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UPDATED: February 13, 2012 NO. 4 JANUARY 26, 2012
Innovation Blooms


HOT TOPIC: Participants discuss innovation and economic rebalancing at the annual economic forum of the Guanghua School of Management, Peking University (WEI YAO) 

As China gears up to rebalance its economy in its quest for more sustainable growth, innovation is proving to be a pivotal source of economic dynamism. How should China spur innovation? What problems are impeding the innovation process? Economists, government officials and industry insiders discussed these issues at the annual economic forum of the Guanghua School of Management, Peking University on January 8 in Beijing. Edited excerpts of their views follow:

An urgent task

Li Yining, professor at Guanghua School of Management, Peking University: As China embarks on a more sustainable path of growth, economic rebalancing has taken center stage, and a vital goal of this campaign is to foster innovation and increase value creations in a string of industries.

To promote business innovations, there are several effective measures that the country should take.

First, it should create a fair market environment. The country needs to eliminate discrimination against smaller private firms and allow them to compete on an equal footing with large corporations. This should be able to boost confidence of entrepreneurs and foster creativeness among private businesses.

Second, policymakers should hand out policy incentives, such as favorable tax policies, government purchase and credit support.

Third, the country should improve the intellectual property right (IPR) protection system. China has formulated a set of rules and laws to crack down on IPR infringements, but stiff efforts are still needed to strengthen implementation of those rules and tighten punishments for violations.

Fourth, it should encourage state-owned enterprises to increase investments in experiments and applications of new technologies.

Progress underway

Zhang Xiaoqiang, Vice Chairman of the National Development and Reform Commission: China has been making remarkable progress on the road of innovation, though we still have a long way to go before catching up with advanced economies.

In 2011, China's inputs in research and development (R&D) accounted for 1.83 percent of its GDP, up 0.63 percentage points from 2005. In addition, China has topped the world in terms of its wind power generation capacities and solar battery output. The information technology and bio-tech industries have also been growing at an annual rate of more than 30 percent.

As part of its 12th Five-Year Plan (2011-15), China has pledged to push into strategic emerging sectors including new materials, biotechnology and energy conservation and environmental protection.

The rapidly expanding domestic market is providing growth opportunities for innovation-driven enterprises. For example, the country is even expected to replace the United States as the world's largest personal computer market in 2012 with sales of at least 85 million units.

Nevertheless, there are still a number of acute problems confronting the economy.

First, Chinese firms lack the ability to apply their technological research in real businesses. Every year, China registers tens of thousands of technological patents, but barely 10 percent of them make the cut.

Second, a serious concern lies in a lack of core technologies, such as high-end chips and basic software. The biggest reason is a shortage of research talent. So the country has to rely on imports for some key equipment and this deficiency puts Chinese firms in a weak position in global competitions.

Third, start-up businesses usually face financing difficulties due to fledgling financial markets and insufficient fiscal support from the government.

Indigenous innovation requires international cooperation. As a result, China should encourage domestic companies to acquire overseas advanced technologies or learn research prowess through joint ventures. It is also necessary to encourage foreign companies to set up R&D centers in China to promote the country as a global R&D hotbed.

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