
R&D expenditure and technology importation (unit: 100 million RMB)
Expenditure on
R&D
Expenditure on
technology 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
11
ble 7
Ratio of R&D/sales in large and medium sized companies, %
1995
2000
2001
2002
2003
2004
2005
0.46
0.71
0.76
0.83
0.75
0.71
0.76
Year
R&D/sales
12
The SME is rising
Table 10 A simplified comparison between small and large S&T-based firms,% , (2004)
Large S&T based enterprise
Small S&T based enterprises
R&D/
Sales
Export of
new
products
/sales
Tech
import
/sales
Patent/
100
persons
R&D/
Sales
Export of
new
products/s
ales
Tech
import
/sales
Patent/
100
persons
1.19
0.29
0.19
0.51
0.91
1.55
0.32
0.06
Joint venture:
HTM
Source: Lundin et .al,0.97
2006a.
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
13
0.90
SOE
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&D
Expendit
ure
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.
14
Outsourcing and alliance strategy is very
popular

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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).
15
Table 18 Selected M&A deals by Chinese firms ( 2001-2005)
Target foreign firm / Unit
Industry
Chinese bidder
Holly group
Philips Semiconductors, CDM hand-set
reference design (US), 2001
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
Ssangyong Motor (South Korea), 2004
Source: Wu (2005), The Boston Consulting Group (2005) and various press reports.
Corporation (SAIC)
Telecommunication
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.
16
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.
17
R&D Expenditure (100 million yuan)
250
256.3
200
150
100
50
179.8
150.5
128.9
103.8
83.0
79.4
75.2
68.0
54.8
40.4
38.1
37.5
34.2
32.7
32.4
30.1
27.8
17.4
17.0
15.8
12.8
11.2
11.0
7.9
6.4
3.8
2.4
2.4
1.2
0.3
0
R&D/GDP(%）
0
Beijing
Guangdong
Jiangsu
Shanghai
Shandong
Liaoning
Sichuan
Zhejiang
Shaanxi
Hubei
T ianjin
Hebei
Fujian
Henan
Heilongjiang
Anhui
Hunan
Jilin
Chongqi
Jiangxi
Shanxi
Gansu
Guangxi
Yunnan
Guizhou
Inner
Xinjiang
Ningxia
Qinghai
Hainan
T ibet
1
2
3
1.32
1.21
4
5
6
7
7.00
2.06
0.84
1.38
1.46
0.80
2.83
1.01
1.65
0.54
0.72
0.49
0.74
0.82
0.65
1.10
0.77
0.60
0.64
0.98
0.41
0.45
0.58
0.30
0.20
0.62
0.62
0.18
0.17
18
Country-specific factors


Lack of IPR
Too strong merit-based evaluation make the
system little capability to encourage risk
activity in science and innovation
19
F. Conclusion


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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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