STI Performance of China

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D9: Final Report
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Science, Technology and Innovation (STI)
Performance of China

D9: Final Report

July 2014
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Executive Summary
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Executive Summary
This report is Deliverable 9: Final Report of the Science, Technology and Innovation (STI) Performance
of China study (N° RTD-2011-C6-China).
The study’s objective is to assess the evolution of China’s STI Performance and analyse its economic
impact on Chinese productivity and competitiveness and on the global markets, taking into account
the differences between various Science and Technology fields, economic sectors and types of actors
involved.

The major role assumed by China in STI fields brings new challenges and opportunities for Europe:
 Challenges, because China has entered higher value added segments of global
production and linked with economies of scale can compete with European
production;
 Opportunities, because the new technology generated by the increasing and
sustained R&D investments can provide a wealth of opportunities to expand the
boundaries of global knowledge, feeding and accelerating the process of innovation.



In that context, the study had the following goals:
 Identifying, assessing and updating the data and indicators relevant to STI in China;
 Mapping China’s research and innovation capabilities in selected technologies as well
as their translation in the development of its industry;
 Providing a description and an assessment of China's efforts and policies to develop
its STI capabilities, including its international strategy;
 Characterizing the framework conditions for innovation, providing in particular an
overview of China's innovation system;
 Pinpointing opportunities and challenges brought about by the STI development of
China.



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The study was implemented by the consortium of Sociedade Portuguesa de Inovação (SPI), The United
Nations University - Maastricht Economic and Social Research and Training Centre on Innovation and
Technology (UNU-MERIT), and the Austrian Institute of Technology (AIT). It ran from December 2012
to August 2014. In order to achieve the goals, the key methods utilized in the study include
bibliometric research, desk research, interviews, survey questionnaires, workshops, and analysis of
existing data and literature.
The study aims to help inform and develop STI strategies for the European Union (EU) considering the
emerging role of China as a competitor and partner of the EU.
This report provides the results of the activities conducted in the project Work packages (WP)s. These
results have been summarised separately for WP1: Identifying, assessing and updating data and
indicators relevant to Science, Technology and Innovation in China and WP2: Mapping of China’s
research and innovation capabilities in selected technologies. Following this, the results of WP3:
Assessing China's policies in terms of development of its domestic STI capabilities and its international
strategy and WP4: An overview of framework conditions and the development and growth of
innovative firms have been summarised together since their methodologies overlapped. Finally, a
summary of the analysis developed under WP5: Draw conclusions for the EU as regard the challenges
and opportunities provided by the development of China the short and medium term (5 years) is
provided.
WP1: Identifying, assessing and updating data and indicators relevant to Science, Technology
and Innovation in China

The objective of WP1 was to identify those indicators which are most relevant to measuring the overall
progress of STI development in China and which are coherent with the Innovation Union Scoreboard
and the Innovation Union Competitiveness Report.
For the indicators which measure the extent to which innovation is ‘enabled’, most values for China
were found to be below the EU
1
value, and also below the national value for example selected EU
countries (Germany – innovation leader; the UK – innovation follower; Italy and Spain – moderate
innovators; and Poland, Romania and Turkey – modest innovators). For instance, the share of

1 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
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population aged 30-34 having completed tertiary education was 15.2% for China in 2011. For the EU
the latest value (2012) was much higher at 35.8%, but compared with Turkey (18%) and Italy (21%)
the difference was smaller. In absolute terms, with 74 million people the number of Human Resources
in Science & Technology (HRST) in China in 2011 was quite close to the 98 million in the EU
2
. However,
the number of new S&T graduates with Science & Engineering (S&E) orientation in 2011 was 875,000
in the EU which was far below the 1.4 million in China. For China this number has increased by more
than 100,000 to 1.5 million in 2012. Therefore, the especially strong S&E orientation of China’s human
resources remains. For a long time human capital, as an innovation input, has been seen as the main
driver of S&T development. However, it can be concluded that compared to such indicators which are
labelled ‘enablers’ in the Innovation Union Scoreboard, the increasing Chinese performance in terms
of indicators for firm innovation activities, was even more impressive.
Business R&D expenditure as a share of GDP for China was 1.4% in 2012, above the EU share of 1.3%,
and much above that of for instance Spain (0.68%) and Italy (0.69%), but below that of Germany
(1.95%). The trend in public sector R&D expenditure (as a share of GDP) in China has not changed that
much over the last 5 years. Besides the high R&D intensity of the business sector, the non-R&D
innovation expenditures of Chinese firms were even more clearly higher - 1.19% in 2010 compared to
0.56% in the EU, and above the level of any of the selected countries, such as Germany and the
catching-up country Poland. Although there is a difference in the definition used for SMEs, the share
of SMEs innovating in-house was 17.5% for China in 2010, higher than the 11.3% for Poland and 10.8%
for Romania, but lower than the EU average of 31.8%.
The innovation output indicator concerning SMEs introducing product or process innovations
indicates that Chinese SMEs seemed to perform better than for instance those of the UK or Spain.
Chinese SMEs (the so-called small above scale enterprises) appear to be an important new driver for
the increased R&D expenditures. In 2011 their R&D expenditures were equal to 11,913 million Euro.
According to the latest update for 2012 this has increased to 14,905 million. Concerning the
contribution of medium- and high-tech product exports to the trade balance there has been a steady

2 Number of individuals having either successfully completed an education at the third level in an S & T field of study or is employed in an
occupation where such an education is normally required. HRST are measured mainly using the concepts and definitions laid down in the
Canberra Manual, OECD, Paris, 1995.
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increase from 2006 to 2011. However, the economic output in terms of licence and patent revenues
from abroad has remained very limited.
Using Elsevier’s Scopus database, an analysis of the evolution of China’s research capacity in key
scientific disciplines for the years 2000, 2005, 2010 and 2011 was conducted. The analysis of the
scientific fields consisted of two layers. Firstly, the general developing trends of 12 fields are
presented, with the analysis focusing on the number and growth rate of publications in the selected
years. The criterion in selecting key scientific fields was a combination of three areas: strong, fast
growing and matching of grand challenges. Secondly, a deeper analysis is provided on collaborative
research between China and the EU
3
in six selected fields - Chemistry; Computer science;
Environmental science; Medicine; Pharmacology, toxicology and pharmaceutics; Physics and
astronomy.
The analysis of general trends in the 12 fields indicates that the strength of research output in China
appears to have a specialisation pattern which was found to be different from that of global research
output. In China, the strongest fields were identified as Engineering, Physics and Astronomy, Material
science, and Chemistry.
The pattern of the fastest growing fields in China was also found to be dissimilar to the global trend.
The emerging fields of Immunology and microbiology have been booming in China. Existing strong
fields such as engineering have shown high growth rates.
This data shows that China has a competitive advantage in natural sciences, such as Engineering,
Computer science, and Materials science. On the contrary, research in social sciences, for instance
Psychology and Arts and Humanities, has not progressed to the same extent.
The level of collaboration with the EU in terms of the total number of collaborative research papers
was found to be similar to that with the U.S. in the studied fields. However, the share of China-EU
collaborations that are published in high impact journals was lower than that with the U.S.
Nevertheless, the ratio of China-EU collaborations to China-U.S. collaborations in high impact journals
increased in almost all the studied fields from 2005 to 2011, indicating that high-quality collaborations
with the EU are increasing at a faster rate.

3 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
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WP2: Mapping of China’s research and innovation capabilities in selected technologies

WP2 provides a comprehensive overview of China’s research and innovation capabilities across
industrial sectors and in selected cross-cutting technologies. The empirical analysis provides novel
insights into the development of China’s research and innovation capabilities, both concerning their
general development as well as their strengths and weaknesses across selected economic sectors and
technologies.
The empirical analysis focused on two indicators: the development of industry R&D expenditures,
widely recognized as one of the main drivers of generating new products and/ or new processes that
induce added value and foster productivity growth; and patent applications. Despite several
limitations, patents are the most direct indicator for the creation of new technological knowledge that
is likely to be commercialized.
The sectors under consideration were defined at the NACE-two-digit level, including nine
manufacturing sectors. In addition to the sectoral approach, three major cross-cutting technologies,
Biotechnology, Environmental Technologies and Nanotechnology, have been analysed. These
technologies do not follow the traditional industry classification, but are nevertheless of special
importance, in particular in light of the EU policy towards grand challenges.
The results of the empirical analysis clearly underpin the improving performance and capabilities of
research and innovation in China over the past 20 years. Though the analysis revealed significant
sectoral and technological differences in China´s STI development, the overall growth with respect to
patent applications and private R&D investment was striking. Most notably, the overall growth of the
indicators under consideration has not been hampered by the global economic crisis.
The rise of China’s scientific and technological capabilities can also be observed in the global
distribution of industrial R&D expenditures which have changed considerably during the time period
2000-2009. China has increased its total R&D expenditures significantly, both in absolute terms as well
as in terms of its global share in total R&D expenditures. China’s global share more than doubled
between 2002 and 2009, from 5.0% to 12.1%. During the financial crisis of 2008/09, a period
characterized by decreasing R&D expenditures in some countries, China’s total R&D expenditures
continued to grow. These results convincingly illustrate the increasing importance of R&D
expenditures as a driving force for generating innovation in China. They point, on the one hand, to a
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deep shift in the structure of the Chinese economy with a rising share of knowledge intensive
industries, in particular in telecommunications and electronics. On the other hand, they reflect
considerable efforts by the Chinese government to accelerate the transformation of the Chinese
economy to a more productivity-driven, knowledge based economy.
Taking a sectoral perspective, the overall impression does hold, although some differences across the
sectors and technologies under consideration were observed. Results of the sectoral analysis indicate
that between 2000 and 2010 the growth of Chinese industrial R&D investment was mainly driven by
the ‘Electrical Equipment’ and ‘Other Transport Equipment’ sectors, followed by ‘Machinery and
Equipment’ and ‘Chemical Products’. R&D expenditures of Chinese firms in ‘Electrical Equipment’ and
‘Other Transport Equipment’ reached 70% of the corresponding expenditures of EU27 firms in 2010.
However, while the growth in R&D investment in the sector ‘Other Transport Equipment’ in the EU
4

was, like the US, driven by high growth rates in ‘Aeronautics’, the driving force behind the growth of
Chinese R&D expenditures in ‘Other Transport Equipment’ was huge R&D investment in ‘Ships and
Boats’.
The gap between China and the EU in R&D expenditures was found to be considerably larger in other
sectors. For ‘Machinery and Equipment’ and ‘Chemical Products’, R&D expenditures of Chinese firms
were around 40% of that of European firms, and for ‘Motor Vehicles’ and ‘Fabricated Metal Products’
this was around 25%. The gap was largest in ‘Pharmaceuticals’ where R&D expenditures of Chinese
firms accounted for around 12% of the R&D expenditures of European firms.
With regard to trends in China’s patent output, overall results match quite well those observed for
industrial R&D investment. Chinese patenting activity before the year 2000 was very low. However,
after the turn of the millennium the number of patents has been increasing steadily, reaching around
17,000 patents in 2011 (which was almost 40% of the patenting activity for the US). Taking into
consideration the share in global patenting, the share of the EU and the US has been gradually
decreasing – nearly in parallel – from around 43% in the year 1990 to about 25% in the year 2011. In
contrast, China´s share in global patenting started to increase markedly after the year 2000. This
increase has been rather significant, starting from nearly zero and almost reaching a 10% share in
global patenting in 2011, with an average annual growth of 1%.

4 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
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The sectoral results for patents did not differ much from sectoral results in private R&D investment.
China´s patent growth between 1990 and 2011 seems to stem mainly from increased patenting in the
field of ‘Computers, Electronics and Optical Products’ as well as ‘Electrical Equipment’, leading to a
world share in global PCT patenting of about 12% in 2011. The high patenting activity in these sectors
can be mainly explained by the high number of patents related to ‘Information and Communication
Technologies’. China hosts two of the largest global players in telecommunications, the multinational
enterprises ZTE and Huawei, which accounted for more than 30% of patents in these sectors and which
also belong to the top patenting actors worldwide. Average patenting intensity, with about a 5% to
7% share in PCT global patenting, was found for the remaining sectors including ‘Chemical Products’,
‘Pharmaceuticals’, ‘Fabricated Metal Products’, ‘Machinery and Equipment’, ‘Motor Vehicles’ and
‘Other Transport’. A lower global share was identified for the three cross-cutting technologies,
showing a share in global patenting of about 5% and lower. In ‘Biotechnology’ and ‘Environmental
Technologies’, the share was about 5%, while ‘Nanotechnology’ showed the lowest value with about
a 3% world share.
To conclude, China has considerably increased its research and innovation capability as reflected by
the significant increase of its share in global patenting and global R&D investment over the past
decade. China’s growth, however, was uneven and characterized by considerable differences across
selected manufacturing sectors and cross-cutting technologies. Differences between China and the EU
in terms of industrial R&D were largest in ‘Pharmaceuticals’ and smallest in ‘Electrical Equipment’.
WP3: Assessing China's policies in terms of development of its domestic STI capabilities and its
international strategy & WP4: An overview of framework conditions and the development and
growth of innovative firms

The objective of WP3 was to analyse and identify the main trends in policy-making and in the funding
system for STI development in China, and to study China's international strategy concerning STI,
particularly with regard to the EU. The objective of WP4 was to provide an overview of the Chinese
innovation system and of the consequences for innovative operators in China.

