The Main Features of China's Innovation System

An innovation system is defined as a purposeful combination of market and non-market mechanisms to optimize production, deployment, and use of new knowledge for sustainable growth through institutionalized processes in the public and private sector.

It's the combination of all of these actors and organizations creating new knowledge for use in everyday life, whether that is in the public sphere or the private sphere.

The origins of the Chinese innovation system can be traced back to the mid-1980s. At that time, reform in the S&T system was included in the broader agenda of economic reforms. S&T reforms have always gone hand in hand with economic reforms. The maturing of this system accelerated in the 1990's as a result of continued international trade, accession to the WTO in 2001 and improvement of framework conditions.

That's not to say that this innovation system is perfect. There is still a lot of room for improvement. At the turn of the century, a combination of experimental national policies in special zones, bottom-up initiatives supported by regional and local authorities, combined with top-down systemic reforms, had given birth to what could be considered a national innovation system (NIS) under construction, created in the image of the entire Chinese economy.

China has excelled in mobilizing resources for S&T, given the political structure. It's easier, in some ways, for the Chinese government to mobilize resources for S&T, to train engineers and scientists and to provide them with employment in state-owned enterprises and public research labs. This occurred in an unprecedented scale and with exceptional speed that mirrors the overall economy. The Chinese economy has grown at an unprecedented scale with exceptional speed as well. R&D spending has increased significantly from the turn of the century onwards and it has accelerated every year. Now, China is considered to be a major global R&D player and a major economic player as well.

However, these impressive investments and resources have not yet translated into a proportionate increase in innovation performance.  China is not in the same bracket yet as more successful, innovative economies such as Japan, Sweden, Israel, and the USA. China has increased spending in R&D but it's capabilities for making productive use of cumulative investment have developed at a slower pace, especially in the business sector. The government, as an actor in this innovation system, still predominates. The business and enterprise sector has lagged behind.

Foreign investment in R&D is expanding rapidly as is foreign investment in other sectors of the economy and its motivation and content are changing. Previously, investment in R&D was clouded with IPR infringements. Now, overseas firms are becoming more willing to invest in China with less fear, although the fear is still there of IPR infringements. They're more willing to share their technologies with the local partners. Access to human resources has become a more important driver than market access or mere support of export oriented manufacturing operations. Human resource development has become a major component that has to precede the successful development of China's innovation system.

Furthermore, a first wave of innovative Chinese firms have developed global brands and expanded their operations abroad, for example, Huawei and ZTE.

Improvement of all the universal framework conditions is still necessary to create the right conditions for market-led innovation to predominate. Indigenous innovation capabilities and R&D intensive investment would be mutually reinforcing. The public support system for R&D and some aspects of the institutional arrangements for China's national innovation systems do not yet sufficiently encourage the deepening of R&D efforts and their translation into innovative outcomes.

Government is still playing a large role in the economy as well as R & D and there are still inadequate incentives for the deepening of R&D efforts and their translation into innovative outcomes. Broader economic changes and some political changes are required for R&D to really flourish successfully. Except in a few targeted areas, there is still a wide gap between the relatively small basic research sector and the massive technological development activities. That's not to say that there's little investment in basic research or it's underfunded. There's a lot of investment in basic research but the making and selling of products is so much greater in scale in comparison.

China's national innovation system is not yet fully developed. It is perfectly integrated geographically and perfectly integrated at different levels of the government but imperfectly integrated in terms of different sectors of the economy. There are many linkages between actors and sub-systems that remain weak. It resembles a large number of innovative islands. There are some islands of excellence but they are not sufficiently well integrated with other part of the economy or other islands of excellence, for that matter. There's a need to spread the innovation culture and the means of innovation beyond the the incubators by promoting once again market-based innovative activities, clusters and networks.

Private enterprise needs to take the lead and government needs to take a backseat.

Regions have played a key role in the advancement of S&T in China and the current regional patterns of R&D and innovation are not optimally efficient. Because much of the R&D and innovation is in the coastal regions, it’s not optimally sustainable for the cohesion of the country. There is too great a physical separation between knowledge producers and potential users. It is not good for social equity.

China's innovation system is fairly new. It's developed at a huge pace given its great size. It has improved dramatically but yet there is still a lot of room for further improvement.
from Coursera course, Science and Technology and Society in China. Week 2. by Naubahar Sharif, The Hong Kong University of Science and Technology