1. The 3rd Workshop on Innovation and Performance Management
Business School Kent University, Canterbury UK 1-4 July 2010
Changing Policies for Innovation
Capacity-building in China
Director-general, Prof. Dr. Mu Rongping
Institute of Policy and Management (IPM), CAS
2010-7-1 1

2. Contents
I. Introduction
II. Innovation Capacity & Innovation Development
III. Policies for Innovation Capacity-building
IV. Conclusion Remarks
P2

3. I. Introduction
Understanding Development
economic development
economic & natural development
economic & natural & societal development
human being centered development
---Scientific Outlook for Development
---Harmonious Society
---Innovation-driven nation 2020 P3

4. I. Introduction
Global financial crisis/climate change:
--threats?
--opportunities?
--long term or short term
Measures for recovering from the crisis:
--10 plans for energizing industrial developments
--4 trillion RMB investments in domestic markets
--S&T are expected to make great contribution for
economic recovering from the crisis.
P4

5. I. Introduction
•China has become one of the world’s largest countries in terms of
gross expenditure on R&D (GERD). The ratio of GERD to GDP in
China has increased from 0.90% in 2000 to 1.54% in 2008, but
much lower than that of developed countries such as USA(2.68%),
Japan (3.44%). P5

6. I. Introduction
•The number of Chinese
applications for invention
patent in China increased
dramatically during the
period from 2000 to 2008.
The efficiency of researchers in China in terms of invention patents
is lower than that in most developed countries. In 2007, the number
of Chinese invention patents granted per 103 researchers was 22.4,
much lower than that in Korea (413), in Japan (203), in Germanys
(46); China filed 3.8 PCT patents per 103 researchers, much lower
than that in Germany (62.7), Japan (39.1) P6

7. II. Innovation Capacity & Innovation Development
What is innovation-driven nation?
What is innovative development?
What is innovation capacity?
It is necessary to set up an indicator system with a view to
monitoring the evolution of innovative development and
innovation capacity in China, and to identifying key policy
issues on innovation and so as to provide necessary support
for innovation policy-making.
P7

8. II. Innovation Capacity & Innovation Development
National innovation capacity is the ability of a country to
conduct scientific discovery, technological innovation and
related commercialization activities.
In a broad sense, national innovation capacity is the ability
of a country to integrate innovation resources with a view to
transforming them into fortune. It is the integrative capacity
that promotes economic and social development.
Innovation-driven countries usually has powerful national
innovation capacity, which indicates high efficiency and
effectiveness of innovation activities, and drives social-
economic development with a comprehensive coordination
and sustainable way. P8

9. II. Innovation Capacity & Innovation Development
P9

10. II. Innovation Capacity & Innovation Development
P10

11. II. Innovation Capacity & Innovation Development
Evolution of National Innovation Capacity Index of China (2000-2007)
25
Input, Output, Condition, Performance (25 indicators)
19.59
20
Innovation Capacity Index
16.65
14.63
15
12.44
10.50
10 8.79
8.03
6.96
5
0
2000 2001 2002 2003 2004 2005 2006 2007
Year P11

12. II. Innovation Capacity & Innovation Development
35
Scales/strength (11 indicators)
30 29.06
Efficiency/effectiveness (14 indicators)
25 24.17
20.86
20
Index
17.19
15 14.16
11.57
9.89 10.12
9.13
10 8.60 8.40
7.69
6.84
6.18 6.02
5.32
5
0
2000 2001 2002 2003 2004 2005 2006 2007
Year
innovation strenth innovation effectiveness P12