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The data collection in WP3 and WP4 was provided through various methods including:
 Survey: Online questionnaires, in English and Chinese, were provided to Europe-based and
China-based stakeholders. There were four specific questionnaires - for Chinese Research/
Industry Stakeholders and European Research/ Industry Stakeholders. A total of 212
responses were received.
 Fact Finding Mission to China: Implemented from 20th October to 12th November 2013 in
Guangzhou, Shenzhen, Shanghai and Beijing. The mission included 30 meetings with
stakeholders, including European and National Chambers of Commerce, Embassies and
Consulates of EU Member States, Private Organizations, and Research and Development
Centres.
 Additional interviews: Implemented with 71 key STI policy stakeholders and industrial
stakeholders in China, identified and interviewed with the support of Tsinghua University and
Renmin University.
The partnership between the EU and China has deepened over the years incorporating a greater
number of topics. The current basis for cooperation is summed up in the EU-China 2020 Strategic
Agenda for Cooperation signed in November 2013. Key areas for STI cooperation include: food,
agriculture and biotechnology, sustainable urbanisation, aviation, water, and ICT, among others.
EU-China Cooperation is being implemented via increasing access to each other’s funding programmes
as well as by providing funding for personnel involved in joint projects in these strategic areas from
each side via specific programmes such as the China-EU Science and Technology Cooperation Special
Program funding Chinese researchers in joint projects or the EU-China Research and Innovation
Partnership (ECRIP) funding mobility of EU Researchers to China.
China´s approach to international STI collaboration takes on many forms - from joint academic
research to technology transfer and licensing, Foreign Direct Investment (FDI), mergers and
acquisitions – which enable it to be connected to various sources of expertise. Joint Ventures were
found to be one of the main forms for Chinese companies (SOEs in particular) to promote international
research/innovation cooperation and to access foreign technology, funding, management and
marketing expertise. Joint research centres, programmes and research networks were also found to
be popular forms of academic collaboration.
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The main guiding policy for Science, Technology and Innovation is the Medium and Long Term S&T
Development Plan 2006-2020, whose goals are further detailed in five year plans, such as the current
Twelfth Five -Year-Plan for Science and Technology Development. These policies show an increasing
focus on STI as a means to address societal challenges as well as a focus on building up indigenous
innovation by improving university-industry links, attracting overseas talent, enhancing intellectual
property rights protection, and strengthening international cooperation.
There are also policies specifically addressing issues with certain regions, such as the Revitalization
Plan for Higher Education Institutes in Mid- and Western China (2012-2020), which aims to tackle
disparities between the more developed coastal and the less developed Central /Western regions. On
the other hand, more developed regions are being used to test new policies. For example, the
Framework for Development and Reform Planning for the Pearl River Delta Region (2008-2020) aims
to upgrade existing low-end manufacturing and stimulating modern service industries testing a more
open innovation system based on innovation platforms.
The main issues that are currently being addressed by STI policy in China include weak research–
industry linkages; increasing enforcement of intellectual property rights laws; insufficiencies in the
evaluation of government R&D expenditures at certain levels; progress in expanding basic research;
and improving coordination of government agencies responsible for STI.
The major funding agencies are the Ministry of Science and Technology (MoST), the National Natural
Science Foundation of China (NSFC), and the China Scholarship Council (CSC) affiliated to the Ministry
of Education (MoE). The Chinese Academy of Sciences (CAS) also has programmes to support the
researchers at its institutions in R&D activities including international collaboration. In addition, there
are also several regional agencies providing funds to support science and technology. Examples of
major agencies include Beijing Municipal Commission of Science and Technology (BMCST), the Science
and Technology Commission of Shanghai Municipality (STCSM) and Guangdong Provincial Department
of Science & Technology (GPDST). Each of these agencies has programmes dedicated to international
cooperation. In spite of increasing support for international R&D cooperation, several challenges
remain for participation of EU researchers in certain programmes, according to evidence gathered in
this study, including: difficulty in accessing information on funding opportunities; procedural issues
for application; lower funding for projects under Chinese funding programmes compared to that for
EU projects; and lack of transparency in selection procedures.
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Regarding support to innovation in companies, it is important to highlight the Innovation Fund for
Small Technology-based Firms – InnoFund, and the availability of tax incentives for high-tech and new-
tech enterprises located in specific areas such as Science parks. Beyond this, banks are increasingly
lending to SMEs, but financing of innovation activities and new ventures by banks is only in its early
stages. The government has begun to see venture capital (VC) as essential to encouraging indigenous
innovation and is a major contributor as well as recently implementing several reforms that facilitate
exit strategies. However, evidence gathered in this study indicates that risks are believed to be high
for investors and there is still a lack of capital to support entrepreneurs, particularly for early-stage
investment. Angel investment is growing but still scarce in China.
Industrial policy documents supporting STI, include the Development Plan of National Strategic
Emerging Industries (2011-2015) to foster knowledge intensive industries such as Information
Communication Technologies (ICT) and biotechnology and five year plans for specific industrial sectors
such as those for environmental protection, waste recycling technology, solar power development or
for the bio-industries. There is also a National Plan for Building Indigenous Innovation Capabilities
(2011-2015), which contains a number of measures to reduce the country’s dependence on foreign
technology, aiming at promoting Chinese-owned technology and intellectual property. This has been
viewed by foreign firms as a means to limit their business opportunities in China’s economy.
In order to implement the indigenous innovation policy, Chinese governmental organizations at the
central and local level have issued an indigenous innovation catalogue and procurement policies to
give preference to certified indigenous innovation products. They have also introduced incentives
such as financing and tax relief schemes to encourage the development and use of indigenous
innovation products by Chinese companies.
According to information gathered in this study, Chinese government policies related to public
procurement present several challenges to foreign companies, including difficulties with accessing
information particularly due to the decentralization of this process as well as a lack of transparency.
Outsourcing to universities/ CAS institutes was identified as one of the most common means for
Chinese companies dealing with STI. Also, companies often import technology. Involvement of EU
organizations in the provision of solutions for Chinese industry may provide opportunities for mutual
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benefit, however, a number of those interviewed in this study considered it essential to have the
support of intermediary agencies in this process.
Human resources policies supporting STI include the Medium and Long-term Talent Development Plan
(2010-2020) and the Medium- and Long-term Educational Reform and Development (2010-2020).
Both policies aim to encourage greater innovation and entrepreneurship whether among students or
by attracting overseas talent. Educational reforms include promoting more intense cooperation
between companies and the vocational education sector, and measures to address skills shortages in
certain areas including demand forecasting.
A number of funding programmes are addressing STI human resources development including those
administered by MoST, NSFC, and CSC. CAS also possesses a number of programmes funding the
development of human resources at its institutes. The Yangtze River Scholar Award Scheme of the
Ministry of Education has been newly updated to support the implementation of the above mentioned
human resources policies to develop STI human resources.
The quality of higher education has been reported to have improved immensely. However, there has
been an uneven geographic distribution of talent across the country. ‘Returnees’, that is Chinese
researchers returning to China from abroad, are seen as an important source of knowledge and a
number of programmes have been introduced to attract them.
Policies to improve research and technology infrastructure include the National Medium and Long-
term Plan for Building Key S&T Infrastructure (2012 - 2030), the 12th Five-year Plan for National High-
tech Parks & the 12th Five-year Plan for National High-tech Business incubators (2011-2015). New
major infrastructures are planned in seven strategic areas: energy, life science, earth system and
environment, materials, particle physics and nuclear physics, space and astronomy, and engineering
technology, which will be open to outside users. China has also planned to accelerate the development
of high-tech parks, clusters and incubators increasing their innovation support capacity and prioritising
strategic emerging industries as well as the service sector. Recently the western part of China has also
become a popular place for SME clusters, with the government highlighting development in the
region.
The “open door” policy in China has enabled easier access to foreign capital and technologies and
spurred its knowledge-intensive activities. China is now an important research, development and
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innovation (R&DI) partner with many countries and organizations around the world. This has led to
the large majority of European Member State governments as well as many institutes in Europe to
establish concrete science and technology cooperation activities with China such as joint R&D
programmes, joint R&D centres or joint PhD programmes.
Regarding the development of firms, whilst there are some tax incentives for R&D intensive companies
located in high-tech zones, foreign companies, and in particular SMEs, face certain challenges
including: access to finance; restrictions on representative offices; access to information about
regulations; and difficulties in maintaining human resources. Additionally, compulsory technology
transfer may be required for those entering Joint Ventures.
China has made substantial progress in recent years with respect to Intellectual Property Rights (IPR)
protection, establishing anti-piracy and anti-counterfeiting laws and regulations as well as conducting
a “Special Campaign” to improve enforcement. The third revision of patent law came into force in
2011 and efforts have been made to improve skills in the intellectual property professions. Yearly
plans developed by the State Intellectual Property Office (SIPO) set out the priorities for each year in
this area. SIPO is keen to cooperate with other countries for the development of IPR in China. Dialogue
between the EU and China on IP issues has taken place since 2003. A new joint project has just begun
including: EU-China Customs cooperation on IPR; and exchanges on legal and administrative IP issues
- best practices, assistance in drafting IP law revisions and implementing regulations as well as the
compilation and publication of databases on IPR issues. The interviewees questioned in this study
confirmed the government efforts in this area and considered that these measures have brought
positive achievements recognized by the international community. Whilst challenges for foreign
companies still exist (particularly including access to information), it was generally felt that the
situation was improving and at the same time foreign companies were developing strategies for
dealing with this situation.
Standardization is another area that has seen rapid development in China in recent years. Chinese
standard development is based on a top down approach. The strategy appears to be to use
standardization as a way to promote indigenous innovation, while also participating in international
standards setting, aiming to promote Chinese standards in this context. This study has found evidence
that this creation of national standards to compete with international ones, can be viewed as a barrier
to market access, forcing foreign firms to adopt Chinese technologies so that they can do business in
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China. It is also thought to inhibit transfer of technology to China. However, since China faces
difficulties in competing against developed countries whose standards require acquisition of
expensive IPR, the development of its own standards represents a strategy to overcome these
difficulties and compete alongside developed countries by reducing exposure to royalties.
International cooperation in this area is active. Increasing EU-China collaboration is evidenced by the
establishment of the Europe-China Standardization Information Platform (CESIP).
WP5: Draw conclusions for the EU as regard the challenges and opportunities provided by the
development of China the short and medium term (5 years)

The objective of WP5 was to draw conclusions on challenges and opportunities brought about by the
development of China and provide the information to guide the decision making process in the context
of an EU (and its Member States) /China STI strategy. These mainly concerned:
• Thematic areas of common interest;
• Challenges and opportunities for EU higher education and research establishments;
• Challenges and opportunities for industrial stakeholders;
• Recommendations for improving the EU’s understanding on China’s STI.
Thematic areas of common interest
Following the EU-China 2020 Strategic Agenda for Cooperation topics for STI, this study analysed:
Food, agriculture, biotechnologies (FAB); sustainable urbanisation; aviation and aeronautics; and ICT.
For FAB, important factors stimulating and identifying opportunities for collaboration include: the EU-
China flagship initiative for research and innovation in FAB, the Chinese Agricultural Science and
Technology Innovation Programme (ASTIP) and an increasing focus on the Green Economy. Challenges
concern: mechanisms for co-funding; information access on joint opportunities; market entry barriers
for bio-based products; and IPR concerns (given the EU’s leading position in this area).
It is recommended to explore the use of the SME Instrument (e.g. phase 3) to help encourage
European SMEs to enter the Chinese market; to continue support for structures that can raise
awareness of funding opportunities; to foster dialogue between the EU-China Flagship initiative for
research and innovation in FAB and (e.g.) China-EU Water Platform to encourage mutual learning and
exchange; and for EU policy makers to continue to advocate the removal of bio-based product market
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entry barriers e.g. green public procurement, and legislation that promotes market growth, addressing
standards or labelling claims.
In the area of sustainable urbanisation, the EU China Partnership on Urbanisation as well as
collaborative activities in sustainable energies are fostering collaboration opportunities. Challenges
were identified regarding the need for reciprocal knowledge on urbanization processes; the
requirement for compatible standards in urban transport; and the necessity to develop interactions
with a range of local and regional authorities. It is thus recommended to foster dialogue between the
different collaborative activities related to this area (e.g. Smart Cities, EU-China collaboration in the
area of sustainable energy); build networks of relevant actors and mechanisms of dialogue between
sectors; and continue work towards the removal of market entry barriers e.g. in public procurement
and legislation promoting energy efficiency.
For aviation and aeronautics, the EU-China Civil Aviation Project (EUCCAP) has promoted
opportunities for collaboration and China’s aviation industry growth is creating demand for
innovation, which in turn is likely to create opportunities for STI activities with and in China. However,
the EU CCC Position Paper 2013/2014 identified market barriers including restrictions in the area of
licensing that negatively affect the involvement of foreign companies in this sector and recommends
strengthening of dialogue in this area including the establishment of regular strategic-level aviation
dialogue between the European Union and China. This study also recommends continued work to
reduce the market barriers in this area.
In the area of ICT, the OpenChina-ICT and now the CHOICE and EU FIRE projects have been
strengthening the collaboration. EU-China Expert Groups also exist for future internet and Internet of
Things (IoT) smart cities and broadband policy. Electrical and optical equipment is one of China’s
strongest sectors, thus while competition is fierce, collaboration is important to overcome challenges
such as a lack of a common technology architecture and standards as well as interoperability issues
and concerns about internet governance, security and differing privacy policies. Smart City
collaboration is recommended to establish knowledge exchange platforms and help strengthen the
link between cities and enterprises.


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i
Higher education and research establishments
The study’s conclusions in regard of higher education and research establishments are presented by
comparing the opportunities and challenges associated with different cooperation strategies such as:
• Human capital movements;
• Establishing joint research centres.
Human capital movements
Increasing funding opportunities are promoting the exchange of personnel between the EU and China.
However, some challenges remain. For example, this study has identified evidence that Chinese
research institutions can encounter difficulties in promoting themselves internationally. It was also
noted that there is still some lack of knowledge about China and of the quality of its research system
among European researchers. The high bureaucracy of the Chinese research system is also believed
to pose a challenge. In order to improve the environment for collaborative activities and maximise
their benefits, it is recommended to emphasize reciprocity of human capital movements to maximize
access to contacts with China. This can perhaps be achieved by introducing a requirement/ incentive
for Chinese researchers returning to China after a period in the EU to continue collaboration with their
EU counterpart researchers. Alternatively, a Chinese alumni network targeting specific research areas
could be developed to encourage Chinese researchers returning from Europe in continuing
collaborative activities or even for EU researchers returning from China.
Establishing joint research centres
Establishing joint research centres can create favourable conditions for collaborative activities,
providing a continuous mechanism for sharing research facilities and knowledge facilitating access to
local incentives. Challenges associated with this mechanism of cooperation include difficulties in
aligning different academic systems, among others. Also, it requires the allocation of a greater level
of investment than less permanent collaborative activities. Thus strengthening of EU support for the
implementation of joint research structures in China is recommended to help increase EU access to
relevant data, research funding, facilities and talent in China, emphasizing EU SME Centre services.
Industrial stakeholders
The study examined challenges and opportunities for industrial stakeholders including SMEs and
makes recommendations for:
• Industry-research collaboration;
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xix
• Physical infrastructure for industry cooperation.
Industry-research collaboration
There are an increasing number of foreign-invested R&D centres in China and clusters have become a
hub for (Chinese and EU) researchers to seek cooperation with industry providing opportunities for
industry-research collaboration. The large gap between industry and research presents a challenge for
cooperation and the Investment Catalogue may act as a domestic protection mechanism. However,
the demand for technology and EU organizations’ ability to provide innovative solutions that address
industry leads to the recommendation to strengthen the use of the EU SME Centre in Beijing to
improve connections between EU firms with Chinese research and industry stakeholders and to
continue to push for the opening of some specific sectors of the Investment Catalogue.
Physical infrastructure for industry cooperation
Incubators and science parks play an increasing role in the promotion of innovation clusters,
technology transfer and commercialization of research results in China. Further, the previously
mentioned Innofund, for example, helps to subsidize equipment upgrades for specific purposes, such
as energy saving, emission reduction, and the adoption of new generation technologies. However,
access to R&D infrastructure in China remains difficult for EU companies and joint R&D centres with
companies are still immature in Chinese universities. It is therefore recommended to increase role of
the EU SME Centre in Beijing in clustering initiatives being developed in China.
Recommendations for improving the EU’s understanding on China’s STI
Since up-dating the data related to the indicators can be done more efficiently than collecting it for
the first time, it is recommended that the European Commission comes to a structured agreement for
a period of a few years to do an up-date of a given basic list of indicators, for which international
comparison is possible and to show the trends in time. Concerning publications, the data is always
available, that is: it can be retrieved from the Scopus database at any time by anybody, but here again
it is less time-consuming when the up-dating is organized in a structured way and at pre-set moments
in time (e.g. same month in the year). Proposals for such structured agreements should be discussed
with others who are engaged in data-gathering activities such as the OECD and Eurostat, in order to
avoid duplication and in order to agree on the specifics in terms of method and definitions of the
indicators and for instance the aggregation level of the fields of publication concerning the
bibliometric data.
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Table Contents

