Sharpening nation's strategic competitiveness
By Xu Binglan (China Daily)
Updated: 2004-09-27 10:22

The world's workshop -- that's how observers have viewed China in recent years.

Some Chinese people love it, probably because it gives them the illusion that the country is producing all the material goods for the whole world.

However, many people don't like it. And increasingly more are joining the second group.

It is just natural that people do not want to have standing in the world only for cheap labour. They also want to excel in industries for their brains.

This is reflected in the increasing and frequent use of terms such as "added value" and "competitiveness" by strategists and policy makers.

"High-tech" has been a chic catchword for quite a few years in China and improvements related to high-tech are lauded.

But such highlights do not always indicate how "high-tech" the country has really become.

Researchers say the country's high-tech exports now account for about 30 per cent of the country's total goods sold overseas, up from 10 per cent five years ago.

However, closer reading of a report by the Ministry of Commerce will inform you that the bulk of these high-tech exports were generated by foreign companies operating in China.

So what is the real picture of China's competitiveness and its ability to provide goods and services with added value?

"China is very strong in public use sectors but generally it is still weak in civil technology," said Xie Yibing, chief analyst of IDC (China), an international research agency for technology companies and of markets.

China can send an astronaut into space but Chinese companies do not own key technologies in many lucrative industries such as automobiles and personal computers.

However, in some sectors such as life science, Chinese are quietly catching up.

Ma Songde, vice science and technology minister, said that China sees information technology, new material, life science, advanced manufacturing and energy as the most important sectors for competitiveness.

In information technology, Chinese companies are at an apparent disadvantage.

China already has big-name IT companies such as Lenovo and Founder.

However, apart from a few exceptions such as Huawei, most Chinese IT companies do not possess intellectual property rights for the core technology of their products, Xie said.

Chinese companies are not able to produce the most advanced chips that is the main problem, he said.

"Almost all the major Chinese IT producers rely on their management particularly market skills to survive, not technology," Xie said.

In life science, a few Chinese scientists are world leaders in their specialized fields and their scientific achievements have potential for considerable commercial benefits.

"It is already very difficult (for China) to catch up in IT, but in life science we have a chance and we cannot afford let the chance slip," said Yang Huanming, director of the Beijing Genomics Institute, which participated in the global endeavour of decoding human gene sequence, the Human Genome Project.

Yang is also head of the Huada Gene Research Centre, which is poised to take the lead in China in commercializing scientific achievements.

Zhao Xinli, a member of the think tank of the Ministry of Science and Technology, said although Chinese companies did not have cutting-edge technologies in chip making, they still have big opportunities in the information service industry, which relies heavily on developers' understanding of cultures.

"If a company wants to design a system for selling mooncakes, you need knowledge more than technology," said Zhao, vice director of the Institute of Scientific and Technical Information of China.

"This sounds simple, but things like this constitute a huge market."

In life science, China will benefit from its diversified biological resources, its huge population and its well-preserved biological record of families the charting of "family trees," Zhao said.

In new areas of exploration, Chinese can compete with foreign rivals in nano technology, the most advanced in this sector, Zhao said.

But in energy and advanced manufacturing, the application of high and new technologies has not had much significance attached to it.

By and large, China needs to do a lot to become more competitive in technology, Zhao said.

What is needed is money, a better system for innovation, and improved education, he said.

Money

To support innovation and development of new technologies, more funds are needed and financial sources should be diversified, Zhao said.

Executives of China's auto industry say the first thing needed in the beefing up of technology in their industry is to inject huge amounts of money in R&D.

But for quite a long time, financial resources have been limited. And the situation exists not only in the auto industry.

Up to now, China's total financial input into all research and development (R&D) activities relative to the size of its economy is still below the world's average and far behind industrial nations, although the ratio has been increasing.

In 1995, funds used for R&D were equivalent to 0.6 per cent of China's gross domestic product. In 2000, it was 1 per cent and last year it stood at 1.3 per cent.

The world average has been between 2 to 3 per cent in recent years.

In addition to the government's input into scientific research institutions and universities, companies should also be encouraged to increase their input in R&D, says a World Bank report on prospects of China's knowledge-based economy.

China's corporate R&D input is particularly low, the report said.

It is generally believed that companies' R&D input will naturally grow alongside companies' turnover and profits.

But in big industries such as automotive, companies' expanded R&D input should be based on a sizable market and a big market share.

Zhao cited the example of home appliance giant Hai'er, which now has very strong R&D capabilities. But China's auto corporations are still struggling for market share at the moment.

Ways to gather funds from private individuals are also necessary.

The country has opened its second board stock market, intended to be a financing vehicle and an exit choice for entrepreneurs investing in high and new technology products.

But the country venture capital industry is still far from being fully developed.

System and people

To guarantee successful innovation systems, the country should strengthen its protection of intellectual property rights.

"This is a serious problem in the IT industry," said IDC's Xie.

Zhao said that researchers and developers need to have a better sense on how to benefit from their innovative ideas.

"Lots of researchers and companies still do not know the importance of patents and do not have the sense to protect their innovations," he said.

Zhao said the country also needed intermediaries between researchers and businesses to ensure more efficient interaction between laboratory and market players.

"We need a group of people who can serve as brokers connecting scientists and entrepreneurs. They should understand both the market and technology. And we also need a more sophisticated market for trading technologies," he said.

China produces more engineers every year than the United State does. The country has strong technology faculties in its universities and research institutions.

And multinational companies have set up research centres in China to tap high-end human resources here.

"The talents (China produces) are just great," said Zhang Yaqin, Microsoft's global vice president and former managing director of Microsoft Research Asia.

However, Zhao said the country needs to improve technology knowledge about their businesspeople and their workers.

"Many owners of small and medium-sized enterprises are really weak in technology, they know they need technology, but often they have no idea at all what technology they need," Zhao said.

In addition, the country should realize the urgency to train technical workers, who are seriously needed in powerhouse coastal provinces.

"Please do not underestimate the importance of technical workers. The competitiveness of the industries finally rests in their hands. Their quality is also important for industries' competitiveness."

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