Technological Innovation in Chinas Industrial Upgrading Problems and Solutions

1、Technological Innovation in ChinaS IndustrialUpgrading：Problems and SolutionsZhao Changwen，耽略Zhonghong(Industrial Economics Research Department，DRC)Technological innovation is the fundamental driver of industrial upgrading Domestic and intemational experience shows that the history of industrial upg

2、rading is a history of technological progressIt is continuous technological innovation that allows industrial structure to transition from low efficiency to high emciency,from simple to complexChinaS economic development has entered the“new normal”， which means the drivers behind ChinaS dynamic econ

3、omic development are undergoing significant changesWhether ChinaS economic growth model cansuccessfully transform from a factor-driven model to all innovation-driven model willdirectly determine the future of ChinaS industrial and economic developmentIIn recent years，China has made great progress in

4、 industrial pgrading byDy buildingDuflamg upup innovativeinnovatwe strengthAlthough ChinaS overall technology level and innovation capability is far behindthe developed countries，China has made great progress in industrial upgrading by building up innovative strength in recent yearsIn a few sectors，

5、the technology level has achieved or nearly achieved the international advanced level1In the new-generation mobile communication sector,a group of innovative industrial leaders in China，armed with independent intellectual property rights，build an internationally competitive industrial chain and comm

6、unication networksHuawei，ZTE and other companies have become forerunners in respect oftechnological innovation in the communications equipment industryIn 20 1 3，Huawei， with 30，000 patents in hand，40of which are ISO or European patents，became the biggest communications equipment manufacturer in the

7、worldZTE ranked first in global PCT patent applications several timesIn 20 1 4，R&D investment of ZTE accounted for more than 11of its sale revenues and R&D personnel accounted for 375of the total number of employees of ZTEChina now has a voice in thedecision-making process of international standards

8、 regarding mobile communications The innovative core technology of Datang Telecom，TDSCDMA，has been incorporated into the 3G international standard，breaking up foreign companies monopoly over mobile communications technologySince TDLTE，of which Chinatook leadership in the development，was recognized a

9、s 4G intemational standard in 20 1 0，leading international operators，system manufacturers，chip manufacturers and instrument manufactures a11 over the world have launched the TDLTEbased industrial development processBy November 2014，China Mobile alone had over 70 million TDLTE users，and 43 companies

10、in 28 countries had adopted the TD-LTE standard2In the energy industry,China has become a world-class leader in hydropower,ultrasupercdtical power generation and a number of other technologiesUHV AC voltage has become the international standardIt also has become a forerunner in areas such as nuclear

11、 power,wind power,solar power and other new energy technologies and installed capacityChina has the worldS largest hydropower capacityIt generated 1 9of global hydropower in 20 1 0The first made-inChina 600。C ultrasupercritical unit was put into use in 2006Now,China has become the worldS largest pro

12、ducer and user of ultrasupercritical unitsChina is also a leader in the research，development and application of UHV transmission technologyIt is the first country to establish a complete system of UHV transmission technology standards。The UHV AC voltage has become the international standardWith resp

13、ect to power generation using new energy,Chinas third-generation nuclear power technology,ACP 1 000，has met the International Atomic Energy AgencyS safety requirements and the latest design standards regarding advanced nuclear power technologyChina has become globally competitive in nuclear power te

14、chnology which is exposed to the United Kingdom， Turkey and other countriesChinaS installed nuclear power capacity iS expected to account for 11 0 of the global capacity by 20 1 5China ranks first in the world in windturbine production，installed wind power capacity and production of photovolmic cell

15、s and modules3In terms of rail transportationChina has become a world-class industrial leader in respect of highspeed rail technology and has the largest and fastest high-speed rail expansion program in the worldChina iS aiming for the worldhi曲est standard of railway equipment and technologyIts goal

16、 is to master the core technologyIt has greatly built up the innovative strength of Chinese enterprises and driven the development of its railway equipment industry by means of taking advantage of ChinaS huge railway market， regulating technology transfer negotiations and studying technology absorpt

17、ion mechanismsAt the end of 2014，China had over 1 5，000 km-long hi曲一speed railways in operationwith a further 1 2，000 km still under construction。It had the worldS190longest hi曲-speed railways in opermion as well as under constructionCurrently, Chinese enterprises have undertaken railway constructio

18、n projects in more than 50 countries and regionsChinas high-speed rail has become a national name card in its“go 910bal”process4With respect to Internet technology,the innovative strength of Chinese enterprises is growing rapidly and ranks among the top places in terms of market valueChinaS e-commer