1. Introduction ....................................................................................................................................... 1
1.1. Objectives of the report ............................................................................................................................. 2
1.2 Methodology .............................................................................................................................................. 3
2. Measuring China's STI development .................................................................................................. 7
2.1. RTD indicators ............................................................................................................................................ 7
2.2. Economic impact indicators ..................................................................................................................... 14
2.3. Research output indicators: bibliometrics ............................................................................................... 19
3. Mapping of China’s research and innovation capabilities in selected technologies ....................... 32
3.1. China’s industrial structure in comparison .............................................................................................. 35
3.2. China’s overall research, development and innovation performance ..................................................... 39
3.3. Sectoral specialisation of Business R&D in China ..................................................................................... 47
4. China's STI policies and international strategy ................................................................................ 60
4.1. Overview of STI policies ........................................................................................................................... 60
4.2. Overview of STI funding ........................................................................................................................... 65
4.3. Industrial Innovation, Indigenous innovation and its impact on foreign firms ........................................ 72
4.4. Human capital for innovation .................................................................................................................. 78
4.5. Research and technology infrastructure .................................................................................................. 84
4.6. Patterns of international cooperation ..................................................................................................... 87
5. Framework conditions for STI in China ............................................................................................ 95
5.1. Development of firms .............................................................................................................................. 95
5.2. Public procurement .................................................................................................................................. 97
5.3. The role of the "investment catalogue" ................................................................................................... 99
5.4. Patenting and licensing system .............................................................................................................. 101
5.5. The development of Chinese standards ................................................................................................ 105
6. Conclusions and Recommendations .............................................................................................. 110
6.1. Thematic areas of common interest...................................................................................................... 111
6.2. Higher education and research establishments .................................................................................... 117
6.3. Industrial stakeholders .......................................................................................................................... 120
6.4. Recommendations for improving the EU’s understanding on China’s STI ............................................ 124
7. References ..................................................................................................................................... 126

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List of Figures

Figure 1. Human resources and venture capital, China and selection of IUS2014 European countries ................ 9
Figure 2. Percentage population aged 25-64 having completed tertiary education, 2011 .................................... 9
Figure 3. Human resources, EU versus China, US, Japan ...................................................................................... 10
Figure 4. IUS 2014 Indicators for firm activities.................................................................................................... 11
Figure 5. Business R&D expenditure by foreign affiliates and SMEs, in millions of euro ..................................... 12
Figure 6. R&D expenditure in the business sector as % of GDP ........................................................................... 13
Figure 7. R&D expenditure in the public sector as % of GDP ............................................................................... 13
Figure 8. License and patent revenues from abroad as % of GDP ........................................................................ 14
Figure 9. Knowledge-intensive services exports as % total service exports ......................................................... 14
Figure 10. Contribution of medium and high-tech product exports to the trade balance ................................... 15
Figure 11. Publication shares in the worldwide total 2000-2013 (BRICK countries, EU, United States and Japan)
.............................................................................................................................................................................. 19
Figure 12. Share of academic disciplines, China vs. Worldwide ........................................................................... 21
Figure 13. Subject fields of Chinese publications as percentage of worldwide total ........................................... 23
Figure 14. Collaborated publications between China and foreign countries ...........................................................
Figure 15. Share (%) of publications in high impact journals ............................................................................... 28
Figure 16. Joint publications with Chinese institutes in 2005 (EU/US) ................................................................. 30
Figure 17. Joint publications with Chinese institutes in 2011 (EU/US) ................................................................. 30
Figure 18. Selected manufacturing industries and cross-cutting technologies (green) ....................................... 33
Figure 19. Difference in sector shares on total production between CN and the EU, 2009................................. 35
Figure 20. Difference in sector shares on total value added between CN and the EU, 2009 ............................... 36
Figure 21. Difference in sector shares on total exports between CN and the EU, 2009 ...................................... 37
Figure 22. Total exports and exports in selected sectors of China and the EU, 1999, 2000, 2005, 2007 and 2009
.............................................................................................................................................................................. 38
Figure 23. Global shares in total R&D expenditures (GERD), 2002, 2007 and 2009 ............................................. 40
Figure 24. Total R&D expenditures (2000-2012) as a percentage of GDP ............................................................ 42
Figure 25. Number of total PCT patent applications (1990-2011) ........................................................................ 45
Figure 26. Share in global PCT patenting (1990-2011) ......................................................................................... 46
Figure 27. Private R&D expenditures in China relative to the EU27 (2010) ......................................................... 47
Figure 28. Development of private R&D expenditures in China relative to the EU (2000-2010) ......................... 48
Figure 29. Private R&D expenditures for Chemical Products (2000-2010) .......................................................... 49
Figure 30. Private R&D expenditures for Pharmaceuticals (2000-2010) .............................................................. 50
Figure 31. Private R&D expenditures for Computers, Electronics and optical products (2000-2010) ................. 51
Figure 32. Private R&D expenditures for Electrical Equipment (2000-2010) ....................................................... 52
Figure 33. Private R&D expenditures for Machinery and Equipment (2000-2010) .............................................. 53
Figure 34. R&D Expenditure in Motor Vehicles (2000-2010) ............................................................................... 54
Figure 35. Private R&D expenditures for Other Transport Equipment (2000-2010) ............................................ 55
Figure 36. Share in global PCT patenting by selected sectors (2011) ................................................................... 56
Figure 37. Patent applications in China relative to the EU (2011) ........................................................................ 57
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List of Tables
Table 1 IUS 2014, national indicators, Chinese data compared to EU and selection of countries ......................... 8
Table 2. Innovation Union Competitiveness Report 2011 indicators, with updates in bold for China and EU .... 16
Table 3. Comparison of growth rate by field (China vs. worldwide) .................................................................... 22
Table 4. Numbers of total journals by field .......................................................................................................... 25

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i






1. Introduction
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1
1. Introduction
This report is Deliverable 9: Final Report of the Science, Technology and Innovation (STI) Performance
of China study.
The objective of the STI China study was to assess the evolution of the country’s STI Performance and
analyse its economic impact on Chinese productivity and competitiveness and on the global markets,
taking into account the differences between various Science and Technology fields, economic sectors
and types of actors involved. The study aims to help inform and develop STI strategies for the
European Union (EU) considering the emerging role of China as a competitor and partner of the EU.
More specifically, the study had the following goals:
 Identifying, assessing and updating the data and indicators relevant to STI in China;
 Mapping China’s research and innovation capabilities in selected technologies as well as their
translation in the development of its industry;
 Providing a description and an assessment of China's efforts and policies to develop its STI
capabilities, including its international strategy;
 Characterising the framework conditions for innovation, providing in particular an overview
of China's innovation system;
 Pinpointing opportunities and challenges brought about by the STI development of China.
In order to achieve the goals, the key methods utilized in the study include bibliometric research, desk
research, interviews, survey questionnaires, workshops, and analysis of existing data and literature.
The study was implemented by the consortium of Sociedade Portuguesa de Inovação (SPI), The United
Nations University - Maastricht Economic and Social Research and Training Centre on Innovation and
Technology (UNU-MERIT), and the Austrian Institute of Technology (AIT).
Sociedade Portuguesa de Inovação (SPI) (http://www.spieurope.eu/)
SPI is an International Management Consultancy Company founded in 1997 as an active centre of
national and international networks connected to the science, technology and business innovation
sector. SPI is the coordinator of the study, as well as leader of WP3: Assessing China's policies in terms
of development of its domestic STI capabilities and its international strategy and WP4: An overview of
framework conditions and the development and growth of innovative firms.
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2
The United Nations University - Maastricht Economic and Social Research and Training Centre on
Innovation and Technology (UNU-MERIT) (http://www.merit.unu.edu/)
UNU-MERIT is a research and training centre of Maastricht University and United Nations University,
focusing on the role of STI in the broadest sense in bringing about development and the improvement
of social welfare at the national and international level. MERIT is leader of WP1: Identifying, assessing
and updating data and indicators relevant to STI in China.
Austrian Institute of Technology (AIT) (http://www.ait.ac.at/)
AIT is one of the largest technical research centres in Austria. The AIT Foresight and Policy
Development has expertise in the emergence of new technologies, as well as economic, societal and
environmental impacts. AIT leads WP2: Mapping of China’s research and innovation capabilities in
selected technologies
1.1. Objectives of the report
The report presents the results and analysis developed by the consortium on the STI Performance of
Mainland China (excluding Hong Kong and Macau) and is organised in the following sections:
• Section 2 - Measuring China's STI development: This section identifies, assesses and updates
data and indicators relevant to STI in China and presents new findings including those related
to RTD, economic performance and research output.
• Section 3 - Mapping of China’s research and innovation capabilities in selected technologies:
This section presents the mapping of China’s research and innovation capabilities in selected
technologies including China’s industrial structure in comparison (as an introduction); China’s
overall RDI performance and the sectorial specialisation of business R&D in China.
• Section 4 - China's STI policies and international strategy: This section provides an overview
of current features of STI policies and the likely prospects for the future. Other features of
China’s innovation system including the situation with regard to industrial and indigenous
innovation including its impact on foreign firms, human capital, and STI infrastructure are
discussed. International cooperation strategy is reviewed and patterns of international
cooperation are assessed.
• Section 5 - Framework conditions for STI in China: This section provides an overview of the
Framework conditions for STI in China system and of the consequences for innovative
operators in China. In particular, the following themes are included: development of firms;
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public procurement; the role of the "investment catalogue"; the patenting and licensing
system; and the development of Chinese standards.
• Section 6 - Conclusions and recommendations: This section draws conclusions for the EU in
regard to the challenges and opportunities provided by the development of China for the short
and medium term (5 years) including: thematic areas of common interest for the EU and
China; cooperation strategies for EU higher education and research establishments; and
cooperation strategies for industry stakeholders including SMEs.
1.2 Methodology
The methodology for the study was provided in five WPs. This report identifies and discusses the work
and analysis provided. A description of the five WPs is provided below.
WP1: Identifying, assessing and updating data and indicators relevant to Science, Technology and
Innovation in China
The objective of this WP was to identify those indicators which are most relevant to measuring the
overall progress of STI development in China and which are coherent with the Innovation Union
Scoreboard and the Innovation Union Competitiveness Report. The results of WP1 supported WP2 in
studying China’s STI Performance in more detail for specific scientific disciplines, technologies and
industrial sectors. The approaches taken to achieve the goals were as follows:
• Identification of relevant indicators;
• Study of relevant indicators for disciplines, technologies and industrial sectors;
• Verification, assessment and interpretation of the indicators.
WP2: Mapping of China’s research and innovation capabilities in selected technologies
Using the broad overview of the indicators to measure the technological and scientific capabilities of
Chinese universities and firms provided in WP1 as inputs, WP2’s objective was to then provide a
thorough analysis of China’s Performance in science and technology. WP2 focused on an analysis of
China’s research and innovation capabilities.
First, a broad overview of China’s research and innovation capabilities across all scientific fields,
technologies and industrial sectors was conducted. Second, selected industries and cross-cutting
technologies were studied. The sectoral coverage of this second stage focused on industrial sectors
using the two-digit level of the Nomenclature generale des Activites economiques dans les
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4
Communautes Europeennes (NACE)
5
where China is a current or future competitor for firms from the
EU-27. The importance of sectors and cross-cutting technologies in light of the “grand challenges”
were complimentary selection criteria. The six challenges identified by the High Level Group for Joint
Programming (CREST-GPC)
6
in preparation for the EU Joint Programming Initiative include
Cities/Transport, Climate Change (including Energy), Cultural heritage, Food, Water, and Health.
The WP2 approach included the following:
• Selection of the fields;
• Matching of selected sectors and cross-cutting technologies with scientific disciplines,
technologies, and industrial sectors;
• Making various data sources comparable;
• Identification of relevant stakeholders and infrastructures through patent and publication
data sources;
• Assessment of trends in the medium term.
WP3: Assessing China's policies in terms of development of its domestic STI capabilities and its
international strategy
The objective of WP3 was to analyse and identify the main trends in policy-making and funding system
for STI development in China, and to analyse China's international strategy concerning STI. This was
achieved through a variety of data collection and analysis techniques, including:
• Development of a list of stakeholders in China and Europe of more than 2,000 contacts, which
included representatives from the government, industry and research;
• Provision of a set of survey questionnaires for foreign research and industry stakeholders (in
English) and for Chinese research and industry stakeholders (in Chinese);
• Provision of structured interviews that aim at complementing the survey questionnaire;
• Implementation of a Fact-finding mission to China (Beijing, Shanghai, Guangzhou and
Shenzhen) in order to support the interview process. The mission was split into two groups of

5 Nomenclature generale des Activites economiques dans les Communautes europeennes (NACE) refers to the industrial classification as
defined in Revision 1 which is used by Eurostat. NACE Rev. 1 replaced NACE 1970. In so doing it established a direct link between the
European classification and the internationally recognised ISIC Rev. 3 developed under the auspices of the United Nations. These two
classifications are directly compatible at the 2-digit level and more detailed levels of ISIC Rev. 3 can be calculated by aggregating the more
detailed levels from NACE Rev. 1. (Source: OECD - glossary)
6 CREST GPC 1308/09,
http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=ST%201308%202009%20INIT&r=http%3A%2F%2Fregister.
consilium.europa.eu%2Fpd%2Fen%2F09%2Fst01%2Fst01308.en09.pdf
STI Performance of China
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two experts (including at least one Chinese expert) to interview the key stakeholders and
collect information from other sources.
WP4: An overview of framework conditions and the development and growth of innovative firms
The objective of WP4 was to provide an overview of the Chinese innovation system and of the
consequences for innovative operators in China. The WP method included:
• Desk research on the different topics of the Chinese STI system for development of innovation
in firms;
• Additional interviews to those conducted in WP3. The result of the desk research helped to
serve as a basis for these interviews with key stakeholder that were mostly provided during
the Fact-finding mission and were with industrial representatives.
WP5 Draw conclusions for the EU as regard the challenges and opportunities provided by the
development of China the short and medium term (5 years)
The objective of WP5 was to draw conclusions on challenges and opportunities brought about by the
development of China and provide the information to guide the decision making process in the context
of an EU (and its Member States) / China STI strategy. Additional interviews and desk research were
carried out and the results of WP1-4 analysed to develop the conclusions and recommendations.
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2. Measuring China's STI development
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7
2. Measuring China's STI development
Data for China has been collected for STI indicators which are used for the Innovation Union, namely
for a selection of indicators used by the Innovation Union Scoreboard (IUS 2011 and 2014) and the
Innovation Union Competitiveness report (IUC 2011 and 2003). In this report, the data collected for
China is presented and compared alongside the European and other national data as reported in the
Innovation Union Scoreboard 2014, and the Innovation Union Competitiveness Reports (2011 and
2013). For a selection of IUC indicators the most recent available data for the EU
7
was extracted from
Eurostat in 2014, in order to allow for a better EU-China comparison on those indicators. An overview
of the data is given in two tables: Table 2.1 for the indicators of the IUS (sub-section 2.1) and Table 2.2
for the indicators of the IUC (sub-section 2.2). In sub-section 2.3 the research output of China is
assessed based on a bibliometric analysis.
2.1. RTD indicators
This sub-section first presents data collected for China which is comparative to the indicators used in
the Innovation Union Scoreboard (IUS) Report 2014 to compare Member States, and then focuses on
the indicators from both the IUS and IUC concerning RTD performance for a comparison between EU
and a selection of non-EU countries.
Table 1 provides the indicator values for China as well as the EU value and the value of a selection of
large EU or associated countries. The reference year for the Chinese data is mostly 2011 or 2010 for
the indicators on ‘firm activities’ which are not surveyed every year. The reference year for the EU
data is also mostly 2011. For the ‘firm activities’ data which are based on the Community Innovation
Survey, older data than 2011 has been used by the IUS for some individual European countries, e.g.
for the indicator 1.1.1 ‘New doctorate graduates’ in Table 1, for most countries 2011 data was
available, but for some countries only an older reference year is available.


