China’s new development model: Analysing Chinese prospects in technology innovation

Abstract

This article examines China’s innovation strategy as a key part of its economic development policy to achieve the next stage of the country’s domestic market modernization. The news that China now possesses the world’s fastest supercomputer appears to confirm the country’s inexorable journey from the world’s manufacturer and assembly hub to leading global innovator. However, this article presents an examination of broader-based innovation metrics which casts a different light on China’s position, showing that much work still remains to be done in order to lift domestic innovative activity to world-class levels. The country is certainly a challenger, but does not yet appear to have become a leader. The article draws on the latest research data of China’s innovative capabilities and links these to empirical assessments of the country’s information and communications technology sector to illustrate current strengths and weaknesses. In conclusion, it is argued that key inhibitors remain in the context of creating commercially sustainable competitive advantage in science and technology, and that the strengthening of moves towards nationalist innovation strategies may be counterproductive as China embarks on a critical phase of its engagement with the global research and development community.

Keywords

China’s indigenous innovation policy economic growth research & development science & technology

This article explores the scope and capability of China’s innovation system, in both a domestic and international context. It looks at key innovation metrics and country comparisons, and reviews the Chinese information and communications technology (ICT) sector as a case study of continuing progress and ongoing problems. In so doing, the article seeks to give a timely assessment of China’s emerging competence in transforming its development priorities from a manufacturing and assembly hub to an innovation-oriented society where disruptive thinking¹ and the application of science are paramount. The current debates over the Chinese priority of promoting ‘indigenous innovation’, understood as the creation of technologies, products, and associated intellectual property owned by Chinese firms,² are examined as a policy driver to increase the country’s domestic assimilation of research and development (R&D) outputs, and located within a wider discussion over China’s emerging innovative challenge and its position relative to other major powers in science and technology. The article concludes with an assessment of whether the indigenous innovation policy reflects best practice under an increasingly globalized R&D landscape.

The policy context of China’s innovation system

Innovation can be defined as a process to create new knowledge in scientific development and to generate commercially sustainable breakthroughs that provide competitive economic advantage.³ China is determined to make great strides as an innovator, and the policy is of ‘fundamental importance’ to the country’s future to secure sustainable growth.⁴ It shows a commitment towards a radical shift in priorities from imitation to invention in order to expand the country’s prowess in designing and owning high-technology outputs, whilst also learning core principles of how to acquire, disseminate, and apply new ideas. The extent of China’s achievements to date and its future capabilities are a matter of considerable importance, not just for China but also for leading innovative economies.⁵

A combination of internal and external factors has been evident in driving policy change in recent years. Internationally, significant competitive pressures have arisen in low-end commodities manufacturing from alternative production locations such as Vietnam.⁶ Domestically, there has been a growing realization at policy levels that an export-oriented dependence on assembly manufacturing exposes China to the kinds of stress experienced in the recent global recession, when market demand in developed economies collapsed and regional manufacturing bases such as in Guangdong experienced a sharp slowdown, exhibited by a fall of 16 per cent year-on-year for 2009 in merchandise exports.⁷ These adjustments resulted in China having to rapidly absorb shocks of mass layoffs of migrant workers and factory closures, precipitating incidents of unrest that gave genuine cause for concern amongst political elites for whom maintaining social stability remains paramount.⁸

However, the evolution of China’s science and technology ambitions should not be seen as just a knee-jerk reaction to a single point of economic malaise in the global system, but instead should be better recognized as part of an ongoing progression of policies that have in many ways mirrored the development of innovation-led initiatives and technology upgrading across Asia. Scholars have highlighted three overlapping and interlocking stages of innovation policy development in the East Asian region. The first stage of government-led national plans is best illustrated by a state-centred approach, typically understood as ‘picking winners’, thus allowing government bureaucrats a direct say in business strategy and priority setting decisions. Weaknesses in the ability of administrators to make competent judgements typically then leads to the emergence of a second phase during which market feedback loops influence public sector agencies to direct their effort more effectively towards improving production techniques, including the acquisition of new approaches through knowledge spillover from partners and rivals across high-technology sectors.⁹ The third stage of innovation policy formation involves the creation of a national innovation system (NIS) to sustain domestic innovation to promote further rapid integration between market needs and enterprise capabilities through a more streamlined process of national policy direction, capital investment, human resource management, and firm-level innovative activities.¹⁰