19、ce industry is also growing rapidlyIn recent years，China has seen a rapid growth in patent applications submitted by Chinese Internet companiesThe number of their patent applications as well as their innovative strength in areas such as instant messaging and mobile payments has caught up with or eve

20、n exceeded foreign companiesAmong the 20 most valuable Internet companies in the world by market value，there ar e six Chinese companies Alibaba，Tencent，Baidu and Jingdong rank among the top 1 0 companiesAlibaba is the worlds first e-commerce firm to handle US$1 trillion a year in transactionsAt the

21、end of 20 14，Chinese e-commerce transactions(including B2B and online retail) reached RMB 1 3 trillion，representing an increase of 25over 201 3；the number of online shopping users reached 36 1 million，representing a yearon-year increase of20；the online retail sales reached RMB 27898 trillion，up by 4

22、97over 20135In the field of biomedicine,China is a world leader in DNA sequencing technology with an industrial growth model where technological innovation and industrial development spur each other mutuallyBeijing Genomics Institute(BGI)is a top institution specialized in life sciences and technolo

23、gyIt has completed Chinese part of the international Human Genome Project(1呦，the International Human HapMap Project(1 0呦，the Rice Genome Project，the Silkworm Genome Project，the Chicken Genome Project，the antiSARSresearch project，Yan Huang Project and many other worldclass scientific researchprojects

24、 involving high-end technologyWith strong sequencing capability,BGIcontributed to 50of the genome sequencing in the worldCurrently,BGI has built a world-class research team and developed a model where science，technology and industries form a mutually beneficial relationship，contributing to the estab

25、lishment of ChinaS leading role in genome sciencesIIMaj or Problems1Despite increasing awareness of innovation，Chinese enterprises are stillhampered by a lack of innovation capacity191Enterprises play a critical role in industrial upgradingTheir innovative strength is what directly affects the resul

26、ts of industrial upgradingIn recent years，as market competition intensifies and factor costs increases rapidly,more and more enterprises have realized that technological irmovation iS what it takes to win market competitionHowever,most Chinese companies lack innovative strengthpressure and R&D inves

27、tmentTheir innovation capacity still needs to be improvedIn 20 13the total R&D investment of ChinaS industrial companies above statedesignated scale wasI蝴B 83 18 billionThe ratio of their R&D investment to their sales revenue wasO8，significantly lower than that of developed countries(35)In the first

28、 half of 20 14，the investment in technological upgrading of Chinese enterprises accounted for 396of their total industrial investmentwhile the ratio of technological investmentagainst the industrial investment in the developed countries reached 5070in the1 950sDue to limited investmentthe SOcalled i

29、nnovation of most companies iS ”imitative innovation”Their innovation efforts rarely lcad to any achievement mat can truly spur technological progressThere are mainly three reasons behind the lack of innovative strength of Chinese enterprises in general：First，with the late mover advantages，many indu

30、stries in China implement policies to attract foreign firms to bring technology into China in exchange for market access SO as to improve the overall technology in the industries through the introduction of advanced foreign technology and equipmentAlthough this strategy has positive significance in

31、a particular development stage，it is why Chinese companies are hi曲ly dependent on foreign technologyCurrently,80of Chinas chips are importedIn 2014，ChinaS integrated circuit import amounted to US$2156billion，which was near ChinaS oil importSecondly,in the stage of rapid economic growth，even if compa

32、nies do not have strong innovation capacity,they can still rely on low cost，market advantages and other factors to achieve good returnsMeanwhile，in recent years，due to economic slowdown and business difficulties，returns on investment in technological innovation are not guaranteedThirdly,because of p

33、oor protection of intellectual property rights in innovation achievements，GreshamS Law comes into effect(”bad money drives out good”)2The number of patents is increasing rapidly,but the quality of patents still needs to be improvedPatents are an important indicator for measuring technological innova

34、tion and industrial developmentIn 20 1 4，China recorded 928，000 invention patent applicationsincreasing byl25and ranking first in the world for the forth year in a rowIn terms of patent applications filed by companies，the number of invention patent applications received from ChinaS companies above s

35、tatedesignated scale was1922 1 9，000 in 20 1 3，increasing by 242over the previous yearthat is，592 invention patent applications from every l 00 companies，representing an increase of 8。0 applications over the previous yeanHowever,China still lags far behind developed countries in patent qualityIn 20

36、11，the average useful life of patents registered by Chinese applicants was 69 years as compared to thel03 years of foreign patentsMeanwhile，although China is the worldS second largest economy,the number of intemational patents registered by Chinese enterprises is still quite lowIn 20 1 4，Chinese com