13. II. Innovation Capacity & Innovation Development
Rank Index Rank Index
1 United States 45.26 1 United States 56.96
2 Japan 29.15 2 Japan 36.75
3 Sweden 20.30 3 Sweden 26.63
4 Germany 18.39 4 Germany 25.20
5 Finland 18.35 5 United Kingdom 24.74
6 United Kingdom 17.65 6 Korea 24.50
7 Israel 17.12 7 France 23.61
8 France 15.71 8 Netherlands 22.04
9 Netherlands 15.58 9 Luxembourg 21.43
10 Luxembourg 14.62 10 Finland 21.06
11 Korea 13.62 11 Norway 21.03
12 Norway 13.55 12 Canada 18.61
13 Iceland 13.43 13 Israel 18.47
14 Canada 13.31 14 Iceland 18.34
15 Australia 12.47 15 Italy 17.73
16 Austria 12.44 16 Austria 17.24
17 Russian Federation 12.40 17 China 16.65
18 New Zealand 12.09 18 Ireland 16.41
19 Italy 12.03 19 Belgium 16.30
20 Belgium 11.32 20 Australia 15.86
21 Ireland 10.78 21 Singapore 15.17
22 Singapore 10.61 22 New Zealand 14.93
23 Spain 9.25 23 Spain 14.70
24 Slovenia 8.73 24 Slovenia 12.29
25 Hungary 7.96 25Russian Federation 11.18
26 Slovak Republic 7.02 26 Portugal 10.32
27 Romania 6.98 27 Greece 10.31
28 China 6.91 28 Hungary 10.10
29 Czech Republic 6.91 29 Czech Republic 9.40
30 Greece 6.55 30 Slovak Republic 9.04
31 Portugal 5.72 31 Poland 8.47
32 Poland 5.41 32 Brazil 7.94
33 south Africa 4.70 33 south Africa 7.62
34 Argentina 4.63 34 Turkey 7.36
35 Brazil 4.17 35 Mexico 6.59
36 Turkey 3.87 36 Romania 6.59
37 Mexico 37 India P13 6.34
38 India
Innovation Capacity Index 2000 3.62
38 Argentina Innovation Capacity Index 2006 5.80
6.96

14. II. Innovation Capacity & Innovation Development
China
Russian Federation 16% Korea
Romania Turkey
Israel 14% India
Finland Brazil
12%
Argentina Mexico
10%
New Zealand 8% Spain
United States 6% Portugal
4%
Japan 2% Norway
Hungary 0% Ireland
-2%
Australia France
Slovak Republic Greece
Sweden Poland
Czech Republic Italy
Iceland Luxembourg
Germany Belgium
Austria Singapore
Canada Netherlands
United Kingdom south Africa
Slovenia
P14
Annual Growth Rate of National Innovation Capacity Index (2000-2006)

15. II. Innovation Capacity & Innovation Development
Rank Index Rank Index
1 Sweden 54.17 1 Sweden 66.81
2 Switzerland 49.96 2 Norway 65.04
3 Japan 49.62 3 Switzerland 63.08
4 Norway 48.03 4 United Kingdom 57.18
5 Finland 47.06 5 Netherlands 56.73
6 United Kingdom 46.93 6 Finland 56.65
7 United States 45.87 7 Japan 54.67
8 Netherlands 44.53 8 Ireland 54.44
9 Germany 42.75 9 France 53.98
10 Austria 42.70 10 Austria 52.48
11 Belgium 42.49 11 Germany 52.20
12 Canada 42.48 12 United States 52.02
13 France 42.45 13 Belgium 52.01
14 Australia 41.74 14 Canada 51.92
15 Ireland 40.65 15 Australia 49.53
16 Italy 37.99 16 Korea 49.26
17 Korea 37.26 17 Italy 47.77
18 Spain 37.14 18 Spain 47.66
19 Greece 32.30 19 Greece 40.45
20 Portugal 31.79 20 Portugal 39.55
21 Argentina 31.28 21 Slovenia 39.02
22 Slovenia 31.23 22 Czech Republic 36.80
23 Czech Republic 29.62 23 Hungary 36.78
24 Hungary 28.01 24 Slovak Republic 33.18
25 Slovak Republic 27.28 25 Poland 32.47
26 Mexico 26.38 26 Argentina 31.63
27 Poland 26.28 27 Brazil 30.74
28 Brazil 24.61 28 Turkey 30.23
29 Russian Federation 23.96 29 Russian Federation 29.68
30 Turkey 22.09 30 Mexico 29.05
31 Romania 19.15 31 Romania 26.23
32 South Africa 15.47 32 China 20.87
33 China 15.36 33 South Africa 17.11
34 India 8.24 34 India 9.88
Innovative Development Index in 2000 Innovative Development Index in 2006
P15
Industrialization，Informatization, Urbanization, Education & Health, S&T development