China’s initiatives should thus be evaluated in light of this ongoing trajectory of change as the country moves from the second to the third stage of innovation policy evolution. The country’s prescription poses a number of key questions. First, just how effective as a stimulant of innovative activity have these new policies been? Second, in what technical areas might China be likely to pose the greatest challenge to competing foreign enterprises? Third, does the ‘indigenous innovation’ policy show China’s increased international assertiveness or illustrate its misunderstanding of how global innovation now works? Finally, to what extent can China’s emerging prowess as a future innovating power be classified as a new type of threat to the established technological capability and competitive advantage of US and European economies?

China’s science and technology strategy 2006–2020

The policy priorities represented by the National Medium and Long Term Program for Science and Technology Development 2006–2020 (hereinafter S&T Strategy) is a key part of China’s innovation-led development ambitions. The strategy envisaged integrating a disparate suite of initiatives to channel state-backed investment effort into 11 priority areas, including ICT, biotechnology, green energy, and nanotechnology invention. National goals were set to restructure Chinese industry towards high-value growth and to raise the level of China’s research and development intensity (R&D intensity) to 2.5 per cent of its GDP by 2020.¹¹

These principles marked a sea change in China’s development trajectory. They were introduced with the ambition of enabling China to reduce its dependence on foreign technology and so soften its ongoing reliance on wholly foreign-owned enterprises (WFOEs) and foreign-dominated joint ventures (JVs) in controlling the outputs of the country’s high-technology product exports, and to rebalance the licence fees paid by Chinese businesses for overseas invented ideas that represent a cost outflow of over US$10 billion per year.¹² Taken together, the policy represented an inward-facing shift to stimulate domestic competences in the face of overwhelming foreign leadership. The S&T Strategy has been linked to initiatives that help engender innovation within the Chinese economy by distinguishing between different inputs (see Figure 1):

Figure 1.

A model for China’s innovation strategy

policies that support the creation of knowledge

policies that support the expansion of firms

policies that stimulate creativity

On the supply side, both central and provincial governments have invested heavily in infrastructure for high technology parks and increased the skilled human resources pool, whilst providing tax incentives for commercial R&D investment, special funds to support innovation by small and medium enterprises (SMEs), and financial encouragement for mainland Chinese firms to engage in international patent filings for domestically created inventions.¹³ On the demand side, procurement policies for state-backed projects, which are highly favourable to domestic firms, have been facilitated by national and local registers of qualified ‘indigenous innovations’, largely devoid of competing wholly foreign-owned enterprises.¹⁴

Measuring China’s innovation capabilities and outputs

There are a number of metrics that enable measurement of inputs and outcomes which can help judge a country’s endeavours. Based on well-established norms of innovation reviews,¹⁵ the following areas will be explored in more depth to better understand the current position:

R&D intensity and gross expenditure on R&D (GERD)

growing the domestic research community

research papers and citations

patent filings locally and internationally

China’s international competitiveness

China in global R&D networks

R&D intensity and GERD

The intensity of research and development within an economy is a popular way to gauge the extent to which that country can be said to be investing in building its innovative capacity, and it also forms a useful basis for comparisons between states that are seeking to maintain or elevate their relative position.¹⁶ The measure of gross expenditure on research and development (GERD) as a percentage of GDP (typically known as ‘R&D intensity’) enables economies of different sizes to be broadly related into a spectrum of achievement.