7 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
STI Performance of China
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Table 1 IUS 2014, national indicators, Chinese data compared to EU and selection of countries
IUS 2014, national indicators
(EU reference year) China EU DE ES IT PL RO UK TR
China
refer
ence
year
Enablers
1.1.1 New doctorate graduates (2011) 2.49 1.7 2.8 1.2 1.5 0.5 1.7 2.4 0.4 2011
1.1.2 Population completed tertiary
education (2012) 15.2 35.8 31.9 40.1 21.7 39.1 21.8 47.1 18.0 2010
1.1.3 Youth with upper secondary level
education (2012) 46 80.2 76.2 62.8 77.6 89.8 79.6 81.8 58.3 2010
1.2.3 Non-EU/domestic doctorate
students (2011) 10.9 24.2 11.2 18.0 8.4 1.9 2.1 30.6 3.2 2011
1.3.2 Venture capital (2012) 0.12 0.277 0.223 0.192 0.138 0.234 0.137 0.419 2011
Firm activities
2.1.1 Business R&D expenditure (2012) 1.4 1.31 1.95 0.68 0.69 0.33 0.12 1.14 0.37
2.1.2 Non-R&D innovation expenditure
(2010) 1.19 0.56 0.88 0.39 0.59 1.02 0.46 0.16
2004-
2007
2.2.1 SMEs innovating in-house (2010) 17.5 31.8 45.2 22.1 34.8 11.3 10.8 28.2
2004-
2006
2.2.2 Innovative SMEs collaborating with
others (2010) 7.4 11.7 14.0 5.8 4.4 4.2 2.9 22.3 5.3
2004-
2006
Outputs
3.1.1 SMEs introducing product or
process innovations (2010) 28.3 38.4 57.0 28.1 39.8 14.4 13.2 21.3 29.5
2004-
2006
3.2.1 Employment in knowledge-intensive
activities (2012) 14.5 13.9 15.8 11.9 13.2 9.7 6.5 17.8 5.0 2010
3.2.2 Contribution of MHT product
exports to trade balance (2012) 3.2 1.3 9.2 3.3 4.8 0.6 0.4 4.2 -3.1 2012
3.2.3 Knowledge-intensive services
exports (2011) 35.8 45.3 55.6 21.6 27.5 28.3 45.2 61.2 21.9 2012
3.2.4 Sales of new to market and new to
firm innovations (2010) 12.7 14.4 15.5 19.0 14.9 8.0 14.3 7.3 15.8 2006
3.2.5 Licence and patent revenues from
abroad (2012) 0.013 0.77 0.64 0.31 0.45 0.21 0.38 0.68 0.00 2012
Sources IUS 2014 for EU data and this study for Chinese data (see annex for details);

For the indicators in Table 1 which ‘enable’ innovation, most values for China were found to be below
the EU value, and also below the national value for the selected countries, except for the share of new
doctorate graduates. The share of population aged 30-34 having completed tertiary education was
15.2% for China in 2011. For the EU the latest value (2012) was much higher - 35.8%, but compared
with Turkey (18%) and Italy (21%) the difference was smaller (Table 1). Venture capital investment as
a % of GDP was at a lower level in China in 2012 (0.12 %) than in the EU as a whole (0.28%), but
comparable to the level of individual EU Member States such as Italy and Romania (both at 0.14%).
STI Performance of China
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Figure 1. Human resources and venture capital, China and selection of IUS2014 European countries
Sources: IUS 2014; for China see annex (reference year 2011)

The IUS also contains an international comparison between the EU and non-EU countries, but for a
more limited set of indicators. The share of people with tertiary education for the age group 25-64
(Figure 1) for China in 2011 (and 2010) was 10% and for the EU in 2011 was 28.5%. In most countries
there was an increase in this high-educated share of the population, but for China, Russia and India
there was no increase between 2010 and 2011.




Figure 2. Percentage population aged 25-64 having completed tertiary education, 2011
Source: IUS 2014, international comparison



15.2
35.8
31.9
40.1
21.7
39.1
21.8
47.1
18.0
0
10
20
30
40
50
China EU DE ES IT PL RO UK TR
1.1.2 % Population aged 30-34 completed
tertiary education (2012)
0.12
0.277
0.223
0.192
0.138
0.234
0.137
0.419
0
0.1
0.2
0.3
0.4
0.5
China EU DE ES IT PL RO UK
1.3.2 Venture capital investment as % of
GDP (2012)
0
10
20
30
40
50
60
2004 2005 2006 2007 2008 2009 2010 2011
BR
JP
KR
US
EU
CN
IN
RU
SA
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10
The IUS does not report absolute numbers, e.g. the total number of people. The IUC often reports
both the relative and absolute figures. At 74 million, the number of Human Resources in Science &
Technology in China in 2011 was quite close to the 98 million in the EU (Figure 3). However, the
number of new S&T graduates (ISCED 5A) with Science & Engineering (S&E) orientation in 2011 was
875,000 in the EU, way below the 1.4 million in China. For China this number had increased by more
than 100,000 to 1.5 million in 2012. This strong S&E orientation of China’s human resources was also
evident in other aspects of STI in China, and its economy and society at large.
Figure 3. Human resources, EU versus China, US, Japan
Sources: Eurostat for EU (2011); for China see annex (2011); and IUC Report 2011 for US and Japan (reference year 2008)
Following the previous indicators, innovation performance of firms was also analysed. Compared to
the indicators which are labelled ‘enablers’ in the IUS, the Chinese indicator performance for firm
innovation activities, was perhaps more impressive than for the enabling factor indicators. In terms of
business R&D expenditure as a share of GDP the value for China was 1.4 in 2012, above that for the
EU, which was 1.3% (Figure 4). The business R&D intensity was below that of Germany, but way above
that of, for Spain and Italy. Next to this high R&D intensity of the business sector, also the non-R&D


114174
73000
15900
50289
9369
0
20,000
40,000
60,000
80,000
100,000
120,000
EU United
States
Japan China South
Korea
New doctoral graduates (ISCED 6), total
875225
247147
114310
1433849
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
EU United States Japan China
New S&T graduates (ISCED 5A) with S&E orientation
98121
74086
0
20,000
40,000
60,000
80,000
100,000
120,000
EU China
Human Resources in Science and Technology aged 25-
64, in thousands, 2011
46.6
51.0
27.6
36.1
29.5
0.0
10.0
20.0
30.0
40.0
50.0
60.0
EU United
States
Japan China South
Korea
Share (%) of female PhD / doctoral graduates in total
PhD / doctoral graduates
STI Performance of China
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11
innovation expenditures of Chinese firms were clearly higher (1.19% in 2010 compared to 0.56 for the
EU), and above the level of any of the selected countries, such as Germany (0.88) and the catching-up
country Poland (1.02).
The share of SMEs innovating in-house was 17.5 in 2010 (Figure 4), which was below the value for the
EU as a whole, but higher than that for Poland (11.3) and Romania (10.8). It must be noted that the
definition of an SME in China is different to the EU definition
8
, but, nonetheless, the innovation output
indicator concerning SMEs introducing product or process innovations (28.3 in 2010) (Figure 4), shows
that in this respect Chinese SMEs seemed to perform better than for instance those of the UK, Spain,
Poland and Romania.

Figure 4. IUS 2014 Indicators for firm activities
Sources: IUS 2014 for EU data; for China see annex

8 In the EU an SME is defined in EU law: EU recommendation 2003/361 .The main factors determining whether a company is an SME are: 1.
number of employees and 2.either turnover or balance sheet total. An SME has <250 employees. It also has either a turnover of ≤50 million
€ or a balance sheet total of ≤43 million €. Medium firms in China are defined as the firms employing equal to or more than 300 but less
than 2000 employees. Small firms in China are defined as the firms employing equal to or more than 20 but less than 300 employees



1.4 1.31
1.95
0.68 0.69
0.33
0.12
1.14
0.37
0
0.5
1
1.5
2
2.5
China EU DE ES IT PL RO UK TR
2.1.1 Business R&D expenditure as a share of GDP
(2012)
1.19
0.56
0.88
0.39
0.59
1.02
0.46
0.16
0
0.2
0.4
0.6
0.8
1
1.2
1.4
China EU DE ES IT PL RO TR
2.1.2 Non-R&D innovation expenditure as a shar of
GDP (2010)
17.5
31.8
45.2
22.1
34.8
11.3
10.8
28.2
0
10
20
30
40
50
China EU DE ES IT PL RO TR
2.2.1 % SMEs innovating in-house (2010)
28.3
38.4
57.0
28.1
39.8
14.4 13.2
21.3
29.5
0
10
20
30
40
50
60
China EU DE ES IT PL RO UK TR
3.1.1 % SMEs introducing product or process
innovations (2010)
STI Performance of China
D9: Final Report

12
The amount of R&D expenditure in Euro of foreign affiliates in China was below that of foreign
affiliates in the EU, US, and Japan (Figure 5). For both 2010 and 2011 the value of these R&D
expenditures by foreign firms was 512 million Euro. In 2012 this had decreased to 505 million Euros.
Chinese SMEs (the so called small above scale enterprises) appear to be an important driver for the
increased R&D expenditure. In 2011 their R&D expenditures were equal to 11,913 million Euros.
According to the latest up-date for 2012 this had increased to 14,905 million (Statistical Yearbook of
China).

Figure 5. Business R&D expenditure by foreign affiliates and SMEs, in millions of euro
Sources: Eurostat for EU SMEs (reference year 2011); OECD for EU data for foreign affiliates (reference year 2009; for China
see annex (reference year 2011); and IUC Report 2011 for US and Japan (reference year 2007)

The high business R&D expenditures in China as a % of GDP are the result of a steady increase over
the last decade. The increasing trend is similar to the trend for South Korea, although for China the
business R&D intensity is at a lower level (Figure 6).

44855
29892
4406
512
30762
5496
11913
4280
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
EU United States Japan China South Korea
Inward R&D expenditure by foreign
affiliates, millions of euro
Business expenditure by SMEs (0-249
employees), millions of euro
44,855
36,090
29,892
30,762
STI Performance of China
D9: Final Report

13

Figure 6. R&D expenditure in the business sector as % of GDP
Source: IUS 2014


The trend in R&D expenditure as a share of GDP in the public sector in China was found to differ from
the trend for the business sector. The change in terms of the share in GDP did not increase much
between 2004 and 2011, and between 2010 and 2011 it slightly declined. But this is in line with a
global trend of a slow down after an increase between 2008 and 2009 (Figure 7).

Figure 7. R&D expenditure in the public sector as % of GDP
Source: IUS 2014
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2004 2005 2006 2007 2008 2009 2010 2011
CA
JP
KR
US
EU
CN
RU
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
2004 2005 2006 2007 2008 2009 2010 2011
JP
KR
US
EU
CN
RU
STI Performance of China
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14
2.2. Economic impact indicators
The IUS 2014 comparison between the EU and third countries shows that the economic output in
terms of licence and patent revenues from abroad as a share of GDP has remained low for China,
compared to the US and the EU (Figure 8), but it should be noted that for the EU the revenues from
other EU Member States are also included.

Figure 8. License and patent revenues from abroad as % of GDP
Source: IUS 2014

Knowledge-intensive services exports as a % of total services exports have increased for China
between 2004 and 2008, but did not increase between 2008 and 2011 (Figure 9).


Figure 9. Knowledge-intensive services exports as % total service exports
Source: IUS 2014
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
0.800
0.900
2005 2006 2007 2008 2009 2010 2011 2012
BR
JP
KR
US
EU
CN
IN
RU
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
2004 2005 2006 2007 2008 2009 2010 2011
BR
JP
KR
US
EU
CN
IN
RU
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15
Concerning the contribution of medium- and high-tech product exports to the trade balance there has
been a steady increase from 2006 to 2011 (Figure 10).






Figure 10. Contribution of medium and high-tech product exports to the trade balance

Source: IUS 2014
-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
2005 2006 2007 2008 2009 2010 2011 2012
BR
JP
KR
US
EU
CN
IN
RU
STI Performance of China
D9: Final Report
16
Table 2. Innovation Union Competitiveness Report 2011 indicators, with updates in bold for China and EU
Based on IUC Report 2011
EU United States Japan China
South
Korea

