In the 2014 Report on the Work of the Government, Premier Li Keqiang proposed: "As innovation is the motive power of economic restructuring, we should put it at the center of national development, integrate science and technology with economic and social development, and propel China toward the upper end of the global industrial value chain." This is another emphasis on the strategic role of innovation after the innovation-oriented strategy was put forward at the 18th CPC National Congress. With changes in China's development, innovation has become the key to transforming development and optimizing the economic structure.

Take advantage of benefits as a late starter

China is a large developing country capable of learning technologies and making innovations. During its high-speed economic development, China's innovative ability went through the process of learning, accumulating, digesting and independent innovating. At present, China is in a period of active innovation with diversified forms and high quality.

In 2012, China's R&D spending exceeded a trillion yuan ($160.54 billion) for the first time. In 2013, R&D spending accounted for over 2 percent of China's GDP, and over 15 percent of the world. The number of China’s researchers ranks second in the world, the number of patents and papers leads the world, and great scientific and technological achievements were discovered, such as the launch of Shenzhou ten spacecraft and Chang'e-3 moon rover, the new record depth reached by Jiaolong deep-sea submersible, and other major breakthroughs in key technologies, including supercomputers, smart robots and super-hybrid rice.

Companies'creative abilities has improved considerably. In 2012, R&D spending by enterprises took up more than 74 percent of the total. Enterprises have become a major force in R&D and innovations, and a number of companies with strong innovative abilities sprang up, such as Huawei, Lenovo, Alibaba and Tencent. Our manufacturing industry is moving toward the upper end of the value chain, industrial technologies evolved from imitation to independent innovation, and some companies can compete with world-class multinational corporations.

Accomplishments were seen in the following aspects: first, highlights could be seen in the IT industry, where original or revolutionary innovations emerged in information service, e-commerce, online finance and other fields. Second, relying on integrated innovation, mass equipment manufacturing began to enter the middle to high-end global market, and some of them have already become world leaders. Third, innovations in technology or business model rose rapidly in emerging technological fields such as bio technology and new energy, and original innovations were seen.

It can be said that China made good use of its late-starter advantage in its development and performed better than other BRICS countries. All the progress was made in advancing reform and opening up and improving the market economy system. As was pointed out by Premier Li in the report, “Chinese people have the ability and wisdom to build an innovation-based country.” We are full of confidence.

Key to innovation-oriented development

The innovation-oriented development cannot be accomplished overnight, and many difficulties and problems remain unresolved. At present, the science and technology supporting the development of cutting-edge techniques are still in shortage, intellectual rights are undervalued, and the application of technological fruits are inefficient. The overall innovative capability of enterprises is far from strong, as few leading innovative corporations coexist with numerous low-level imitating companies. General assembly shops and integrated enterprises grow fast in competitiveness and innovation, while many supporting enterprises develop slowly because of a lack of key parts and basic technologies. The innovative system across the country grew unevenly, and the innovation gap between regions is growing. Technology, talent, risk capital, innovation-based businesses and activities in middle-high ends of the value chain are gathering in a few developed provinces and cities, leaving districts with intensive traditional industries at a disadvantage in competition for innovative resources.

Many barriers hindering the innovation-oriented development are from the institutional problems, to be resolved by completing the market economy system and building a society ruled by law. The market system needs improving, since the incentive propelling various market players to make innovations is not enough.

For instance, the pricing system for resources and energy does not reflect the true cost, a market of fair competition has not been built yet, the development of a multi-layer capital market remains unfinished, and immediate efforts are needed to protect intellectual rights.

Meanwhile, we shall make good use of the visible hand of government to reduce stress and pave the way for all market players, thus bringing real benefit to innovators. Once these problems are sorted out, the great innovative potential concealed in the market will be unleashed, and the goal of building an innovation-based country will become reality faster.

Promote innovation-driven development by reform and opening up

The key to making the transformation from investment-driven to innovation-driven development is to cultivate a mechanism and policy environment favorable to innovation, therefore inspiring the innovative initiative of the whole society.

First, we shall adhere to reforming the market economy system and building a favorable market environment to encourage corporate innovation. We shall establish a fair market-entry rule to provide equal access to resources and market for companies of all ownerships. We shall accelerate reform of the pricing system for resources to urge enterprises to make innovations. We shall expand reform of administrative review and approval system and get rid of administrative monopoly to make room for innovation and entrepreneurship. We shall reinforce protection of intellectual rights and crack down on illegal activities such as selling fake and inferior products to maintain the innovation enthusiasm of enterprises. We shall speed up development of a multi-layer capital market to expand the financing channels of innovative start-up companies. We shall tighten the standards for environment, safety, energy efficiency and quality to promote survival of the fittest, or to drive innovation by maintaining higher standards.

Second, we shall further reform technological and educational policy systems and establish an open national innovation mechanism with cooperation, vitality and efficiency. We shall increase spending on human resources to build an educational system and a multi-level talent structure favorable to develop a strong manufacturing country and an innovation-based country. We shall specify the orientation of all innovation participants, integrate industries with colleges and research institutes, thus letting the innovation system work efficiently as a whole. To make enterprises the major participant of innovation means that enterprises should play an essential role in innovation decisions, R&D spending, technology integration and industrialization of research results, while research institutes and colleges should play their part in basic research and its application, and development of common technologies. We shall abolish institution and policies restricting the cross-department or cross-region flow of innovation factors such as talent and research institutes, in order to enhance the efficient use of innovation resources. We shall expand pilot programs of regional innovation system reform, promote establishment of world-class innovation systems in pilot projects, and benefit regional innovation system building with reform.

Third, we shall maintain a balance between government function and market function. The major role of government is to build an external environment supporting innovation. As China is at a track-shifting period, government plays an irreplaceable role in institutional reform and system building. The government should increase spending on external fields or fields bringing benefits to society, such as basic research, cutting-edge technology, public charity research, common technology research and R&D in key areas and technologies concerning national security and lifeline of the national economy; the market should play its role of resource allocation for common competitive technologies, with government providing favorable policies.

Fourth, we shall build a policy system following the new trend of open and cooperative global competition. An innovation environment results from the coordination of all systems and all policies, and we should strengthen the collaboration of technological, fiscal and tax, trade, financial, investment, industrial, competition, educational and social policies to produce a joint policy power with common goals and cooperation. To promote the flow and allocation of innovation factors in globalization, we must build innovation policies and environment in accordance with international rules, integrate “bringing in” and “going out” and gather innovation factors across the world to build an innovation-based country.

Innovation is a process of communication, and to realize an innovation-driven development is a systematical and long-term task. Nevertheless, as long as we share the same goal and continue in out efforts, the task will be completed.

Authors: Lu Wei and Ma Mingjie, research fellows, Development Research Center of the State Council

Source: People's Daily, March 2014