China is catching up technologically. For the leap into the top group but it is not enough. By Frank Bickenbach, Holger Görg and Wan-Hsin Liu.
Frank Bickenbach, Holger Görg and Wan-Hsin Liu are scientists at the Institute for the World Economy Kiel
The most recent demonstration of Chinese technology development came particularly large therefore: a passenger aircraft, which introduced the state manufacturer COMAC (Commercial Aircraft Corporation of China) on an air show and that is to the western suppliers Airbus and Boeing strike fear in four or five years. Given the development in recent years, it seems inevitable that the technology development quickly unlock China’s industry and in an increasing number of industries will be a competitor established supplier of technically sophisticated products. But on closer inspection turns out a self-perpetuating this is not catching up.
There is no doubt China has developed impressively fast becoming a country of high technology. Aircraft, high speed trains and smart phones from China – Twenty years ago it was almost unthinkable. Since the turn of the millennium, however, the government has increasingly aligned to the course for innovation and technological modernization. Research and development expenses (R & amp; E) have recently risen considerably stronger than in the leading industrial countries. They amounted in 2013 already to a little over two percent of gross domestic product (GDP) and are thus at the average level of European countries – with an enormous economic power. Companies such as the IT companies Huawei and ZTE are now technologically most innovative world
funding problems for start-ups
However,.: China’s R & amp; D intensity is still significantly lower than those in traditional R & amp; D-intensive countries such as Germany, Japan, USA, Switzerland or South Korea. The number of patent applications in China is high, since 2010 the country is here the world leader. But many argue that the heavily subsidized by the Chinese policy increase in the quantity of inventions (or patents) are often opposed to low quality or depth of the invention.
In addition, financing difficulties. Small and medium enterprises, especially high-tech start-ups come in China even more difficult to raise funds than in industrialized nations. Most state-owned banks prefer large or state-owned enterprises, and in addition to these key players in the financial market there is only one little developed capital markets for investments in risky innovations. Another aspect is the lack of qualified professionals. Although the higher education reform has improved the starting position and the number of college grads forced upwards, but there are still a lot of catching up in terms of quality of education and the skills of the workforce compared to traditional innovation locations. At the same time the technology transfer from universities to companies due to lack of cooperation
The state intervention in the innovation process have side effects too seldom succeed.. It often does not decide the market where the focus or rather the direction of innovations are. State sponsored enterprises bind large amounts of capital and skilled workers, usually work but neither efficient nor innovative. SOEs invest under pressure from the government, although increasingly in R & amp;. E, but they are often less successful in translating research expenditure in innovations and patents
The trend is positive
And finally there is the problem of lack of legal certainty and the continued lack of enforcement of intellectual property protection. This hinders especially cooperation of Chinese companies with highly innovative multinational companies because they have to worry about an unwanted transfer of technology.
Where is China’s economy so in terms of innovation? Considering the patent statistics zoom, China is particularly innovative in recent years when it comes to modern materials and material chemistry, digital communications, as well as the solar and wind energy. The targeted policy promotion (including quite generous financial support) in these industries plays a crucial role here. In addition, the integration of these companies into global value chains helps to learn from the world’s technology leaders, to cooperate with them and to gain access to international markets.
The country is clearly on a positive trend, what innovations and technology terms. To continue this trend, or even accelerate, but it is probably necessary to address the existing institutional problems and align research and development more than before to market needs. Should China succeed, the international market for passenger aircraft, smartphones and other technology-intensive goods is likely to be significantly more competitive.