Forecasts for 2011 put China’s gross expenditure on R&D in purchase power parity terms (PPP) at US$153 billion, second only to the United States by value and representing 12.9 per cent of the total world spending on R&D, as compared with the United States which has estimates of US$405 billion and 34 per cent respectively.¹⁷ Whilst representing a clear trend in both scale and commitment, country comparisons with economies within the Organisation for Economic Co-operation and Development (OECD) illustrate that, although it has significantly increased its capacity to overtake some developed economies, China remains a challenger, not yet a leader (see Figures 2 and 3).

Figure 2.

R&D intensity – China versus OECD average

Figure 3.

R&D intensity – country comparisons

In China, the state dominates the proportion of R&D funds invested across the economy. Although this is slowly shifting towards more direct business-led expenditure, the significance of large state-owned enterprises (SOEs) as key commercial actors within many of China’s industrial sectors, together with a trend to register state-funded research institutes as companies, belies any real dilution of the critical role played by the Chinese state.¹⁸ Some estimates put this share at 69 per cent of all innovation funding, as compared to, for example, the United States, where the position is largely reversed with the vast majority of gross investment emanating from wholly private-sector enterprises.¹⁹ This distinction is important as it illustrates a characteristic Chinese model of state-led activism, creating both hard and soft infrastructure to promote long-term capacity building and supporting key projects in industrial sectors pre-selected as strategic to national development, such as communications technology and green energy. This policy preference is reflected in China’s increased number of science and technology parks and business incubators, as well as the ongoing extent of education support initiatives directed at university departments and associated research programmes.²⁰

A further critical difference that characterizes the Chinese pattern of R&D activities concerns the emphasis on the type of research which takes place through domestic funding. Of the three main kinds typically classified – basic research (blue sky experimentation), applied research (as building blocks for new products), and experimental development (of existing products and processes) – Chinese visibility in basic and applied subsectors is considerably lower than OECD averages. Whilst great strides have been made in process and incremental innovation across China’s highly competitive industrial sectors, this imbalance may help to explain the Chinese state’s policy emphasis of procurement-led indigenous innovation funding for its domestic enterprises.²¹

The research community, papers, and citations

China has also invested heavily in improving its human resources within science and technology fields, creating an active research community of technologically trained scholars (see Figure 4), with objectives to increase both the number of research papers and their qualitative assessment through greater citations. Recent figures estimate the absolute number of Chinese researchers at just over 1.4 million, putting it in second place to the United States by number of specialists.²² However, as a measure of population, China still educates a relatively small percentage to tertiary level (less than 10 per cent compared with the OECD average of 27 per cent), whilst there also continues to be ongoing issues in the perceived levels of quality of Chinese educated outside the elite institutions. This weakness is particularly marked in areas such as disruptive thinking, problem-solving skills, and people-management skills, perhaps reflected in the volume of students from China seeking advanced degree education overseas in systems such as those offered by the United States, United Kingdom, Australia and New Zealand.²³

Figure 4.

Researchers per thousand employed, full-time equivalent

Equally important to the actual number of researchers available within an economy is how productive each one may be in his or her field through the creation of papers and research articles, and how influential researchers are through the impact of their work. China’s share of scientific articles increased substantially over the decade to 2008 to represent totals of around 12 per cent of world output that year, compared to the United States’ share of just over 16 per cent.²⁴ These figures also show considerable progress and greater visibility by China in some interesting key subsectors of technology and applied science, including chemistry, geosciences, and space research (see Table 1).

Table 1.

