ANALYSIS OF MODERNIZATION STRATEGY AND GOVERNMENT REGULATION OF SCIENTIFIC AND TECHNICAL COMPLEX IN CHINA

 

Международные экономические отношения 

Reshetnikova Marina

PhD student, People’s Friendship University of Russia

ANALYSIS OF MODERNIZATION STRATEGY AND GOVERNMENT REGULATION OF SCIENTIFIC AND TECHNICAL COMPLEX IN CHINA

Retrospective of modernization in different countries shows that successful solving of social and economic problems can be executed with the ability to respond challenges of globalizing world. The most important thing in the modernization concept is the government strategy designed to solve number of problems such as maintaining innovation capacity and building economy of knowledge, ensuring balanced development of industries and the quality of economic growth, creating efficient mechanisms that allow the country adapt to new phenomena of global economy.

Outstanding success of Chinese economic development attracts the world’s attention to its experience in economic modernization. Since 1979 Chinese economy has been growing by 9,7% per year. The WTO entrance in 2001 gave additional growth boost that has reached 10,05% annually.[2, p.16] As a result China’s economy has ranked number 2 in terms of national GDP overtaking Japan in 2011. The IMF predicts that by 2016 China will become the first economy in the world based on GDP purchasing power parity (PPP) [3, p.81].

 The aim of this article was to analyze the experience of government regulatory role in modernization of national economy.

Modernization of scientific and technical complex in China began in the late 80’s and was closely linked to modernization of public sector. The ultimate goal of China’s ongoing reforms was the creation of a modern research base to ensure continued economic growth through the production of goods with high added value for subsequent export.

Implementation of such ambitious program began with the change of research institutions management. First of all it concerned research institutes and laboratories. Part of them was eliminated; remaining ventures either were focused to conduct fundamental research, or transferred to private entities and scientific-industrial complex. As a result the core of the research has shifted to enterprises and institutions of higher education that previously had never been involved in this work.

The next step was the creation of the technology market. Later it has turned into a major platform for transactions between know-how owners and buyers. Along with the creation of special economic zones in coastal regions China has established a network of business incubators and technology parks. First of them opened in 1988 in Beijing. In just five years there were 53 techno parks where there were 9687 registered high-tech companies. Today their number exceeds 53600. [2, p.31]

At the same time Chinese government launched a range of national projects such as “863”, “Torch”, “project 211”. [2, p.23] They all aimed to support and develop research institutions. All these events had beneficial impact on GDP growth -(Table 1)

Table 1. Dynamics of China’s GDP in 1978–2010

Indicator

1978

1980

1990

2000

2005

2010

GDP per capita, USD

276

336

318

852

1728

4371

GDP per capita PPP, USD

298

458

1278

3920

6852

7518

Balance of payments, billion USD

0,2

–1,3

11,1

165,6

818,9

2847,3

Source: Statistical statement on Chinese economy 1978-2010, IMF.

Special attention was driven to the problem of scientific education. From 1990’s government has started a program to broaden admission in high schools and gave financial support for universities. In addition universities began to recruit foreign professors to develop joint training programs with leading world universities. From 1978 to 2009 the number of foreign students who had an internship or full course of study in China reached 1,69 million people.[3, p.25] Modernization of this field has attracted investment from private enterprises. Since 1990 annual growth of business R&D investment in China amounted to 10,6%. In 2010 71,7% of R&D investment and 73,2% of carried research were performed by or with the help of business structures. [2, p.41] Alongside 97,9% of allocated funds were directed to experimental studies. (Fig. 1)

Built by the author

Fig. 1 China’s R&D expenditure by research type (2010)

China’s investment reliance on scientific areas with the most share of technology transfer and high share of FDI turned out to be successful. Due to this policy Chinese companies quickly established production and export facilities of electric appliances, telecommunication equipment and then switched to more sophisticated products. Over past decade China has become the world largest producer of TV sets, computers, mobile phones and other electronic products. From 2009 it has also become the leader in global automotive industry. [1, p.24]

In 2004 for the first time export of high-tech products in China exceeded import.  By 2007 the country’s share in the world export of high-tech products reached 18,1% and based on the data of 2010 the total amount of exported goods counted 376,9 billion US dollars. [1, p.51] High-tech companies located in industrial parks also produced significant profit. In 2009 their net profit counted to 66,1 billion UD dollars, while their export of goods reached 200,7 billion US dollars. [1, p.46]

China can rekindle its great innovative past, though some reforms may be needed first.

Successful modernization of Chinese S&T complex has allowed the country to reach global performance of high-tech goods export as well as significantly raise the level of country’s ongoing research. The share of value added high-tech products in the country’s GDP rose from 3,1% in 2002 to 4,5% in 2010. [1, p.21] However the range of Chinese high-tech products is mainly represented by electronic and telecommunication equipment, computers and office equipment.  Such areas like pharmaceuticals, medical devices and aerospace industry have significantly modest rates.

By some estimates China’s dependence on foreign technology is more than 50%. [2, p.19] In addition in order to ensure sustainable development of high technology, economy requires an appropriate level of fundamental science development. Unfortunately, China has not reached it yet. In 2010 basic research funding was 4,7% while on experimental research the government has spent 82,7% of total S&T spending.  As was mentioned above Chinese business is the principal investor in the scientific development. Unfortunately it still shows insufficient interest in fundamental research. Last year it spent less than 0,1% of all allocated funds.[3, p.37] As a result the pace of own innovation in China is still far behind the pace of economic growth.

The situation is going to change in the nearest future as many of these industries such as biotechnology, pharmaceuticals, IT, new types of energy, aviation, aerospace and laser technology obtained priority status and are enshrined in “National Plan of medium- and long-term development of science and technology for 2006-2020”. This plan also defines quantitative indicators which China intends to achieve by 2020. In particular, R&D expenditures should amount 2,5% of GDP. The contribution of scientific and technological progress in economic development should exceed the level of 60% and the dependence on foreign technology cut up to 30% [1, p.69].

However today it is clear that it will be difficult for China to achieve these goals. R&D expenditure accounted 1,75% of GDP in 2010. It is less than 2% that had been planned before. [3, p.12]

         For an objective assessment of the prospects for Russian-Chinese cooperation in the sphere of high technologies it is necessary to take into account scientific trends in China described in this article. For the last thirty years China has managed not only to upgrade their scientific and technical complex, but has been actively exporting its high-tech products worldwide. Despite all impressive results China has still many problems to solve before it can enter the elite club of scientific powers. New trends in modernization of the country require thorough analysis of the factors that influence the economic growth.

Bibliography

  1. OECD Reviews of Innovation Policies: China. OECD.2010
  2. Huang, C. Organization, Program and Structure: Analysis of Chinese Innovation Policy Framework//R&D Management, 2008. Vol.34. №4
  3. Yuan, W. China’s Government R&D Institutes: Changes and Associated Issues// Science Technology Society, 2010. Vol.10.№1.