16. II. Innovation Capacity & Innovation Development
GDP/Capital，CO2 Emission/GDP，
Energy Consumption/GDP
Romania Russian Federation
Argentina 6% Turkey Argentina 50% Romania
Mexico China Japan Slovak Republic
Japan Norway United States Czech Republic
5% 40%
South Africa Ireland Mexico Hungary
4% 30%
United States Korea China Poland
3% 20%
Australia Hungary Brazil Greece
2% 10%
India Spain Austria Ireland
1% 0%
Finland Netherlands Germany South Africa
0% -10%
Slovak Republic France Switzerland Norway
United Kingdom Switzerland Korea Slovenia
Germany Italy Sweden Spain
Canada Greece United Kingdom India
Belgium Slovenia Australia Portugal
Austria Brazil Italy Belgium
Sweden Portugal France Turkey
Poland Czech Republic Finland Netherlands
Russian Federation Canada
Annual Growth Rate of Innovative Annual Growth Rate of Industrialization
Development Index (2000-2006) Development Index (2000-2006) P16

17. III. Policies for Innovation Capacity-building
Chinese government has issued supportive
policies to implement the outline of M&L term plan
for national S&T development in 2006, and 76
detailed regulations and policy documents by the end
of 2009. These policies have effectively promoted the
capacity-building for innovation in China, which has
profound impact on economic and social sustainable
and green development.
P17

18. III. Policies for Innovation Capacity-building
P18

19. III. Policies for Innovation Capacity-building
Four principles for the 12th five year plan (Sept. 2009)
Overall planning and consider all factors
Innovation-driven
Green Growth (sustainable)
Work together and share with each other (harmonious).
Innovation capacity-building covers all fields of social,
economic and science & technology system, focusing on
following:
innovation in strategic emerging industries and service industry
innovation for energy saving & emission decreasing
innovation on urbanization and urban management
P19

20. III. Policies for Innovation Capacity-building
Main Tasks for Innovation Capacity-building
•S&T mega-projs, knowledge & tech. inno programs
•Development of strategic emerging industries
--new energy/bio-tech (medicine/breeding/manufacturing)
--information network/new materials.
--high end manufacturing/electric cars
•Upgrading/restructuring of key industries
--shipbuilding, automobile, steel.
•Innovation in modern service industriies
•National Innovation Cities
--e/s/t/s P20

21. III. Policies for Innovation Capacity-building
(1) To Increase Investment in S&T&I
•To set up a diversified investment system for STI, to increase STI
expenditure dramatically, and to maintain a growth rate faster than
governmental regular revenues.
•To optimize the structure of R&D expenditure and national S&T
programs so as to stimulate enterprises’ investment in innovation.
•To set up a new mechanism for managing public R&D expenditure,
especially a performance evaluation system, to improve the efficiency
and effectiveness of STI, with a focus on expenditure in research
organization, talents, and national S&T programs.
P21

22. III. Policies for Innovation Capacity-building
(2) Tax Incentives
•To share the risk of innovation in enterprises by means of tax
deduction (sharing 12.5% of enterprises’ R&D expenditure).
To deduct tax of imported facilities & instruments, and to speed
up the depreciation of the facilities and instruments so as to
upgrade enterprises’ experimental capacities.
•To provide tax incentives for equipments & instruments &
materials imported by ETDC & ERC & National S&T projects
so as to promote capacity building for innovation in enterprise.
•To support the development of transformed PRIs, venture
capitals, and S&T service institutions by providing tax deduction.
P22