China’s share of world publications in selected technologies

Technical category	1999 to 2003		2004 to 2008		Category output growth
Technical category	Count	Share	Count	Share	Category output growth
Materials Science	20,847	12.22%	48,210	20.83%	12%
Chemistry	44,573	9.29%	99,206	16.90%	15%
Physics	31,103	7.97%	66,153	14.16%	17%
Geosciences	5,322	4.95%	12,673	9.30%	11%
Space Science	2,055	3.80%	3,514	5.89%	21%
Biology	6,697	2.66%	15,971	5.86%	10%

Source: Battelle, 2010 Global R&D funding forecast, 24

However, there is a continuing problem over the limited extent to which Chinese papers are cited by mainstream English-language journals, with the average number of citations for a Chinese article in the decade to 2008 remaining at under five, compared with 14 for a US article. There may be different explanations for this. On the one hand, it may indicate a weakness of the science being written in articles, perhaps caused by underlying fragility in the peer review mechanisms available to Chinese researchers. Indeed, the quality of the scientific research environment in China is not without its domestic critics, with claims of cronyism in grant-funding decisions for scientific projects that are driven as much by traditional notions of guanxi than by rigorous assessments of scientific competence and project merit.²⁵ On the other, it could be explained by recognized trends for European and US researchers to cite each other rather than look further afield in their specialization, especially as both regions have traditionally represented centres of innovation and scientific excellence.²⁶

Patent filings

The number and type of patent filings have traditionally been seen as a useful measure of innovative capability. In China, however, this metric has become a matter of some controversy, reflective of a rapid increase in Chinese domestic patenting activity at the same time raising questions of a qualitative nature about the substance of patents being registered.²⁷

China’s State Intellectual Property Office handled 289,838 invention patent applications in 2008, making it the third busiest in the world after the United States and Japan, with two-thirds of these applications being resident (versus non-resident) filings and representing a growth rate of 18.2 per cent over 2007, bucking the trend towards slowdown during the recession that afflicted many of the other main patenting offices.²⁸ A sharp increase in patent grants from China’s State Intellectual Property Office coincided with this rising tide of applications. This has fuelled arguments about the underlying quality of individual patent awards in China, with criticisms pointing to increased incentives for making patent applications as part of China’s innovation drive, such as the promise of tenure for academics, the awarding of urban residence status for individuals, and financial bonuses for staff at China’s State Intellectual Property Office who approve more applications. Moreover, in 2008, China accounted for 72 per cent of worldwide applications in the designation of ‘utility model’ patents which represent an incremental design step-change rather than an innovative leap, and which have review mechanisms far less rigorous than those for invention patents. The actual extent of domestically inspired innovation across China may, therefore, be rather lower than at first implied by the marked rise in applications and grants.²⁹

In order to combat national idiosyncrasies in patent granting, it is typical to use a proxy that can provide an alternative perspective. One option is to refocus away from domestic intellectual property office behaviour, and instead make assessments of an economy’s use of international patent activities in the three main patent offices, whose assessment criteria is of worldwide repute – the US Patent and Trademark Office, the European Patent Office, and the Japanese Patent Office. Together, these comprise the ‘Triadic Patent Offices’.

Here, China fares less impressively. Although China’s international patent filings also markedly increased during 2008/09, its total share of triadic patents is only 1.1 per cent. Furthermore, estimates of the number of triadic patents per million inhabitants are also very low when compared to traditional centres of innovative dynamism, potentially reflecting limited depth of innovations at globally competitive levels (see Figure 5).³⁰

Figure 5.

Triadic patent families per million population, 2008

China’s competitive edge

Whilst China’s current strength in innovation metrics may exhibit weaknesses, the impact of the country’s economic re-emergence cannot be downplayed and it is important to introduce a wider perspective on its national capabilities. One useful way to pull together perceptions of a country’s competitive position is to examine comparatively the features which inform its overall standing in global terms. These tend to add a broader context to the more narrow elements of a country’s innovative capability, and additionally take into account aspects such as macroeconomic stability, per capita income bands, and the potential of domestic market size. The World Economic Forum produces regular reports of this kind, and categorizes China as being at the second stage of evolution as an ‘efficiency-driven’ economy, and not yet having achieved the ‘innovation-driven’ character that it reserves for more advanced economies.³¹