Summary table of indicators
With up-dates in bold
Gross domestic expenditure on R&D (GERD) millions of euro 236,553 (1) 270,733 (2) 113,986 (2) 45,151 (2) 21,480 (2)
R&D intensity 2.01 (1) 2.77 (2) 3.44 (2) 1.54 (2) 3.37 (2)
Business expenditure on R&D (BERD) millions of euro 146,905 (1) 196,563 (2) 89,436 (2) 33,077 (2) 16,188 (2)
Business expenditure on R&D (BERD) as % of GDP
(15)
1.25 (1) 2.01 (2) 2.70 (2) 1.12 (2) 2.54 (2)
Business expenditure by SMEs (0-249 employees), millions of euro
(4)
36,090 (0) 30,762 (3) 5496 (3) 11,913 (0) 4280 (3)
Business expenditure by SMEs (0-249 employees) as % of GDP 0.29 (0) 0.30 (3) 0.17 (3) 0.2 (0) 0.56 (3)
Inward R&D expenditure by foreign affiliates, millions of euro
(5)
44,855 (1) 29,892 (3) 4406 (3) 512 (0) :
Inward R&D expenditure as % of R&D expenditure by business enterprise
(5)
32.4 (1) 14.3 (2) 5.1 (3) 0.83 (0) :
Public expenditure on R&D (GOVERD + HERD) millions of euro 87,275 (1) 63,495 (2) 12,073 (2) 22,758 (2) 4984 (2)
Public expenditure on R&D (GOVERD + HERD) as % of GDP 0.74 (1) 0.65 (2) 0.69 (2) 0.41 (2) 0.78 (2)
Investment in knowledge (R&D and Education), millions of euro 885,072 (1a) 930,935 (3) 240,224 (3) 361,737 (0) 74,444 (3)
Investment in knowledge (R&D and Education) as % of GDP 7.2 (1a) 9.1 (3) 7.5 (3) 6.95 (0) 9.7 (3)
New doctoral graduates (ISCED 6), total 114,174 (0) 63,712 (2) 16,296 (2) 50,289 (0) 9369 (2)
New doctoral graduates (ISCED 6) per thousand population aged 25-34 1.70 (0) 1.56 (2) 0.98 (2) 2.49 (0) 1.19 (2)
Number of researchers (FTE) 150,4575 (2) 141,2639 (3) 656,676 (2) 1,592,420 (2) 236,137 (2)
Number of researchers (FTE), per thousand labour force 6.3 (2) 9.2 (3) 10.3 (2) 2.0 (2) 9.7 (2)
Number of researchers (FTE) working in the private sector 707,534 (2) 1,130,500 (3) 501,077 (2) 1,092,213 (2) 18,5811 (2)
Number of researchers (FTE) working in the public sector 797,040 (2) 282,139 (3) 155,599 (2) 500,207 (2) 50,326 (2)
Human Resources in Science and Technology aged 25-64 98,121 (0) : : 74,086 (1a) :
Human Resources in Science and Technology aged 25-64 as % of labour force 42.4 (0) : : 9.7 (1a) :
New S&T graduates (ISCED 5A) with S&E orientation)
(11)
875,225 (0) 247,147 (2) 114,310 (2) 1,433,849 (0) :
License and patent revenues from abroad, millions of euro
(6)
25,137 (1) 62,279 (2) 17,474 (2) 568 (0) :
STI Performance of China
D9: Final Report
17
License and patent revenues from abroad as % GDP
(6)
0.21 (1) 0.64 (2) 0.53 (2) 0.013 (0) :
Community trademarks 60,967 (2) 12,877 (2) 2081 (2) 811 (2) :
Community trademarks per billion GDP (PPS€) 4.88 (2) 1.16 (2) 0.62 (2) 0.13 (2) :
Total number of scientific publications (fractional counting method) 469,479 (2) 357,837 (2) 92,089 (2) 256,495 (2) 39,792 (2)
Scientific publications in the 10% most cited scientific publications worldwide 55,557 (3) 58,319 (3) 8122 (3) 14,499 (3) 3231 (3)
Scientific publications in the 10% most cited scientific publications worldwide as % of total
scientific publications of the country
11.6 (3) 15.3 (3) 8.3 (3) 7.0 (3) 8.5 (3)
PCT patent applications, total number 49,545 (3) 49,282 (3) 28,970 (3) 6416 (3) 7227 (3)
PCT patent applications per billion GDP (PPS€) 4.0 (3) 4.3 (3) 8.3 (3) 1.1 (3) 7.0 (3)
Female PhD / doctoral graduates, total number 53,609 (0) 32,497 (2) 4499 (2) 98,007 (0)(12) 2763 (2)
Share (%) of female PhD / doctoral graduates in total PhD / doctoral graduates 46.6 (0) 51.0 (2) 27.6 (2) 36.1 (0) 29.5 (2)
International scientific co-publications, total number 132,412 (2) 117,794 (2) 24,064 (2) 37,524 (2) :
International co-publications as % of total publications 24.2 (2) 27.4 (2) 22.6 (2) 13.5 (2) :
PCT patent applications with co-inventor(s) located abroad 4719 (2) 5002 (2) 627 (2) 760 (2) 261 (2)
PCT applications with co-inventors located abroad, as % of total PCT patent applications
9.7 (2) 11.1 (2) 2.3 (2) 10.5 (2) 3.6 (2)
Public-private co-publications per million population 36.2 (3) 70.2 (3) 56.3 (3) 1.2 (3) :
Venture capital (early stage, expansion and replacement), millions of euro
(7)
10,185 (1) 12,954 : 6773 (0) :
Venture capital (early stage, expansion and replacement) as % of GDP
(7)
0.09 (1) 0.13 : : :
Cost of patent application and maintenance for SMEs, PPS€ 167,798 (1) 4413 6953 14,709 (0) 5509
Cost of patent application and maintenance for SMEs, per billion GDP (PPS€) 14.21 (1) 0.39 2.24 1.88 (0) 5.08
Health technology patents (PCT) 6798 (3) 10,154 (3) 2277 (3) 540 (3) 449 (3)
Health technology patents (PCT) per billion GDP (PPS€) 0.55 (3) 0.89 (3) 0.65 (3) 0.09 (3) 0.44 (3)
Climate change mitigation patents (PCT) 1195 (3) 551 (3) 744 (3) 115 (3) 89 (3)
Climate change mitigation patents (PCT) per billion GDP (PPS€) 0.10 (3) 0.05 (3) 0.21 (3) 0.02 (3) 0.09 (3)
Employment in knowledge intensive economic activities
(8)
as % of total employment 35.1 : : : :
STI Performance of China
D9: Final Report
18
Medium and high-tech manufacturing exports, millions of euro
(9)
781,149 (2) 522,413 (2) 396,343 (2) 544,786 (2) 204,299 (2)
Medium and high-tech manufacturing exports as % of total product exports
(9)
59.6 (2) 59.1 (2) 74.6 (2) 56.0 (2) 71.2 (2)
Knowledge intensive service exports, millions of euro
(9)
608,223 (2) 153,865 (2) 34,418 (2) 38841 (2) 35,703 (2)
Knowledge intensive service exports as %¨of total service exports
(9)
49.4 (2) 41.4 (2) 33.9 (2) 38.8 (2) 69.1 (2)
Contribution of medium-high and high-tech exports to the manufacturing trade balance as % of
total manufacturing
(10)

5.1 (2) 5.4 (2) 12.2 (2) : 3.5 (2)

Source: DG Research and Innovation; In bold an up-date from Eurostat for 2011 EU data; this study for 2010 and 2011 data for China (also in bold)
Notes: (0) 2011. (1a) 2010. (1) 2009. (2) 2008. (3) 2007. (4) EU does not include IE. (5) EU does not include not included 2009: BG, DK, EE, LT, LU, LV, MT, PT, RO, SK (6) EU refers to extra-EU. (7)
EU does not include BG, EE, CY, LV, LT, LU, MT, SI, SK. (8) Employment in the public sector is included. (9) EU includes intra-EU exports. (10) EU does not include BG, CY, LV, LT, MT, RO. (11) ISCED
5A including first and second degree of 5A. (12) China data refers to enrolment
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19
2.3. Research output indicators: bibliometrics
Research Output of China
Scientific output is a key aspect in evaluating China’s research capacity. In this section the results of
an analysis of publication data from Elsevier’s Scopus are presented. The selected publication
document type was “articles”, which does not include conference papers, editorials, notes, reviews,
etc. The time span covered the 14 most recent years: 2000 – 2013. Besides the aggregate
performance, 27 disciplines were analysed using the pre-defined subject categories from Scopus.
The number of scientific publications with Chinese addresses maintained a 17% annual growth rate
between 2000 and 2013, increasing from around 41,000 to over 300,000 (Figure 11). Despite the fact
that the number of scientific publications for the EU and US both kept growing at a speed of 4% per
year, their shares in the worldwide total have decreased over the years, both dropping 2 or 3 per cent
– the EU27 from 33% to 31% and the US from 26% to 23%. The share of Japanese publications declined
even more, from 9% in 2000 to 5% in 2013. The proportional shrink in the share of these countries is
mainly caused by the rapid increase of BRIC countries, among which China grew the most, from 4% of
the world total in 2000 to 18% in 2013. Other BRIC countries like India and Brazil have increased their
shares slightly, by about 2% over the 14 years studied. Russia, however, was the only exception among
the BRICs. It’s share dropped by 1%, from 3% in the year to 2% by 2013.

Figure 11. Publication shares in the worldwide total 2000-2013 (BRIC countries, EU
9
, United States and Japan)
Source: Scopus - SciVerse Elsevier. Note: Document type is “article”.

9 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
0%
5%
10%
15%
20%
25%
30%
35%
EU 27
United States
China
Japan
India
Brazil
Russia
STI Performance of China
D9: Final Report

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20
Research output by field
In mapping China’s research capacities, it is necessary to focus on the key scientific disciplines. To
ensure comparability with other studies, the predefined subject categories from Scopus were used.
The criterion in selecting key scientific fields was a combination of three areas: strong, fast growing
and matching of grand challenges. The strongest research areas in China represent its scientific
strengths and competitiveness in the past, while the fastest growing ones may indicate China’s future
development trends.
The coverage of the scientific fields consisted of two layers. Firstly, in the following section the general
developing trends of 12 fields were examined, providing the publication number and the growth rate
for each of these fields in the selected years (2000, 2005, 2010 and 2011). These Chinese indicators
are compared with the worldwide benchmarks. The twelve fields, as agreed with the EC, were as
follows:
• Computer science;
• Biochemistry;
• Engineering;
• Physics and Astronomy;
• Chemistry;
• Materials Science;
• Immunology and Microbiology;
• Environmental Science;
• Agricultural and Biological Science;
• Medicine;
• Pharmacology, Toxicology and Pharmaceutics;
• Energy.
Secondly, the text that follows presents a deeper analysis on the research efforts between China and
the EU
10
in six selected fields. The selected areas were Chemistry, Computer science, Environmental
science, Medicine, Pharmacology, Toxicology and Pharmaceutics, Physics and Astronomy.


10 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
STI Performance of China
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21

Strongest research fields
The research output in China was found to have a different pattern from that of the global output
seen in Figure 12. Over the 14 year period (2000-2013), the aggregate worldwide scientific output was
dominated by Medicine, which accounted for 28% of the total publications. The second field was
Biochemistry, genetics and molecular biology, which was followed by Engineering and Physics and
astronomy. In China, however, the dominant position – which accounted for about 29% of the national
total publications – was occupied by Engineering. The next three largest fields with the most
publications were Physics and Astronomy, Material science, and Chemistry. In general, the major
contribution to China’s total scientific research output came from hard science. On the contrary,
research in soft science has not developed well in China.

Figure 12. Share of academic disciplines, China vs. Worldwide
Source: Scopus - SciVerse Elsevier.
Note: This is calculated on the basis of total publications between 2000 and 2013

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STI Performance of China
D9: Final Report

22
22
Fastest growing fields
China’s fastest growing fields - which can indicate its future development direction - were also found
to be different from the global trend (Table 3). The emerging field immunology and microbiology has
been booming with a growth of 28% per year, although its share of China’s total publications in 2011
was rather low. In contrast, strong fields with larger proportions in the total publications grew at a
relatively slower speed. For instance, Chemistry, Materials science, Physics and Astronomy, and
Engineering increased by less than 20% per year. An exception is Pharmacology, Toxicology and
Pharmaceutics which had a low share in the national total academic output and also grew slower than
20% per year.
However, regardless of the field taken into consideration, the growth rate of Chinese publications was
always a lot higher than that of the aggregated global total. Table 3 shows that annual growth rates
of Chinese publications in all of the selected twelve fields were 10% higher than those of the
worldwide total.
Table 3. Comparison of growth rate by field (China vs. worldwide)
WORLDWIDE CHINA
GROWTH RATE
DIFFERENCE
12 fields
Growth rate
2000-11
ratio to the
total (2011)
12 fields
Growth rate
2000-11
ratio to the
total (2011)
(China vs
worldwide)
Computer Science 10.1% 0.06
Immunology and
Microbiology
28.0% 0.03 24.8%
Engineering 7.5% 0.15 Computer Science 27.5% 0.10 17.4%
Materials Science 7.2% 0.11 Environmental Science 25.7% 0.06 18.5%
Environmental Science 7.1% 0.05
Agricultural and
Biological Sciences
25.3% 0.08 18.5%
Agricultural and Biological
Sciences
6.8% 0.10 Medicine 24.7% 0.15 18.3%
Chemistry 6.7% 0.11
Biochemistry, Genetics
and Molecular Biology
23.9% 0.13 18.5%
Medicine 6.4% 0.30 Energy 21.4% 0.05 15.3%
Energy 6.1% 0.03 Engineering 20.8% 0.30 13.3%
Pharmacology, Toxicology
and Pharmaceutics
5.5% 0.04
Pharmacology,
Toxicology and
Pharmaceutics
19.1% 0.04 13.6%
Biochemistry, Genetics
and Molecular Biology
5.4% 0.14 Physics and Astronomy 18.3% 0.20 13.4%
Physics and Astronomy 4.9% 0.13 Materials Science 17.9% 0.20 10.7%
Immunology and
Microbiology
3.3% 0.04 Chemistry 17.7% 0.17 10.9%
Source: Scopus - SciVerse Elsevier. Note: Growth rate is calculated by the exponential growth.

STI Performance of China
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23
To shed light on the strengths and weaknesses of the research fields in China, Figure 13 shows China’s
development trends with global benchmarks. It provides the share of Chinese publications in the total
global publications.

Figure 13. Subject fields of Chinese publications as percentage of worldwide total
Note: Fields are ranked by their percentage values in 2013.

The percentage share of Chinese publications in the total worldwide output by field reveals the
strengths and weaknesses of research capabilities in China. The country shows a clear competitive
advantage in natural sciences, such as Engineering, Materials science, and Computer science. On the
contrary, research in social sciences, for instance Psychology and Arts and Humanities, has not
progressed to the same level.
As shown in Figure 13, China’s top five strongest research fields were Engineering, Energy, Materials
science, Computer science and Chemical engineering, while the five weakest fields were Psychology,
Arts and Humanities, Nursing, Health professions and Social science. For 2013 the publications in
Engineering, Energy, Materials science, Computer science and Chemical engineering, accounted for
respectively 34%, 32%, 30%, 30% and 29% of the global total. However, the global shares of China’s
0%
10%
20%
30%
40%
Engineering
Energy
Materials Science
Computer Science
Chemical Engineering
Physics and Astronomy
Multidisciplinary
Chemistry
Earth and Planetary Sciences
Mathematics
Environmental Science
Pharmacology
Biochemistry... Biology
Immunology Agr. and Biological Sciences
Decision Sciences
Medicine
Neuroscience
Veterinary
Dentistry
Economics, Econometrics…
Business, Management and…
Social Sciences
Health Professions
Nursing
Arts and Humanities
Psychology
2000 2005 2010 2013
STI Performance of China
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24
Psychology, Arts and Humanities, Nursing, Health professions and Social science fields were only
between 2 % and 4 %.
Collaboration with the EU
11

China’s rising role and global influence in academic research is not only reflected by its research output
in terms of numbers of publications, but also by its global collaboration and integration performance,
which has an even more direct influence on other nations. In this section, an analysis of the
performance of research efforts between China and the EU in 6 selected subject fields is provided. To
shed light on the collaboration prospect in quantity and quality terms, the analysis covered not only
the total collaborated output but also examined joint papers in high impact journals.
The selected subject fields were:
• Chemistry;
• Computer science;
• Environmental science;
• Medicine;
• Pharmacology, Toxicology and Pharmaceutics;
• Physics and Astronomy.
First, the number of co-authored papers between China and the EU were identified. In order to have
a full comparative view, research efforts between China and all foreign countries and the US were also
taken into consideration. Secondly, the percentage shares of these co-authored papers in the total
Chinese publications were calculated.
• % share of the publications with foreign co-authors;
• % share of the publications with EU co-authors;
• % share of the publications with American co-authors.
Thirdly, the publication quality of these co-authored papers between China and foreign countries
(including the EU and the US) was assessed. By subject field, the joint research efforts published in the

11 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
STI Performance of China
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25
25
top 2% of the high-impact journals were examined. The selection of top journals was based on the SJR
(SCImago Journal Rank) in each category. Table 4 presents the numbers of journals by field
12
.
Table 4. Numbers of total journals by field
Fields Number of Total journals Top 2%
Chemistry 680 14
Computer Science 1031 21
Environmental Science 879 18
Medicine 5363 30
Pharmacology, Toxicology and Pharmaceutics 526 11
Physics and Astronomy 843 17

Source: Scopus and SCImago Journal Rank

As shown in Figure 14 (a-f), joint research efforts in Chemistry grew steadily during the whole period
studied, and the percentage of joint publications with foreign countries in this field climbed from 13%
in 2005 to 16% in 2011.
However, in Computer science, Environmental science, Medicine, and Physics and Astronomy, the
collaboration percentage decreased greatly in 2005. This reduction was mainly caused by the
publication boom of Chinese researchers in that period. Namely, the numerator (collaborated papers
with foreign researchers) grew slower than the denominator (total publications). Afterwards, the
collaboration ratio increased again in Computer science, Environmental science, Medicine, but
stagnated in Physics and Astronomy (staying at 16% between 2005 and 2011).
In Chemistry, and Physics and Astronomy, China collaborated almost equally with the EU and the US.
In Medicine and Pharmacology, Toxicology and Pharmaceutics, China collaborated more with the US
than the EU.

