China's innovation campaign: dos and don'ts China has launched a national campaign to enhance
its capability for innovation. But experts advise that does not mean China
always has to be the original inventor.
Updated: 2006-03-19 08:44
China has been exporting a large
amount of commodities to overseas markets. While Chinese people feel proud that
"Made-in-China" is everywhere around the world, it has long been a sore point
when it comes to the label's profitability.
A Chinese DVD player exporter can make only 1 dollar from each machine priced
at 32 dollars, while 20 dollars goes to the foreign patent owners. That's 60
percent of the total value. And according to the Minister of Commerce, Bo Xilai,
China must export 100 million shoes or 800 million shirts in exchange for the
value of one Boeing aircraft.
To change this situation, the Chinese government has made it a top priority
to enhance the country's innovation capability.
"The 11th Five Year plan makes an important step forward. It's a major
change, that is, it seeks to establish a basis of what it calls independent
innovation." renowned U.S. economist and Nobel Prize winner, Joseph Stiglitz,
made the comment at a seminar recently held by the China Center for Economic
Research of Peking University: "in the past, China has been basically borrowing
ideas, trying to close the gap."
"What it recognizes that enormous
amount of the rents that exist in the world associate with knowledge rents, the
returns to the control of knowledge. So if China's income is going to be raised,
it has to create a basis of independent innovation," Stiglitz added.
The Chinese government plans to allocate over 70 billion yuan, or more than 8
and a half billion U.S. dollars, this year for investment in science and
technology. That represents an increase of nearly 20 percent year-on-year.
According to the Minister of Science and Technology, Xu Guanhua, China has to
maintain an investment rate of 40 percent from now on, while the contribution
rate of science and technology to GDP growth is slated to grow from the current
39 percent, up, to hit 60 percent. Otherwise, it is not possible for us to meet
the target of quadrupling the current per capita GDP by the year 2020.
But despite the increasing input, Justin Yifu Lin, Director of the China
Center for Economic Research, insists that China cannot merely pursue original
He said:" There are three types of innovation. One is the original
innovation, which enables you core technologies; another is called integrated
innovation, which refers to incorporating various features into different types
of products; and the third is introducing and absorbing advanced foreign
technologies and inventing new products out of them."
Justin Yifu Lin added that innovation is a production and investment
activity. China needs to consider the cost and risks during the process.
Developed countries have made many innovations, especially original innovations,
because they have abundant capital and strong risk-taking capabilities, where
they hold comparative advantages. But for the Chinese mainland, if it overly
stresses on original innovation, it is very likely that the benefits brought
about may be overshadowed by the cost we pay."
Ho-Mou Wu, a new comer to the China Center for Economic Research, cites the
experience of some Taiwan companies as an example:" The contention for patents
has a bearing on the life or death of a country's industries. Independent
innovation is a very challenging task. Take the Taiwan Semiconductor
Manufacturing Company Ltd as an example. TSMC is a very important conglomerate
in Taiwan. It has invested a huge amount of money in independent original
innovation while the outcome has proved not necessarily as good as it was
intended to be."
He urged to draw up a patent map first and find out where there is room for
self-innovation and whether the country is able to afford such innovation.
However, even if an innovation is worked out, it still can hardly be widely
adopted if others know little about it. In that case, the innovator needs to be
a global citizen, speaking the globally acknowledged language.
Professor Joseph Stiglitz said:" one of the advantages China has of being a
large economy is that you can set your own standard. If they want to come in to
China, they have to pay you. And if you have a global standard, you then have a
bargaining chip in the global debate that says 'Ok, maybe we won't use our
standards. But if you don't accept a lower fee, we'll go to our standard. This
is part of the globalization today and it's only by having independent
innovation, will you be able to enter into this global bargaining game on the
basis of some degree of equality."
The International Organization for Standardization has just rejected adopting
a China-developed wireless encryption standard called WAPI for global use. But
China says it will firmly support the technology and that failure in the
international standard application will not affect its use