Nevertheless, China presents strong scores in a number of key metrics. Using the World Economic Forum’s categorization, it is far ahead of other countries in its class, particularly in terms of basic requirements such as infrastructure and macroeconomic stability, as well as in efficiency enhancers such as education. Indeed, it ranks overall ahead of a number of member states of the European Union, an achievement which should be recognized as an indication of China’s serious potential (see Table 2). Moreover, its standing in terms of innovation factors has improved on both measures of business sophistication and innovation over the previous two years, and it is by far the strongest nation amongst the economies of Brazil, Russia, India, and China (the BRIC economies) in the rankings. However, China has ongoing weaknesses which continue to require remedies with regard to its domestic policy, especially in the context of institutional effectiveness, financial market sophistication, and technological readiness.³²

Table 2.

Competitiveness indicators and rankings from selected economies

Country/ Economy	Overall	Basic requirements	Efficiency enhancers	Technological readiness	Innovation factors
Switzerland	1	3	3	3	3
United States	2	28	1	13	1
Singapore	3	2	2	6	10
Sweden	4	5	7	1	4
United Kingdom	13	26	8	8	14
China	29	36	32	79	29
Czech Republic	31	45	24	30	26
Poland	46	71	31	48	46

Source: World Economic Forum, The Global Competitiveness Report 2009–2010, 14–20. Selected rankings from a list of 133 entries

This summary illustrates that, whilst China has clear potential to achieve its goals, in the current context it may be premature to dismiss the capabilities of established nations in the hierarchy of technological innovation, and overestimations of China’s strength should be avoided.

The globalization of innovation

The landscape of innovation has been changing radically over recent years, with considerable examination given to the way that the R&D process has become globalized. In the context of the Chinese domestic policy of fostering ‘indigenous innovation’, any moves to capture and lock in spillover from this globalizing trend into China’s domestic economic space need to be contrasted with potential detrimental impacts that might be caused by policies that dis-incentivize innovation-led multinationals from further Chinese engagement and trigger protectionist responses in overseas markets.³³ This is especially important in China as multinationals have been shown to have a key role in knowledge and productivity spillover, particularly intra-firm and intra-industry, even despite mixed evidence globally.³⁴ These tensions may be sharpened because of the major role that the state plays in China’s innovation regime which could imply a more overtly nationalistic approach versus an alternative enterprise-led strategy that might give more priority to the market opportunities of any potential Sino-foreign collaborations.

Foreign firm engagement in the transformation of China’s R&D activities has taken place in three stages over the last two decades. First, there was a period when politics drove strategy. During this period, China-based locations for R&D were established by Western multinationals in order to facilitate market entry and good relations with political leaderships at national and local levels, effectively as a sweetener to improve relations, creating what has been described as little more than ‘PR&D’ corporate centres.³⁵ The second stage was more market-led. During this phase, genuine research activity at the level of product development concentrated on creating outputs to satisfy the distinctive nature of Chinese domestic demand. The current third stage has been knowledge-led, with an evolution of R&D initiatives across corporations of different sizes and in various high technology sectors. This has created global centres of excellence, employing both local and expatriate talent working together on international projects, with China as one key part of corporate R&D strategy.³⁶

An illustration of these trends can be readily found in the Chinese capital. Beijing’s Zhongguancun Technology Park (zPark) has over 40 foreign research and development offices, including those of BT, Microsoft, and Nokia-Symbian, each of which anchors China as part of the global flows of ideas using the theory that developing an effective innovation capability is a cumulative process involving ongoing and collaborative learning.³⁷ This also shows that the creation of true innovation is now rarely achieved within national borders alone, and China’s further success in knowledge accumulation may depend on its effectiveness at engaging with such a globalized structure.

Re-evaluating the ‘China threat’ debates

There has been much debate about the threat/opportunity paradigm over China’s re-emergence into the forefront of international affairs over the last 20 years, but mainly characterized in terms of foreign policy, military capability, and economic strength.³⁸ Only relatively recently have strands of thinking emerged about the disruptive influence that an innovation-led China could have on the world’s technological landscape and on the future competitive position of economies from Europe and the United States. One sector that presents a useful point of reference is China’s ICT industry, and especially the development of high value competences within key subsectors such as telecommunications and business software.