12 The field of Medicine is an exception. Due to its large number of total journals in this subject field, only top 30 journals were considered
in the analysis.
STI Performance of China
D9: Final Report

26
26





13


13
EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2000 2005 2010 2011
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a) Chemistry
0%
5%
10%
15%
20%
25%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2000 2005 2010 2011
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b) Computer science
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20%
25%
30%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2000 2005 2010 2011
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c ) Environmental science
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15%
20%
25%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2000 2005 2010 2011
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d) Medicine
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8%
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12%
14%
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f) Physics and Astronomy
Figure 14. Collaborated publications between China
and foreign countries
Source: Scopus - SciVerse Elsevier.

co-authored papers (with all foreign countries)
co-authored papers (with US)
co-authored papers (with EU)
% of co-authored papers (with all foreign countries)
% of co-authored papers (with US)
% of co-authored papers (with EU)
STI Performance of China
D9: Final Report

27
27

Publication quality
Comparison of high impact publications by collaboration group shows that co-authored papers
between Chinese and US scientists have had a higher impact than the average of collaborative work
between China and all foreign countries (Figure 15 a-f). In four out of the six selected fields, the
percentage of high impact publications between China and US reached its highest level in 2005:
Chemistry (10.7%), Computer science (8.2%), Environment science (14.7%) and Medicine (6.5%).
Physics and Astronomy was the only field in which the EU
14
outperformed the US in terms of the
publication shares in high impact journals.
The field in which collaborative efforts had the highest impact was Environmental science, with 7.7-
9.7% of the total collaborative papers appearing in relevant journals between 2000 and 2011. High-
impact collaboration in Pharmacology and Physics and Astronomy emerged only after 2005. Though
rising over years, the shares of collaborated publications were still rather low until 2011.


14 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
STI Performance of China
D9: Final Report

28
28




Figure 15. Share (%) of publications in high impact journals
15

Source: Scopus - SciVerse Elsevier.

15 EU refers to the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2000 2005 2010 2011
a) Chemistry
US EU
all foreign all
Only Chinese
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2000 2005 2010 2011
b) Computer science
US EU
all foreign all
Only Chinese
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2000 2005 2010 2011
d) Medicine
US EU
all foreign all
Only Chinese
0.0%
5.0%
10.0%
15.0%
20.0%
2000 2005 2010 2011
c) Environmental science
US EU
all foreign all
Only Chinese
0.00%
0.50%
1.00%
1.50%
2000 2005 2010 2011
e) Pharmacology
US EU
all foreign all
Only Chinese
0.0%
1.0%
2.0%
3.0%
4.0%
2000 2005 2010 2011
f) Physics and astronomy
US EU
all foreign all
Only Chinese
STI Performance of China
D9: Final Report

29
29
To have a better view on the collaborative research with China, the EU
16
was compared with the US in
Figures 16 and 17. The number of joint publications between the EU and China was divided by the
number of joint publications between the US and China. Thus, a value greater than 1 indicates that
China had more collaborative research with the EU than the US, while a value less than 1 means that
China collaborated more with the US than the EU.
Considering the fact that the volume of collaborative research between China and foreign countries
was rather low in 2000, two benchmark years - 2005 and 2011 - were selected for this comparison.
As seen in Figure 16, in 2005, in terms of the total collaborative research with China, the EU was at a
slightly higher level than the US in Chemistry (EU/US=1.04), and at a similar level in the rest of the
fields. In Computer science and Environmental science, this value was around 0.8. The values in all
fields dropped in 2011 (Figure 17), indicating that the US performed more collaborative research with
China while in 2011 the EU decreased its share in the selected fields.
Regarding “high quality collaboration”, defined for the purposes of this analysis as publications in high
impact journals, the EU/US ratio increased in almost all fields from 2005 to 2011: Chemistry from 0.45
to 0.60, Computer science from 0.50 to 0.57, Environmental science from 0.34 to 0.41, Medicine from
0.21 to 0.31 and Physics and Astronomy from 0.50 to 0.87. The only field in which the value decreased
is Pharmacology, Toxicology and Pharmaceutics. However, this needs to be treated with caution, given
that the total publication numbers in this field were rather low and thus small changes in the numbers
of co-publications can be exaggerated.


16 EU refers to the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
STI Performance of China
D9: Final Report

30
30

Figure 16. Joint publications with Chinese institutes in 2005 (EU
17
/US)
Source: Scopus - SciVerse Elsevier.

Figure 17. Joint publications with Chinese institutes in 2011 (EU
18
/US)
Source: Scopus - SciVerse Elsevier.

17
EU refers to the EU25.
18
EU refers to the EU27.
0.00
0.50
1.00
1.50
Chemistry
Computer
science
Environmental
science
Medicine
Pharmacology,
Toxicology and
Pharmaceutics
Physics and
Astronomy
2005
Total publications Publications in high impact journals
0.00
0.50
1.00
1.50
Chemistry
Computer
science
Environmental
science
Medicine
Pharmacology,
Toxicology and
Pharmaceutics
Physics and
Astronomy
2011
Total publications Publications in high impact journals
STI Performance of China
D9: Final Report

31
31


3. Mapping of China’s research and innovation
capabilities in selected technologies
STI Performance of China
D9: Final Report

32
32
3. Mapping of China’s research and innovation capabilities in
selected technologies
WP2 of this project developed a comprehensive overview of China’s research and innovation
capabilities across selected technologies and industrial sectors. This chapter provides an in-depth
analysis of China’s strengths and weaknesses in terms of patent specialisation following the
International Patent Classification (IPC), and China’s development in various industries in terms of
R&D expenditure. The analysis compares R&D activities of Chinese firms in eight sectors and in specific
cross-cutting technologies to those of the EU-27.
The Sectoral Approach
Eight industrial sectors were selected for the empirical analysis. The sectors were defined at the NACE
two-digit level:
• C20 - Chemical Products
• C21 – Pharmaceuticals
• C25 – Fabricated metal products
• C26 – Computers, electronic, optical products
• C27 – Electrical equipment
• C28 - Machinery and equipment
• C29 - Motor vehicles
• C30 - Other transport equipment (with a special focus on C30.1, ships and boats and C30.3, the
aerospace industry)

It was initially intended also to include one service sector, namely the sector J62 - Computer
programming, consultancy and related activities. However, due to severe data limitations, this sector
had to be eliminated.


STI Performance of China
D9: Final Report

33
33
Definition of cross-cutting technologies
In addition to the sectorial approach introduced above, three major cross-cutting technologies were
analysed. These technologies do not follow the traditional industry classification, but are of special
importance, also in light of the EU policy towards grand challenges:
• Biotechnology;
• Environmental Technologies (with a special focus on wind and solar photovoltaic energy);
• Nanotechnology.
While environmental technologies and biotechnology are clearly related to more than one of the
grand challenges (e.g. Cities/Transport, Climate Change, Water, Health), nanotechnology can be
considered as an important cross-cutting technology with potential positive impact in light of most of
the challenges.
As seen in Figure 18, the sectors included and the cross-cutting technologies clearly overlap (e.g.
Pharmaceuticals and Biotechnology). However, it is evident that the cross-cutting technologies are
not limited to the sectors in the detailed analysis provided.

Industrial Sectors (NACE 2.0)
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Figure 18. Selected manufacturing industries and cross-cutting technologies (green)

Biotechnology
Enviromental technologies
Nanotechnology
STI Performance of China
D9: Final Report

34
34
Data
The analysis mainly employs two analytical indicators, patent counts and R&D expenditures, derived
from different data sources. The main data sources used were:
• OECD, REGPAT database, January 2014;
• China Statistical Yearbook;
• Eurostat, various databases;
• OECD, STAN database;
• World Input-Output Database (WIOD).
Data from the OECD REGPAT database was retrieved to calculate all patent-related indicators used.
This concerns mainly the global portfolio of PCT patenting over the years 1990-2011, disaggregated
by countries or groups of countries and selected technologies matched to the industrial sectors and
cross-cutting technologies introduced above
19
. Because of the low costs involved in PCT patenting and
policies to stimulate PCT patenting in China, which may lead to a large number of patents with
comparable low economic value (Dang and Motohashi 2013), the use of proxies of patent value, e.g.
highly cited patents and/or triadic patents was also considered. However, triadic patent data is only
fully available up to the year 2006 and would not be able to capture current developments in patent
activity. When using citation data the large citation lags of up to 15 years has to be considered, the
time period under consideration would only be rudimentarily observable. In a similar way also other
patent value measures are just observable a rather long time period of up to 10-15 years after patents
have been granted, additionally different measurement approaches are currently used that are not
yet fully developed.
Information from the China Statistical Yearbook has been used to gather data on Chinese R&D
expenditures over the years 2000-2010 across the selected manufacturing sectors, while data from
Eurostat provided the same information for the EU
20
, and data from the OECD Stan database for the
US and Japan. This was necessary for comparison purposes in the STI development of China as

19 Matching procedures described in inception report:
In the case of the industrial sectors considered some data, in particular on R&D expenditures, is already available in the structure needed.
However, patent data as a major input in this work package is classified along technologies and not industrial sectors. Therefore, the patent
data will be transformed into industrial sectors using the concordance tables provided by Schmoch et al. In case of two of the cross cutting
technologies, the OECD has identified relevant IPC and European Classification System (ECLA) codes to match patents with environmental
Technologies (ENV-Tech Indicators) and biotechnology . Patents relevant for the third cross-cutting technology considered, nano-
technologies, can be identified via the ECLA code.
20 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
STI Performance of China
D9: Final Report

35
35
compared to the EU, but also to the US and Japan. For data on the industrial structure (sectoral value
added and production) and exports, the World Input-Output Database (WIOD) was used
21
.
3.1. China’s industrial structure in comparison
Differences in the industrial structure of China and the EU
22

Before the data on R&D expenditures and patent applications were examined in detail, China’s
industrial structure was studied and compared with that of the EU. The industrial structure can be
measured by using data from 2009 on total production (Figure 19) and value added (Figure 20). A
considerable specialization of China in ‘Electrical and optical equipment’ was revealed. ‘Electrical and
optical equipment’ includes two sectors – ‘Computers, electronic, optical products’ (C26) and
‘Electrical equipment’ (C27). Additionally, a high importance of the sector ‘Metal and metal products’
(including NACE 2.0 section C25 ‘Fabricated metal products’), some low-tech-manufacturing sectors
(most notably ‘Textiles, apparel, and leather’), ‘Agriculture’ and ‘Mining’ was found.

Figure 19. Difference in sector shares on total production between CN and the EU
23
, 2009
Source: WIOD, own calculations
Note: NACE Rev. 1.1

21The data used are taken from the World Input-Output Database (WIOD), (see www.wiod.org). It was compiled on the basis of national
accounts, national supply and use tables and detailed trade data on goods and services, combining information for 59 products and 35
industries. More detailed information is provided by Timmer et al. (2012) and Dietzenbacher et al. (2013).
22 EU refers to EU27.
23 EU refers to EU 27.
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STI Performance of China
D9: Final Report

36
36
With very few exceptions, the shares of all manufacturing sectors in total production (and to a lesser
extent also in value added) were higher in China than the EU. In contrast, all the services sectors played
a much smaller role in China’s economic structure. Therefore not only the importance of certain
manufacturing sectors was found to differ between China and the EU, but also the weight of the
manufacturing sector as a whole in China appeared be to much larger than in the EU.

Figure 20. Difference in sector shares on total value added between CN and the EU
24
, 2009
Source: WIOD, own calculations
Note: NACE Rev. 1.1
The absolute numbers reveal that in some sectors both the relative importance of the sector was
higher in China compared to the EU and that the absolute value of the production was above the level
of the EU. These sectors included a number of low-tech manufacturing sectors, among which was
‘Textiles, apparel and leather’ for which China’s production in 2009 was three times higher than that
of the EU. However, China’s ‘Electrical and optical equipment’ production was also higher than that of
the EU by a factor of two. In contrast, in all other high- and medium-high-tech manufacturing sectors

24
EU refers to EU27.
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STI Performance of China
D9: Final Report

37
37
the total EU production was above the value for China. Total production of the ‘Transport equipment’
sector was two times higher in the EU compared to that in China in 2009.
Export specialization of China compared to the EU
25

Using a similar approach the differences between the export specialization of China and the EU were
examined in the year 2009 (Figure 21). In only two sectors – ‘Electrical and optical equipment’ and
‘Textiles, apparel, leather’ – did the identified high specialization in production also translate into a
high export specialization. The other manufacturing sectors with high shares of total production
seemed to be more oriented towards the Chinese domestic market. One example of a sector with
such a pattern (a high share in production, but a low share in total exports) was ‘Metal and metal
products’. The two sectors with the highest identified share in total Chinese exports (‘Electrical and
optical equipment’ and ‘Textiles, apparel, leather’) together accounted for more than half of all
Chinese exports in 2009. In contrast, EU exports were more equally distributed across economic
sectors. In the case of the EU, the sector with the highest share in total exports – ‘Transport
equipment’ – only accounted for less than 12% of total exports.

Figure 21. Difference in sector shares on total exports between CN and the EU
26
, 2009
Source: WIOD, own calculations
Note: NACE Rev. 1.1

25 EU refers to EU27.
26 EU refers to EU27.
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STI Performance of China
D9: Final Report

38
38
Analysing total exports for China and the EU
27
, Figure 22 shows that EU exports were still about four
times the value of Chinese exports in absolute terms in the most recent year where data is available
(2009).
Only in the sector ‘Electrical and optical equipment’ was the value of Chinese exports close (75%) to
the EU value. However, the absolute figures also reveal the much faster growth of Chinese exports
compared to those of the EU. In 1995, Chinese ‘Electrical and optical equipment’ exports were only
10% of the EU value. While Chinese exports in other sectors grew significantly over the last 14 years,
the value of EU exports was between more than three (‘Fabricated metal products’) and 27 (‘Motor
vehicles’) times higher than the corresponding Chinese exports in 2009. However, it should be noted
that EU exports also include intra-EU Exports. If only extra-EU exports were included the gap between
China and the EU in term of total exports would be significantly smaller.

Figure 22. Total exports and exports in selected sectors of China and the EU
28
, 1999, 2000, 2005, 2007 and 2009
Source: WIOD, own calculations
Note: NACE Rev. 1.1

27
EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007.
28
EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007.
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STI Performance of China
D9: Final Report

39
39
3.2. China’s overall research, development and innovation performance
Trends in China’s industry R&D
This section is focused on the development of China´s industrial R&D expenditures, disaggregated by
different sectors of economic activity in comparison to the EU
29
, the US and Japan. R&D expenditures
have been widely used in studies measuring the STI performance of firms, regions or countries as an
indicator for the ability to generate innovations. More specifically, industry R&D expenditures have
been commonly considered to be one of the main drivers of generating new products and/ or new
processes that induce added value and foster productivity and growth (see, for example, Mairesse and
Sassenou, 1991). The R&D expenditures are generally measured in Euro at current prices.
In the empirical analysis, only sectors in the China Statistical Yearbook were considered to measure
the development of industrial R&D expenditures along with the selected sectors of interest (see
Section 3.3). These sectors were matched with the NACE rev. 2 classification for sectors of economic
activity in order to compare Chinese R&D expenditures with the those of the EU, the US and Japan.
Correspondingly, data on Chinese R&D expenditures were sourced from the China Statistical
Yearbook, while for the EU, the US and Japan, data was gathered from Eurostat, the OECD and national
statistical offices.
Development of total R&D expenditures
Prior to analysis of the development of R&D expenditures from a sectorial perspective, it is
appropriate to discuss the general development of R&D expenditures in China as compared to other
countries. This can shed some light on the overall importance of R&D in the Chinese economy, and
the role of China in the world in terms of R&D. Figure 23 illustrates country shares of total R&D
expenditures worldwide (including firms, universities and public actors) for the years 2002, 2007 and
2009, while Figure 24 shows the development of total R&D expenditures as a percentage of gross
domestic product for the time period 2000-2012.

