The Development of Science, Technology and Innovation Policy in China

In many countries, government policies play a significant role in fostering science and technology (S&T) and innovation, particularly in developing countries, less so in developed countries. When a country is developing or is underdeveloped, the government plays a larger role. As the country becomes richer, more advanced, the government plays a smaller role. At the later stages, private enterprises take the lead in fostering S&T and innovative growth in the economy.

Some important tasks related to government are first to set framework conditions conducive to innovation. Some premiere conditions may not be aimed specifically at fostering innovation but have a significant impact. For instance, governments can ensure that the markets are functioning well, ensuring sound corporate governance, that financial institutions are present to allow new ventures to be financed adequately. All of these initiatives may not be directed specifically at S&T, but having good underlying fundamental conditions helps many aspects of the economy including S&T. Other framework conditions have a more direct effect, for example, the legal protection of intellectual property rights, setting of technological standards and so on. Governmental tasks also involve developing and implementing policies. Policies have a very important role to play not only creating the framework but also to ensure the growth of S&T and innovation in an economy.

In the Chinese context, government's role is augmented owing to the disparities between modern and traditional sectors and also between types of ownership, state-owned enterprises versus private enterprises. The role is also exaggerated by the greater propensity for market failure. Although China's economy is becoming more market-oriented, it is not entirely based on market forces. There is still some areas of the economy where market failure does occur so China's government has to step in and try and correct those market failures. For instance, in the financing of small to medium size enterprises, the government's role in China is also augmented due to distortion of incentives for research and innovation. If large state-owned enterprises are controlled by the state and they get funding from the state no matter what, what incentives do these state-owned enterprises have to get engage in technological innovation? There's a distortion of incentives for research and technology and innovation and these distortions have to be eliminated by the government. Finally, there are uncertainties in the business environment regarding interpretation and enforcement of legislation, for example, intellectual property rights protection. Many analysts in the west have accused China of infringing on these. There is legislation in place but enforcement is not always done in a standardized manner. There is also insufficient interaction among actors within China's innovation system and this is partly as a result of the historical legacy of its innovation system. More cooperation, more integration and more interaction among, for instance, businesses, enterprises and public research organizations will likely yield more innovative products. There's also insufficient coordination in the national innovation system with little interaction between various parts and layers of the government, between the central government, provincial government and municipal level. Between central and sub-national levels, there's room for improvement in terms of interaction and cooperation and integration, in terms of policy. Finally, there is a shortage of complimentary assets in certain areas of S&T, for instance, advanced specialized infrastructure and the government can play a large role in providing for these otherwise lacking within the Chinese economy.

In the 1950's and 1960's, S&T policies in China were based on the Soviet model which provided the template for economic development in China at that time. The Soviet Union was very influential in terms of the trajectory of S&T policies that China implemented in the 1950s and 1960s. These policies were characterized by little private industry and commerce, domination of central planning in the distribution of goods, and in the investment and allocation of division of labor. However, the Soviet model was not all bad. There were some notable successes, during this period, for example, computers, semiconductors, nuclear and jet propulsion technologies. The first atom bomb and the hydrogen bomb were created during this period. These represented successes for China's S&T early policy initiatives but the range and scope of these achievements was relatively limited. R&D took place in diffuse locations with little or no coordination among these locations. Different sectors of the economy had different layers of the government. Industrial ministries frequently possessed their own autonomous research labs and these were not very closely coordinated and did not interact much with one another. Large state-owned enterprises put excessive emphasis on indicators of quantitative output rather than indicators of technological output. One feature that pervaded an early S&T policy was the linear model of R&D or the linear model of innovation that influenced central policy makers very heavily.

The linear model of innovation (how new technologies can be developed):

1.     1. basic research

2.     2. applied research

3.     3. development

4.     4. testing

5.     5. commercialization

Each of these steps is discrete, separate from one another although each one builds on the previous step. There is movement forward through the steps only.

The linear model of innovation might not be a very good reflection of reality but it allows policy makers to feel that innovation and R&D are governed by laws that are amenable to planning and control. Money can be poured into any of those one steps. To improve basic research, more money should go to universities, to scientists, for instance. Each of these discrete steps in the linear model can be supported by an organization. It doesn't consider innovation and R&D to be an integrated process.
The linear model of R&D pervaded all aspects of early S&T policy initiatives in China. It was an organized collective activity. Despite its shortcomings, this model of innovation is still, not only in China and many other countries, relatively widely adopted. In the Chinese model, in the early 50s and 60s, it reinforced institutional redundancy. 

Recent policy initiatives show the government's determination to build a fully-fledged, high-performing and efficiently functioning national innovation system. Investment in S&T started to increase from 2000, formalized in the year 2006. Through this plan, The Medium- to Long-Term Strategic Plan for the Development of S&T, a vision is developed up to 2020. It set out key objectives and priorities for S&T with its overarching goal to make China an innovation-oriented society by the year 2020 and, over the longer term, to make China one of the world’s leading innovation economies. It emphasizes the need to develop capabilities, to address many previous shortcomings, sustain economic growth and social development, promote home-grown innovation, and increase government-led R&D and investments.

Goals:

1. to increase growth expenditure in R&D as a percentage of Gross Domestic Product (GDP) to 2.5% by the year 2020. 

Many of the advanced economies of the world today spend in excess of 3% of their GDP on R&D but if China were to achieve this by 2020, it would represent a huge amount of absolute spending in terms of dollars spent on R&D given the fact that it is currently the second largest economy in the world and projected very soon to be the largest economy in the world.

2. technological progress to contribute 60% of economic growth. 

Economic growth is not to be reliant on low-tech or resource intensive or labor-intensive products. Business expenditure on R&D (BERD) has to double that of tech transfer. In other words, the Chinese government is trying to ensure, or force, private enterprise/the business sector to become the leader of S&T growth. 

3. to become among the top 5 in terms of invention, patents granted to Chinese citizens and in terms of citation of international scientific papers.

This is a very ambitious plan and if the goals are realized by 2020, we can expect China will be a global leader in terms of S&T. Several years into this plan, it seems that the quantitative targets of this plan are indeed going to be achieved. There are 11 priority areas of the plan which include the following: energy, water and mineral resources, environment, and so on. These are areas in which the plan places particular emphasis for the development of S&T expertise in terms of project areas. The government's commitment to its strategic orientation combined with the dynamism of China's economic development means that progress should be likely. It will allow China to emerge as a significant contributor to global innovation.
from Coursera course, Science and Technology and Society in China. Week 2. by Naubahar Sharif, The Hong Kong University of Science and Technology