23. III. Policies for Innovation Capacity-building
(3) Government Procurement Policy
•To promote the indigenous innovation by providing various
measures of government procurements, concerning
identification of indigenous innovative product and related
evaluation measures, for instance, to give high priority to
indigenous innovation products in national significant
construction projects.
•to initially and selectively purchase indigenous innovation
products so as to encourage enterprises invest more in
innovation product development and capacity-building.
P23

24. III. Policies for Innovation Capacity-building
(4) Innovation Based on Imported Technology
•To strengthen the management of technology import and
assimilation. Key national projects should build innovation
capacity based on imported advanced technology.
•To make special technology policy with a list technologies to
be encouraged/limited to strengthen the capacity-building for
innovation in enterprises.
•To support cooperation among industries, universities and
research institutes in innovation based on imported advanced
technologies. P24

25. III. Policies for Innovation Capacity-building
(5) To Create and Protect the IPRs.
Chinese government has taken many measures to create and protect
intellectual property rights (IPRs) since 2006.
•To compile a list of key technologies and products for which China
should hold related patents.
•To support enterprise to generate & protect IPRs, to engage in
standard-making procedure at national and international level.
•.To shorten the examination cycle for invention patents, and
improve the system for IPR protection and information service.
•To support enterprises to set indigenous technical standards jointly
with universities and PRIs, to integrate them in R&D, design and
P25
manufacture.

26. III. Policies for Innovation Capacity-building
(6) To Build National Infrastructure/Platform for S&T
•To construct lots of experimental bases, infrastructure and platforms,
including the scientific facilities and large equipments, the platform of
natural resources and scientific data, for NKLs/NEL/NERC.
•To support enterprises, especially transformed research institutes and
large enterprises to establish TDCEs and NELs through cooperation
with universities and research institutes.
•To establish a sharing mechanism to make the platform for STI open
to all users, for instance, to evaluate the openness and effectiveness of
these platforms.
P26

27. III. Policies for Innovation Capacity-building
(7) To Train Qualified HR & Make them Flow to Firm
•To train talents in different level from top scientist to skilled
workers, to encourage talents flow from Universities to enterprises.
•To recruit/bring up world leading scientists/experts in strategic
research fields via national program for hi-level innovation talents.
--China has recruited more than 800 oversea top experts working in China via
“The Recruitment Program of Global Experts”.
•To bring up scientists/engineering technologists and innovation
teams in national S&T programs, and platforms on STI such as
NELs/NERCs.
•to reform income distribution/incentive mechanism in enterprises
by providing some preferential policies, to attract talents. P27

28. III. Policies for Innovation Capacity-building
(8) Financial Measures for Indigenous Innovation
Chinese government has taken a number of financial measures to
support indigenous innovation since 2006:
•To given high priority in financing national megaprojects for S&T,
national projects concerning the industrialization of hi-tech.
•To improve the financial services to SMEs for innovation, to
improve the legal framework by making venture capitals easily
invest in start-ups.
•To establish multiple capital markets to support indigenous
innovation, including a stock market for technology-based SMEs,
stock transactions for hi-tech enterprises and regional transaction
P28
market for property rights.

29. IV. Conclusion Remarks
Innovation is a social process, its success is
determined by diversified stakeholders of
innovation such as scientists, technologists,
engineers, entrepreneurs.
P29

30. IV. Conclusion Remarks
• Innovation is a complex process of value
creation, including: scientific & technological
value, cultural value, economic value and the
social value, concerning the activities ranging
from scientific discovery, technological
invention, methodical innovation, and their
applications as well as social diffusion.
P30

31. IV. Conclusion Remarks
It is expected to explore the potential of social
innovation and to develop and experiment new
theory for innovation development by building a
batch of National Innovation Cities, focusing on
innovation for key industries, strategic emerging
industries, modern service industries and for
social development.
P31

32. IV. Conclusion Remarks
Innovation-friendly environment is the
key for developing the potential of social
innovation, especially the potential of
human creativity.
P32

33. Thank you!
2010-7-1 33