29 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007.
STI Performance of China
D9: Final Report

40
40

Figure 23. Global shares of total R&D expenditures (GERD), 2002, 2007 and 2009
Source: UNESCO, own calculations
30

Two important trends can be seen. Firstly, that there was a significant overall increase in global R&D
expenditures between 2002 and 2009, from roughly 800 billion USD in purchasing power parities (PPP)
to 1,250 billion USD PPP. Secondly, that the distribution of global shares has also changed considerably
during this period:
• North America, including the US and Canada, had the highest share of global R&D
expenditures. However, North America’s share has gradually decreased between 2002 and
2009 in relative terms from 37.7% to 32.7%.
• Japan’s global share has decreased from 13.7% to 10.7% between 2002 and 2009. Between
2007 and 2009, Japan’s R&D expenditures slightly decreased also in absolute values, related
to the global economic crisis in this time period.

30 European Union refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time
of writing.
26,1%
23,5%
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European Union
STI Performance of China
D9: Final Report

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41
• For the EU
31
, R&D expenditures in absolute values have increased, roughly with the same
magnitude as the US. However, the share of the EU in global R&D has stagnated between 2007
and 2009.
• In contrast to the other countries under consideration, China has increased its total R&D
expenditures significantly, both in terms of absolute values as well as in terms of its global
share in total R&D expenditures. The global share has more than doubled between 2002 and
2009, from 5% to 12.1%. In 2009, China’s global share on total R&D expenditures (12.1%)
exceeded the global share of Japan (10.7%). During the financial crisis of 2008/09, a period
characterized by decreasing R&D expenditure in some countries, China’s total R&D
expenditures have continued to increase. Given the trend to be observed from Figure 24, it
can be assumed that China will maintain the third position behind North America and the
EU27 in the mid-term, and further close the gap to the EU27 in the mid- to long-term.
Figure 23 also clearly indicates that the rise of China in terms of absolute R&D expenditures was not
accompanied by a decline of the EU, North America and Japan. For the whole period, R&D
expenditures in all three economic regions increased; the share of the EU only decreased relative to
total global R&D expenditure.
These results convincingly illustrate the rapid growth of R&D expenditures in China and the efforts of
the country in catching-up. It points, on the one hand, to a deeper shift in the structure of the Chinese
economy with a growing share of knowledge intensive industries, in particular telecommunications
and electronics. On the other hand, it also reflects considerable efforts by the Chinese government to
accelerate the transformation of the Chinese economy to a more technology-driven, knowledge based
economy (see, for example, Scherngell et al. 2014).
China’s catching up becomes even more impressive if the observation period is enlarged and total
R&D expenditures as a percentage of GDP are compared to illustrate the R&D intensity of countries
relative to their economic size. Figure 24 outlines this indicator for China, Japan, the US and the EU
32

for the period 2000-2012. In the last decade China nearly doubled its R&D intensity and overtook the
EU in 2012.


31 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
32 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
STI Performance of China
D9: Final Report

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42


Figure 24. Total R&D expenditures (2000-2012) as a percentage of GDP
Source: OECD, own calculations
33

The development points to a constant and considerable growth in private R&D expenditures of firms
located in China between 2000 and 2012. This trend is likely to continue in the near future as there is
no implicit or explicit evidence of factors that may reduce this growth pattern in the mid-term. While
in 2000, private actors located in China spent around 12 billion Euros on R&D, this value has increased
to 78 billion Euros in 2010, i.e. the magnitude of private R&D expenditures increased by a factor of 6.5
in this period. This tremendous growth cannot only be explained by a changing innovation behaviour
of some selected firms; it has rather to be related to a more pervasive structural shift of the Chinese
economy from low- and medium-tech industries to medium-high- and high-tech industries, such as
telecommunications and electronics (see, e.g., Crescenzi et al. 2012). In related literature, a number
of explanations for this development have been identified, most importantly the absorption of
technological knowledge via foreign direct investment (FDIs), and massive government support for
knowledge diffusion from basic to applied research and development (see, e.g., Scherngell et al. 2014).
Further it is worth noting that - as also observed for total R&D expenditures - growth of private R&D

33 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0.0%
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STI Performance of China
D9: Final Report

43
43
expenditures has not been subject to a hiatus during the years of the global economic crisis. In
contrast, growth of private R&D expenditures in this period was even slightly higher than before.
An interesting question that arises in this context concerns the role of foreign-owned firms in the
overall development of R&D expenditures in China. China initially served as an assembler of more
sophisticated inputs imported from abroad - often referred to as the Chinese ‘workbench economy’ –
driven by cheap factor inputs, in particular cheap labour. Meanwhile, however, there are also signs
indicating that foreign-owned firms are increasing their R&D activities in China, utilizing millions of
skilled Chinese engineers and scientists, with their new competencies to develop products specifically
designed for the Chinese market. However, the figures on foreign R&D activities provided by Chinese
sources are ambiguous and difficult to interpret (Zahradnik and Urban 2014). It is clear that R&D
activity of European and US firms in China is rising fast; however, it is still considerably lower than the
levels of R&D activity of US firms in the EU, or EU firms in the US (Zahradnik 2014, p. 50).
Concerning the other countries depicted in Figure 24, it is possible to observe a decline in private R&D
expenditures for the US in the time period 2000 and 2010. However, firms located in the US still spend
by far the highest amount of on R&D in absolute numbers with a value of around 200 billion Euros in
2010. While Japan stagnated during the observed time period at a level of 100 billion Euros, the EU
countries showed a rather constant growth between 2000 and 2008. But stagnation occurred for the
EU after 2008 at around 150 billion Euros per year.
Trends in China’s patent output
In this section attention is given to the analysis of the development of China’s patent output. When
mapping the research and innovation capabilities of countries, patents are without doubt one of the
most often used indicators taken into consideration. Patents are – in spite of various limitations
discussed in scientific literature (see, e.g., Scherngell, 2007) - the most direct indicator of the creation
of new technological knowledge that is likely to be commercialized.
In this analysis the main focus was on raw patent counts, drawing on a time series for the years 1990-
2011. The International Patent Classification (IPC) was used to capture China’s research and
innovation capabilities for the eight sectors and three cross-cutting technologies. The REGPAT
database is a data collection tool to get information on global patenting, aiming to describe the
development of China’s patent output in comparison to other countries and groups of countries.
Within REGPAT the patents that are filed under the Patent Cooperation Treaty (PCT) of the World
STI Performance of China
D9: Final Report

44
44
Intellectual Property Organization (WIPO) have been identified, as these are most appropriate for
cross-country analysis to avoid home patent office bias. Patent counts were drawn from inventors
listed in patent documents, i.e. the number of inventors located in a specific country is counted. In
this context, the approach of fractional counting is implemented.
Development of the total patent output
Figure 25 presents the total number of PCT patent applications of China in comparison to the United
States, Japan, the EU
34
, and the group of all remaining countries, labelled Rest of the World (RoW).
China’s share may still be small compared to the US and the EU, however, it is growing fast. A shift in
global patenting share across countries was seen, in particular the increasing importance of China and
RoW, the latter mainly dominated by other Asian countries such as South Korea, India, Vietnam and
Thailand.
From Figure 25, the following main results can be summarized:
• Since 1978 global patenting activity has increased tremendously, in particular between the
early 1990s and 2005. In 1990, the number of annual PCT patents equalled about 20,000; a
number that increased to about 140,000 over a time period of 15 years;
• The EU and the US showed the highest annual number of patents, followed by Japan;
• China showed a very low patenting activity before the year 2000. However, after the
millennium the number of patents increased steadily, reaching a number of about 15,000
patents in 2010 (which was around two thirds of Japan’s and 50% of the US’ patenting activity);
• Continuing this trend, China may further increase its share in global patenting relative to the
US, Japan and the EU;
• While a steep increase in patenting in the 1990s can be seen at a similar rate in both the US
and EU, Japan's patenting activity increased faster after 2000 (especially after 2003), resulting
in 2010 for a nearly same performance in patenting activity as the US;
• Countries of the RoW group begin to intensify patenting earlier than China, since 2008
accounting for nearly the same figures as Japan.


34 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
STI Performance of China
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45

Figure 25. Number of total PCT patent applications (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations
35

Turning to relative shares instead of absolute values (Figure 26), the shift in global patenting becomes
even more evident. The share of the EU
36
and the US in global patenting gradually decreased - nearly
in parallel - from around 43% in the year 1990 to less than 30% in the year 2010. Note that this
decreasing trend may also be related to a general lower propensity to patent in the EU and the US.
However, it is without doubt, to a substantial degree, also related to the increasing share of the other
three countries and groups of countries. While China’s share in global patenting started to increase
noticeably after 2000, the share of RoW has steadily increased since the 1990s. Japan showed a rather
low increase during the 1990s, a steep increase between 1999 and 2004, then stagnation until 2008,
and a considerable increase again for 2009 and 2010.

35 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
36 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
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STI Performance of China
D9: Final Report

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46
The increase of China’s share in world patenting was rather stable and significant, starting from nearly
zero to an almost 10% share in global patents in 2011, with an average annual growth of 1% in global
patenting shares. This significant growth can be explained by different developments: on the one hand
by the increased opening-up, privatization and semi-privatization of China’s economy during the
1990s and the settlement of foreign firms stimulating knowledge flows to the local Chinese economy;
on the other hand, the Chinese government has invested tremendous resources into STI policy
programmes, for instance, supporting the translation of research results from universities into the
Chinese economy (see, for example, Scherngell et al. 2014, among others). These policy programmes
seem to have come into effect over the past decade.

Figure 26. Share in global PCT patenting (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations
37

However, at this point it is once more worth mentioning that cross-country comparisons using patents
across all industries are problematic. Firstly, the value distribution of patents is skewed, i.e. many
patents have no industrial applications, but raw patent counts assume an equal value of each patent
(see, e.g., OECD, 2001). Secondly, the propensity to patent differs greatly across industrial sectors, and

37 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0%
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STI Performance of China
D9: Final Report

47
47
thus cross-country comparisons are subject to bias related to the sectoral composition of a country.
Nevertheless, the main conclusion of the analysis of global patenting development holds, namely that
China has increased its research and innovation capability as reflected by the considerable increase in
its share of global patenting over the past decade.
3.3. Sectoral specialisation of Business R&D in China
Development of industrial R&D expenditures in selected economic sectors
The empirical analysis of total and private R&D expenditures across all sectors above provides
interesting results on the general development of R&D expenditures in China. However, a sector
specific view is necessary to assess sectoral trends, and to identify which sectors contribute most to
the general development. Hence, in this section the analysis draws on the development of private
R&D expenditures between 2000 and 2010 at the level of industrial sectors as defined in Section 3.2.
First, the relative size of private R&D expenditures in China compared to the EU was examined. Figure
27 shows Chinese R&D expenditures in 2010 in various sectors as a percentage of the R&D
expenditures in corresponding sectors in the EU27.

Figure 27. Private R&D expenditures in China relative to the EU27 (2010)
Source: China Statistical Yearbook, Eurostat, own calculations
0.0%
10.0%
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48
‘Other transport and electrical equipment’
38
is the only sector in which Chinese firms spent more than
half the value on R&D than their European competitors. The gap is largest in ‘Pharmaceuticals’.
Altogether, Chinese firms spent around half of the amount of EU firms on R&D.
In a dynamic perspective, there is no sign of a slowing down of China’s catching-up in terms of R&D
expenditures (Figure 28). Catching up has even accelerated since the global financial crisis of 2008/09.
This is mainly due to different reactions of EU
39
and Chinese firms to the crisis. In the EU, firms stopped
expanding their R&D budget; this was not the case in China. As a consequence, catching-up has
accelerated considerably since 2007.


Figure 28. Development of private R&D expenditures in China relative to the EU
40
(2000-2010)
Source: China Statistical Yearbook, Eurostat, own calculations


38 Due to data constraints ‘Computers, Electronics and optical products’ and ‘Electrical equipment’ was summarized as ‘Electrical and optical
equipment’.
39 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
40 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0%
10%
20%
30%
40%
50%
60%
70%
80%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
R
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Other transport equipment
Electrical and optical
equipment
Machinery and equipment
Chemical Products
Motor vehicles
Fabricated metal products
STI Performance of China
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49
In the following figures, the analysis depicts the development for specific individual sectors in
comparison to the EU
41
, the US and Japan.
The analysis begins with ‘Chemical Products’ (Figure 29). The picture for China was found to be quite
similar to the overall development of R&D expenditure, though the growth performance seemed to
increase more after 2005. For the last period 2009-2010 - in sharp contrast to the overall development
– R&D expenditure in chemicals decreased slightly. In general, other countries seem to invest much
more in R&D for chemical products; however, a sharp decrease for Japan has been identified between
2000 and 2007, and for the US between 2001 and 2003. After 2003 the US - though rather volatile -
more or less stayed at the same level, while Japan’s R&D expenditures for chemical products
considerably grew after 2007. The EU invested most in R&D in this sector in 2010, showing a small but
rather constant growth between 2000 and 2010.

Figure 29. Private R&D expenditures for Chemical Products (2000-2010)
42

Source: China Statistical Yearbook, Eurostat, OECD, own calculations

Figure 30 shifts attention to private R&D expenditures for ‘Pharmaceuticals’. The global
pharmaceutical market is dominated by the US (see, e.g., Hu et al. 2013). Pharmaceuticals is a science-

41 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
42 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
M
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50
based sector with high entry barriers and a high degree of cumulativeness of the knowledge base,
which means that current R&D activities build considerably on expertise gained in previous research
(Marsili 2001). This was clearly confirmed when looking at private R&D expenditures in this sector.
Firms located in the US invest more in R&D in the pharmaceutical sector than the EU
43
, Japan and
China together, though the magnitude slightly decreased after 2007. For China the high growth
performance observed for ‘Chemical Products’ was not evident. Only since 2008, did Chinese
expenditures seem to have grown more intensively, but still at a lower level than that for ‘Chemical
Products’, which points to the cumulativeness of knowledge in this sector. The EU and Japan show a
very similar growth performance. Their growth in this sector between 2000 and 2010 is also markedly
higher than that for China.


Figure 30. Private R&D expenditures for Pharmaceuticals (2000-2010)
44

Source: China Statistical Yearbook, Eurostat, OECD, own calculations


43 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
44 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
M
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China Japan US EU
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51
For the sector ‘Computers, Electronics and Optical Products’ (Figure 31), some similarities to the sector
‘Pharmaceuticals’ were detected. The US was found to dominate this sector with respect to R&D
expenditures, though a considerable hiatus can be observed between 2001 and 2003. The EU
45
almost
caught up with Japan, but private R&D expenditures have remained more or less the same for both
since 2007. In contrast, China showed a stable significant growth between 2000 and 2010,
approximating the level of the EU in the medium-term.

Figure 31. Private R&D expenditures for Computers, Electronics and optical products (2000-2010)
46

Source: China Statistical Yearbook, Eurostat, OECD, own calculations

A completely different picture was found for the related sector ‘Electrical Equipment’ (Figure 32). This
was the only sector of economic activity out of all sectors under consideration where firms located in
China spent more on R&D in 2010 than their competitors located in the EU
47
, the US or Japan. In 2006,
Japan - though already decreasing before this - had the highest R&D expenditures in this sector, but
this was followed by a considerable hiatus between 2006 and 2007. While the EU took the role as
global leader in terms of private R&D expenditures in this sector in 2007, China overtook the EU in

45 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
46 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
47 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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US EU
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52
2009, showing a tremendous growth between 2005 and 2009. US expenditure did not change
significantly over the period putting it in fourth position just below Japan in 2009.
However, it is important to note that private R&D expenditures in this sector were generally lower
than in other sectors, such as pharmaceuticals or computers. Additionally, Chinese sectoral R&D data
is not completely comparable to that of other countries
48
. Nevertheless, the fast growth of China may
be to a large extent related to the establishment of Chinese firms as global players in the
telecommunications sectors. The telecommunications manufacturers ZTE and Huawei are notably the
most important ones in this context, also showing a considerable portfolio to local suppliers for high-
level assembling in the Guangdong region (Shenzen).