China’s high technology sector in global terms

The Chinese ICT industry shares a key characteristic with China’s own innovation system, in that ‘contradictions abound’.³⁹

On the one hand, the country has nurtured great success. In telecommunications, domestic firms Huawei and ZTE are rightly recognized as world-class innovators and pioneers of the latest technologies. Their achievements include global leadership in hardware design for sophisticated communications internals for domestic and military use, alongside the development and use of advanced embedded software solutions that facilitate leading-edge video management and Internet-delivered television across China. Huawei had increased its R&D spending by 27 per cent year-on-year to the end of 2008, at exactly the time when many developed-economy counterparts were scaling back sharply in the light of recession. Moreover, the company was the second most prolific applicant of international patents (after Japan’s Panasonic) using the Patent Cooperation Treaty of the World Intellectual Property Organization (WIPO), illustrating an outward facing growth strategy that adopts the full tactical panoply of a multinational from an advanced economy.⁴⁰ In hardware design and development, China’s Tianhe-1A supercomputer officially became the fastest recorded in the world in November 2010, being just one example of investment in advanced technology production that exploits integrated computer clusters in huge science parks such as those located in the technology-led cities of Wuxi, Suzhou, and Chengdu.⁴¹

In software, from almost complete invisibility at the beginning of the 21st century, great strides are being made by Chinese organizations. Innovating firms such as Neusoft are creating next-stage developments in e-healthcare systems and integrated hospital management processes to coincide with China’s investment in public health services. Tencent, China’s instant messaging leader, not only eclipses rival Microsoft for customers as the country’s largest Internet business by market value, it achieved a recognized global presence as the leading performer in Bloomberg Businessweek’s Best Technology Companies for 2010,⁴² pushing Apple into second place even despite the launch of the iPad.⁴³ Software services such as Alibaba not only facilitate access to China’s small- and medium-sized enterprise market for domestic and overseas firms through online trading and partnering, its AliPay system is helping to build trust in Internet payment systems for Chinese individuals whose culture is still strongly cash-based, and in this the firm may have a profound impact on the trajectory of e-commerce across all provinces. Business software leaders Kingdee, UFIDA, and numerous other IT services firms are now listed on international stock markets and have ambitious plans to challenge US, European, and Indian sector leaders with strategies that use their domestic Chinese experience as launch pads for international expansion across the Asia-Pacific region and beyond into the home markets of Western competitors.⁴⁴

On the other hand, however, realities exist that question whether the ambitions and success of Chinese technology companies have actually combined to create world-leading innovation outputs. First, the advanced integrated circuit chips which power China’s supercomputer processing capabilities are all made in the United States by US domestic firms. Second, whilst innovative leaders such as Huawei do exist, many other examples of major domestic technology companies appear to simply mirror technical solutions and business models of Western majors, and it can be argued that success within the Chinese mainland does not equate to global market dominance. The latest list of the top 250 ICT firms shows China with four entries, dwarfed by the United States with 75 and Japan with 52 of the world’s leading high-technology enterprises.⁴⁵ In these terms, therefore, the indigenous Chinese high-technology sector is still very small even despite its clear potential for future growth, and there is still considerable opportunity available for larger and more successful foreign rivals, whose technological capability far exceeds that of most mainland enterprises, premised on there being available market access to Chinese consumers.

