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 Lei Jun CEO of Xiaomi, one of China's rare global innovators.
Lei Jun CEO of Xiaomi, one of China's rare global innovators.
Zeng Zhihua

BEIJING China can be proud of its achievements in both business innovation and in creating a technology-driven economy. In recent years Chinese enterprises have taken their place among the heavyweights in the technological sector and, in particular, in the information and communication industry:names such as Lenovo, Huawei, ZTE, Tencent and Xiaomi are recognized global leaders.

There are now even world-class Chinese competitors in the automobile industry such as BYD and Geely, while China is also now among the few countries to produce high-speed rail and aircraft manufacturing technology. The first Chinese-made large passenger aircraft, the C919, was rolled out in Shanghai in early November.

China's investment in Resarch and Development continues to rise, with R&D investment topping 2% of China's GDP in 2013 for the first time, higher than the average level of European Union countries. In 2013, the number of China's patent applications, including residents and non-residents, exceeded 825,000, ranking first in the world. The number of scientific and technical journal articles published by China surpasses those of Germany, Japan and the United Kingdom. As a latecomer, China has indeed made remarkable progress.

Last May, China launched Made in China 2025, a manufacturing strategic plan proposed by Prime Minister Li Keqiang, while its recently published 13th Five-Year Plan, also included "innovation" as one of its core objectives.  

And yet... technical progress, R&D investment and actual output notwithstanding, China remains mainly an imitator in the fields of high-technology. It still faces a substantial challenge with regard to R&D quality, as well as the industrialization and commercialization of scientific progress.

While China is transforming from Made in China to Invented in China, its colossal manufacturing industry — most notably in the various labor-intensive sectors, —faces enormous difficulties in rising in the global value chain. While its patent applications have indeed increased significantly, as of 2014, only 7,921 of its applications are certified by the U.S. Patent and Trademark Office. This doesn't even make up half of those of South Korea or Germany. In addition, many of them are owned by multinationals. At the same time, though Chinese universities churn out plenty of patents, their utilization rate comes in at a mere 5%, with the majority irrelevant for commercial application.

In 2013, China's investment on basic research is still below most OECD economies, while its R&D spending is mainly used in technology-based infrastructure such as research buildings and equipment.

Protecting intellectual property

All these factors affect China's real performance spurred by rapidly increasing science and technology investments. As World Bank data of 2012 showed, there remains a sizable gap between China and the leaders of the global knowledge economies, such as Germany and the United States, whether in terms of the corporate technology absorption capacity, the rule of law, regulatory quality, private investment in R&D, or the quality of management schools.

The recent World Economic Forum's report of 2015-16 also pointed out China's weak points. For instance, in higher education and training, China ranks 68th out of 140 countries, while in technological readiness it ranks 74th. Although China has the world's largest science and technology talent pool, its overall proportion of college students and doctoral students, especially in the science and engineering category, is relatively low.

If China wishes to promote itself in the global value chain and become a real global innovation powerhouse it needs to further improve its innovation ecosystem. This requires the strengthening of intellectual property rights protection, providing a more just competition environment, enhancing the efficiency and quality of R&D, and promoting organizational and managerial innovation.

We must remember that China achieved industrialization in a remarkably short amount of time. Building on its economic success, the country is indeed playing a leading role in certain high-tech industries. However to accelerate the process of transforming itself into a true innovation superpower, China needs further structural reform and more policies that are fundamentally driven by the free market.

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As global rivalries and over-fishing impact the seas around South America, countries there must find a common strategy to protect their maritime backyards.

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