China's R&D Policy for the 21st Century: Government Direction of Innovation

Abstract:     
Innovation and progress in science and technology (S&T) top China's economic agenda. The central government's guiding policy document for the promotion of innovation is the Medium to Long Term Plan for the Development of S&T (the S&T Plan) issued in January 2006. The S&T Plan articulates the ambitious goal of China becoming an "innovation-oriented" society by the year 2020. The S&T Plan places the government front and center in directing innovation and the course of technological progress in China, while purporting to also recognize that progress in innovation may only be accomplished if enterprises assume a more central role. These two messages appear inherently contradictory and limit the likelihood that China will be fully successful in its drive to promote innovation.

China's approach, unlike that of many Western countries, establishes a central role for the government in steering the quantity, quality and direction of R&D. The S&T Plan sets specific quantitative targets to be met by 2020 including: the investment of 2.5 percent of GDP in R&D; reducing China's dependence on imported technologies to 30 percent; improving the contribution to economic growth made by technological advances to 60 percent; and joining the world's top five countries in terms of number of patents granted for domestic inventions and citations in international science papers. The S&T Plan also sets more qualitative targets such as the promotion of indigenous (Chinese-origin) innovation; the achievement of major scientific breakthroughs in targeted areas; and making enterprises the driving force of the innovation system. This article describes the S&T Plan in detail, as well as policy interventions at the regional and local levels. The article concludes with comments on China's efforts to direct innovation and technological progress.

Keywords: China, innovation, R&D policy, S&T Plan, indigenous innovation, policy interventions, intellectual property

JEL Classification: O3, O31, O32, O33, O34, O38, O39

working papers series