Growing tensions over ‘indigenous innovation’ policies

Debates on China’s technological capability have now entered a new phase as China responds with policies such as ‘indigenous innovation’ to promote domestic development and to foster protective attitudes to public-sector procurement that have been characterized as designed to shut out foreign companies altogether.⁴⁶

These initiatives have now become the subject of much speculation amongst commentators assessing China’s willingness to use its growing economic power to its own distinctive advantage. China now appears to be explicitly linking its innovation policies with its procurement directives.⁴⁷ Legally, China is not a signatory to the WTO’s Government Procurement Agreement, and so it need only adopt regulations that are consistent with its own National Procurement Law. Nevertheless, during the first six months of 2010, concerns about discriminatory policies and debate over state-led pressures on foreign-owned enterprises to transfer key technologies to Chinese domestic partners to exploit procurement preferences reached all levels of international relations. It was the emergence of clearer requirements over the National and Provincial Register of Indigenous Innovation Products that particularly exacerbated fears, as there appeared to be very limited pathways for foreign firms to secure the steps required for accreditation. Formal registration would confer key benefits, not the least of which was that government procurement preferences at all levels of purchasing would be granted to companies owning registered products.⁴⁸ These policies led to considerable pressure on China from 34 overseas trade associations, prompted renewed bilateral talks with the Unites States Trade Representative, and rose up the agenda of group discussions under the EU–China High Level Economic and Trade Dialogue in Beijing. Moreover, concern over the potential impact on Western enterprises led to unusually outspoken criticism of China’s policy from senior politicians in speeches and official statements.⁴⁹

In response, some domestic opinion has fuelled the fires by combining reasoned argument with nationalist rhetoric. For example, one interpretation published in Beijing sees these steps as China’s ‘incontrovertible right to decide the ways of spending taxpayers’ money … on domestically developed products’ and that foreign firms should take greater initiative with their own strategies ‘instead of blaming China’.⁵⁰ An alternative interpretation, however, is that these policies may actually show a country that recognizes not its strengths but its weaknesses in innovation, and is trying to correct imbalances. Given this scenario, perhaps the real question is not about the legality, fairness, or threatening nature of these initiatives, but about their effectiveness in achieving China’s objectives.

China’s future trajectory in innovation policy

The future remains far from clear. One key question is whether China’s policy of indigenous innovation that was designed to foster competitive advantage amongst domestic firms can coincide with global trends towards multi-located R&D strategies, cumulative learning principles, and agile product-development techniques. The danger for China is that its attempts to enforce regulations for knowledge transfer and stimulate domestic innovative activism run the risk that the country’s still relatively immature level of internal knowledge management could collide with international corporate concerns about the safekeeping of their own ideas and strategic debates on how to manage Chinese assertiveness. Thus, a relatively narrow technical matter of registration and procurement within a national innovation strategy becomes conflated with deeper international worries about China’s wider ambitions.

In response to such pressures, China’s position has recently appeared to shift somewhat, as it announced revisions during 2011 as to what constitutes an ‘indigenous’ product in ways that at least took account of some international concerns.⁵¹ This may also show that there is at least some recognition amongst the Chinese elite that an unduly antagonistic attitude may not be the best method to promote the kind of cross-border collaboration that is now the hallmark of R&D at a global level. The evidence shows that China has both strengths and weaknesses in its innovative capability, and that its shortcomings, even despite substantial funding, illustrate a still-emerging power with much work yet to do, rather than one poised for global R&D leadership. In this context, it may have been recognized that the main loser from a too nationalistic innovation policy could be China itself.

Conclusion

This article has explored China’s current capabilities as an engine of innovation and has located arguments over its indigenous innovation policy within the wider discussion of national competence and international comparative indicators. It has introduced a reformulated analysis of the China threat by using evidence of the country’s own competitive position in high technology and knowledge-led innovations. While there are Chinese corporate leaders in some technology subsectors, such as telecommunications, as well as a growing body of impressive mainland scholarship in new science within fields such as geosciences, biotechnology, and space research, structural weaknesses remain which can act as inhibitors to further success, including questionable patent examination policies, limited depth of scientific inventions, and few disruptive high-technology market leading enterprises. The article’s conclusion is that it is the Chinese themselves who may have most to lose from protectionist measures that seek to constrict the flow of ideas and constrain domestic–foreign collaborative R&D from flourishing across China.

Footnotes

Notes

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