37、panies applied for 26，472 European patents in total，accounting for 9of the total number ofpatent applications in Europe，while the applications submitted by US companies accounted for 26 Moreover,ChinaS patent applications are mainly related to digital communications technology,the applications submi

38、tted by Huawei and ZTE alone accounted for 70 of total applicationsIn terms of approved patents，the European Patent Office approved about 64，600 patents in 20 1 4，of which those submitted by Chinese companies only accounted for 2，In 201 4the US patent authority approved over 300，000 patent applicati

39、ons for the first time，of which those submitted by Chinesecompanies only accounted for 2as compared to the 1 8ofJapanese companies3Although China has realized the importance of key and common technologies that drive industrial development，they still are the bottleneck in industrial upgradingKey tech

40、nologies and common technologies that drive industrial development are basic，relevant，systemic and openThey are the most innovative link in the entire technological innovation chain of all industry,and can be widely used in one ormultiple industries and produce deep influenceThus，they play a very cr

41、ucial role inindustrial upgradingChina has recognized the importance of these technologiesHowever,ChinaS weak performance in key and common technologies iS still the bottleneck in its industrial upgradingLow self-sufficiency of key technologies，which leads to high dependence 011 others，and difficult

42、y in improving COlIlmOn technologies， is why ChinaS manufacturing sector”big but not strong”The main causes are as follows：first，the model that uses various projects to support conlmon technologyresearch and development has several problems，including a lack of systematicplanning and repetitive unpla

43、nned investment；secondly,although the ability to adaptto the market of most research institutions that are transformed into enterprises has improved，their ability to provide public services is weakened to some extent；thirdly, as an important aspect of common technology developmentChinese R&D institu

44、tes specialized in standard development，certification and evaluation are not193welldeveloped4Despite the significant progress made by universities and research institutes in terms of knowledge and innovation，China is weak in application and industrialization of innovation resultsIn recent years，the

45、ability of Chinese universities and research institutes to conduct basic research has significantly improved，as evidenced by a number of high level innovations made by themHowever，due to the system，concepts and other reasons，China fails to establish an effective and tightly integrated mechanism that

46、 forms a network among enterprises，research institutes and universities to promote knowledge innovation，technology development and application of R&D resultsOn the one hand，a large number of scientific and technological achievements are shelved and its difficult to translate these achievements into

47、practical productive forces；on the other hand，a large number of enterprises lack the support of advanced technology and the scientific and technological supply does not met their demandThe causes are as follows：First，universities and research institutes are weak in making original innovations and fa

48、il to provide sufficient technology services to industriesSecondly,the poorly designed evaluation system fails to stimulate R&D personnel to translate innovations into productive forcesThirdly,professional institutes fail to provide sufficient technical services and technology transfer servicesto me

49、et the innovation demand of enterprisesFourthly,unclean ownership of innovation results leads to long review and approval processes and uneven distribution ofbenefits5The government-led technological innovation model has played an important role in certain stages of economic development，but this mod

50、el prevents the the market mechanism from fully playing its roleOver the past 30 years，to catch up with developed countries，China has adopted an unbalanced development model in terms of technological innovation and industrial policies which allow Chinese govemment to support leading industries，deter

51、mine theroute for technology development，designate companies to undertake projects andpromote the development of the most competitive enterprisesAlthough this approach is effective in promoting rapid economic growth，it also causes excessive government intervention and prevents the market mechanism f

52、rom fully playing its roleMany companies and research institutes focus on getting government support，and some even put all of their efforts in taking advantage of the system to capitalize upon government support；this model also has led to unfair access to market and competition，either overtly or cov

53、ertly；prices do not reflect marketdemand and resourceenvironmental costs；monopolized industries，financial industry and real estate industry are much more profitable than other sectors of the economy, severely hampering companiesenthusiasm for innovation；it is why,although China ranks second in the w

54、orld in R&D investment，its industries are still at the low end ofthe global value chainIIISuggestions to Policy Makers1Adapt to the requirements of the new normal of economic growth and realize the transition from traditional industrial policies to innovative onesAfter ChinaS economy enters a new no

55、rmalthe effectiveness of traditional industrial policies is greatly reduced as the stage of development changesThe effects of the traditional approach which uses preferential land，taxation，financial andemployment policies to reduce production costs and gain competitive advantage have been significan

56、tly weakenedMeanwhilea&r ChinaS industrial development transitions from a stage of technology imitation to an innovationdriven stage，the government no longer has sufficient information for the development andimplementation of industrial policies(1)Promote the upgrading of the following two factors of production：labor and capitalThe government shall carry out a comprehensive reform of the higher education system under which universities should integrate elite educatio