Figure 32. Private R&D expenditures for Electrical Equipment (2000-2010)
49

Source: China Statistical Yearbook, Eurostat, OECD, own calculations

48 Chinese data on sectoral R&D expenditures is not classified along the NACE 2.0 sectoral classification but uses a national classification
system. The transformation of Chinese data into NACE 2.0 leads to large amounts of R&D being allocated to electrical equipment but very
low Chinese R&D expenditures in Computers, Electronics and Optical Products. However, the patent analysis performed in the following
section reveals that Chinese R&D in both of these sectors grew at a similar pace over the last years. Therefore the results on R&D
expenditures of these two sectors have to be interpreted carefully, especially the allocation of a firm to one of these two sectors seems to
be treated differently in China compared to the EU, US and Japan. However, these two sectors can be summarized as electrical and optical
equipment when needed and results for this broader sector seem to be much more reliable.
49 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0
2,000
4,000
6,000
8,000
10,000
12,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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China’s development in the sector ‘Machinery and Equipment’ (Figure 33) was comparable with
overall Chinese development. A considerable growth performance was observed after the year 2003.
The EU
50
countries devoted most funds to this sector, followed by Japan and the US, with Japan
showing an increasing trend since 2009, while investments of US firms decreased after 2006. Also for
the transport related sectors (Figure 34 and 35), China showed more or less the same constant growth
pattern over the time period 2000-2010. Concerning ‘Motor Vehicles’ (Figure 34), it is worth noting
that R&D expenditures of firms located in the US significantly decreased over the observed time
period. Starting as global leader in the year 2000, the US was overtaken by the EU and Japan in 2002
and 2003, respectively. The EU and Japan showed similar growth patterns over the observed periods.
China has been closing the gap with the US which can be assumed as likely to continue in the near
future. Given the trend to be observed from Figure 34, China may overtake the US within a few years.

Figure 33. Private R&D expenditures for Machinery and Equipment (2000-2010)
51

Source: China Statistical Yearbook, Eurostat, OECD, own calculations

However, while the US showed a significant decrease in private R&D expenditures for ‘Motor
Vehicles’, the complete opposite development can be observed for the sector ‘Other Transport

50 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
51 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
M
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China Japan US EU
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54
Equipment’ (Figure 35), mainly comprised of R&D in aeronautics and in boats and ships. While the US
was the global leader in this sector over the whole time period, a tremendous growth is observed
between 2007 and 2008 for China. Private R&D expenditures nearly doubled in this year, mainly
related to extensive investment in aeronautics. As mentioned above, China showed a stable growth
pattern, as did the EU
52
. While the growth in the EU was, as for the US, driven by high growth rates in
aeronautics, the driving force behind the growth of Chinese R&D expenditures in ‘Other Transport
Equipment’ was huge R&D investments in ‘Ships and Boats’. In 2010, ‘Aeronautics’ only accounted for
20% of the total Chinese R&D expenditures in ‘Other Transport Equipment’. This was well below the
equivalent value for the EU for which 88% of R&D expenditures in ‘Other Transport Equipment’ were
spent on the subsector of ‘Aeronautics’. The R&D priorities within this sector are therefore clearly
different in China compared to the EU or US.

Figure 34. R&D Expenditure in Motor Vehicles (2000-2010)
53

Source: China Statistical Yearbook, Eurostat, OECD, own calculations

52 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
53 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
0
5,000
10,000
15,000
20,000
25,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
M
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Figure 35. Private R&D expenditures for Other Transport Equipment (2000-2010)
54

Source: China Statistical Yearbook, Eurostat, OECD, own calculations

Patent output in selected sectors and cross-cutting technologies
To provide a more detailed picture of the trends observed above, the remainder of this section is
devoted to China’s patent output in a global perspective. More information on China’s patenting
activities at the sectoral level is provided in the Annex.
Figure 36 presents the share in global PCT patenting for the year 2011 in the eight sectors and three
cross-cutting technologies under consideration (see Section 3.1), while Figure 37 depicts the number
of patent applications in China relative to the EU
55
. First, it is possible to observe the growth in overall
patenting followed by an overview of sectoral priorities in Chinese patenting, again in comparison to
the US, the EU27, Japan and RoW.

54 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data were not available at the time of writing.
55 EU refers EU27.
0
5,000
10,000
15,000
20,000
25,000
30,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Figure 36. Share in global PCT patenting by selected sectors (2011)
Source: OECD, REGPAT database, January 2013, own calculations

The results show that in 2011, China had a specialisation in the sector ‘Computers, Electronics and
Optical Products’ as well as ‘Electrical Equipment’, holding a share of more than 10% of global PCT
patents in these sectors. The high patenting activity in these sectors can be mainly explained by the
high number of patents related to Information and Communication Technologies. China hosts two of
the largest global players in telecommunications, the multinational enterprises ZTE and Huawei,
accounting for more than 30% of patents in these sectors and also belonging to the top patenting
actors worldwide. The average patenting intensity was around 5% to 7% share in PCT global patenting
and was found for the remaining sectors: ‘Chemical Products’, ‘Pharmaceuticals’, ‘Fabricated Metal
Products’, ‘Machinery and Equipment’, ‘Motor Vehicles’ and ‘Other Transport Equipment’.

0
5,000
10,000
15,000
20,000
25,000
30,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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57

Figure 37. Patent applications in China relative to the EU (2011)
56

Source: OECD, REGPAT database, January 2013, own calculations

A lower global share was identified for the three cross-cutting technologies, revealing a share in global
patenting of about 5% and lower in 2011. While in ‘Biotechnology’ and ‘Environmental Technologies’,
the share was about 5%, ‘Nanotechnology’ showed the lowest value with about 2% world share. This
is rather surprising since China has a high publication intensity in the field of Nanotechnology (see
Chapter 2). In the scientific domain, the increase in publishing may be explained by extensive
government initiatives to support basic research in this field. As for patenting, the comparably low
patenting intensity may be, on the one hand, explained by the lack of rather large private firms that
patent in this area, and, on the other hand, it may be the case that large firms, such as ZTE or Huawei
choose to patent in other IPC categories than Nanotechnologies.
In contrast, strengths of the EU27 in terms of patenting sectors appear to be ‘Fabricated Metal
Products’, and the transport related sectors such as ‘Motor vehicles’ and ‘Other Transport Equipment’.
The US and RoW showed a particular high patenting activity in ‘Biotechnology’ and ‘Nanotechnology’,
and Japan for ‘Electrical Equipment’ and ‘Environmental Technologies’. However, to get a deeper
insight into the development of patenting activities in these sectors and cross-cutting technologies, a

56 EU refers EU27.
0%
10%
20%
30%
40%
50%
60%
70%
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sector-specific view is provided in the Annex investigating the number of PCT patent applications for
each sector under consideration for the years 1990-2010.
To sum up, patent as well as R&D expenditure data are witness to a profound change in the
technological capacities of Chinese enterprises, universities and research organisations during the last
10-15 years. On the one hand, input and output in terms of R&D expenditures and patents has
increased considerably, although China still lags behind the US and the EU in these indicators. On the
other hand, there is a considerable specialisation visible in R&D as well as patent data, with strengths
in electronics, telecommunications, and transport equipment.


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4. China's STI policies and international strategy


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4. China's STI policies and international strategy
This chapter of the report describes the main STI policies and their implementation and provides
opinions on the main STI issues and future prospects gathered from desk research, project survey and
interviews. It is divided into the following sub-sections:
• Sub-section 4.1 – Overview of STI Policies - the main trends in S&T and Innovation policy, and
the likely future prospects.
• Sub-section 4.2 – Overview of STI funding - the main STI funding instruments.
• Sub-section 4.3 – Industrial and indigenous innovation policy and funding – policies, funding
and issues, including modes for STI development, and consequences for foreign firms.
• Sub-section 4.4 – Human capital policies and funding – policies, funding and issues.
• Sub-section 4.5 – Research and technology infrastructure - policies supporting this area and
their role in improving enterprise-research collaboration.
• Sub-section 4.6 – International cooperation strategy – policies and their implementation, in
particular with the EU; patterns for different stakeholders and role in developing STI
capabilities.
4.1. Overview of STI policies
This sub-section covers the main trends in Chinese STI policies including the current and likely future
priority areas. Firstly, core national STI policies are summarised. Supporting and regional policies are
also outlined. Finally, the main STI policies issues are analysed.
4.1.1 Core national STI policies

The current main guiding policies for Science, Technology and Innovation include:
• Medium and Long Term S&T Development Plan 2006-2020;
• Five -Year-Plans for Science and Technology Development (current plan 2011-2015).
Medium and Long Term S&T Development Plan 2006-2020 (MLP)
57,58

This plan aims to transform China into an innovative society by 2020. Achievement is assessed by four
main indicators: R&D as a percentage of GDP greater than 2.5%, advances in S&T contributing at least

57 Medium and Long Term S&T Development Plan 2006-2020, State Council, http://www.gov.cn/jrzg/2006-02/09/content_183787.htm (in
chinese). Last accessed on 14th May 2014.
58 Medium and Long Term S&T Development Plan 2006-2020, summary information, ERAWATCH (in English).
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60% to economic growth, reliance on foreign technologies reduced to less than 30%, and a rank among
the global top five countries in terms of patenting and scientific publication citations.
Grand challenges are recognised as key concerns with challenges in environment, energy,
agriculture, employment and indigenous innovation capabilities being considered as of highest
importance. For this breakthroughs are required in biotechnologies, ICT, new materials, advanced
manufacturing, renewable energy, marine science, laser technology, and aerospace technologies.
The plan seeks to encourage indigenous innovation through government procurement of high-tech
equipment and products and includes actions for stimulating greater R&D investment in R&D
performing firms, fostering the establishment of new indigenous R&D performing firms, reducing the
firms that do not perform R&D yet, increasing extramural R&D carried out in cooperation with the
public sector and increasing R&D in the public sector.
The plan is further detailed in five-year plans. The current plan is described below.
Twelfth Five -Year-Plan for Science and Technology Development 2011-2015
59,60

Promoting indigenous innovation and the contribution of S&T to societal challenges to address energy
and environmental constraints, an aging population, and an unbalanced and unsustainable
development pattern are the two key axes of Chinese innovation policy evident in this plan.
Achieving this will involve developing important emerging industries and technologies. Basic science
and technology will also be addressed through infrastructure improvements and cross-disciplinary
research through six national key science research projects.
The plan does recognise current weaknesses in the innovation system including government micro-
management in enterprise activities, lack of policy transparency and ineffective intellectual property
law enforcement, among others (MOST 2011). Following the publishing of this plan some areas of
weakness have been addressed in further policy documents and activities. For example, in July 2012,
the State Council held a conference on “deepening reform to accelerate national science and
technology innovation system view”, to establish a national innovation survey system. Also, in March
2013 the 12th National People’s Congress outlined the strategic document “Further reform of the
S&T system and build enterprise-centred innovation system,” released by the State Council in 2012.

59 Twelfth Five -Year-Plan for Science and Technology Development 2011-2015, State Council,
http://www.most.gov.cn/mostinfo/xinxifenlei/gjkjgh/201107/t20110713_88230.htm (in chinese). Last accessed on May 14th 2014.
60 Twelfth Five -Year-Plan for Science and Technology Development 2011-2015 Summary, ERAWATCH (in English).
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This policy is designed to strengthen “Industry-University-Research” linkages, and foster research and
innovation capacity in the business sector. Further, early in 2013 MOST began drafting the revision of
The Law of Promoting Technology Transfer which is expected to reflect the market-based relations
between universities and industry in technology transfer. Finally, in November 2013, MOST published
a draft report on a National Innovation Survey to be used to monitor innovation indicators.
Future research priorities
In addition to the previously described long-term policy documents, other long-term research visions
include “Technological Revolution and China's Future-Innovation 2050”
61
, published by CAS as a
roadmap for China's S&T development. Two further roadmaps on the future direction of
Nanotechnology and major Cross-frontier Technology also exist. In addition, those interviewed in the
context of this study considered that the future focus of S&T funding should be on emerging
technological areas, emerging industries and the energy and health sectors.
4.1.2 Supporting policies

Other policies that support different aspects of the abovementioned STI policies, will mostly be
discussed further in other sub-sections of this chapter. They relate to:
• Industrial or indigenous innovation e.g. the Development Plan of National Strategic Emerging
Industries during the 12th Five-Year-Plan Period (2011-2015), the National Plan for Building
Indigenous Innovation Capabilities in the 12th Five-Year-Plan Period (2011-2015) as well as
the plans for the development of specific industries (see section 4.3);
• Human capital e.g. the National Outline for Medium and Long-term Talent Development Plan
(2010-2020) and the National Plan for Medium- and Long-term Educational Reform and
Development (2010-2020) (see section 4.4);
• STI infrastructure e.g. the National Medium- and Long-term Plan for Building Key Science and
Technology Infrastructure (2012 - 2030), the 12th Five-year Plan for National High-tech Parks
(2011-2015) and the 12th Five-year Plan for National High-tech Business incubators (2011-
2015) (see section 4.5);
• International cooperation e.g. the EU-China 2020 Strategic Agenda or China’s recent policy
paper on the EU “Deepen the China-EU Comprehensive Strategic Partnership for Mutual
Benefit and Win-win Cooperation” (see section 4.6);

61 Technological Revolution and China's Future-Innovation 2050, Chinese Academy of Science, June 10, 2009,
http://english.bic.cas.cn/NE/200906/t20090619_7263.html: Last accessed on May 16th 2014.
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• Intellectual Property e.g. the Promotion Plan for the Implementation of the National
Intellectual Property Strategy in 2013 (see section 5.6).
4.1.3 Regional policies

Regional governments (provinces, municipalities) in China are granted a high degree of autonomy for
regulating and managing the local economy and society. Sub-national governments contribute about
a half of the total government investment in R&D.
The distribution of investment in research in China is concentrated in the east along the coast, which
performs more than two thirds of China’s research activities. Those questioned in the context of this
to this study indicated that it was still hard for companies that do not locate along the coast or in the
major cities, to obtain funding from the government. There are efforts to address these disparities.
For example, in 2012, the Ministry of Education released the Revitalization Plan for Higher Education
Institutes in Mid- and Western China (2012-2020)
62
.
At the same time, the regions where STI activities are most intense are often used as testing beds for
innovation policies. For example, the Framework for Development and Reform Planning for the Pearl
River Delta Region (2008-2020)
63
aims to upgrade existing low-end manufacturing and stimulate
modern service industries testing a more open innovation system based on innovation platforms.
4.1.4 Main STI policy issues

This section discusses some of the main STI issues including opinions from desk research, the project’s
survey and interviews where relevant.
In 2010, a report by UNESCO on China’s STI system, highlighted issues such as strengthening
protection of IP rights; overcoming financing difficulties that support small and medium enterprise-
driven innovation; improving cooperation processes among those main organizations charged with
supporting China’s innovation agenda, including enterprises, universities and research institutions;

62 http://news.nost.org.cn/2013/06/new-education-plan-10-billion-rmb-investment-in-100-local-universities-in-midwest-china/ Last
accessed June 2014.
63 http://www.provost.cuhk.edu.hk/prvo/provost_media/academic_initiatives/PDR_Framework_Eng.pdf. Last accessed June 2014.
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64
and putting further investment in basic research
64
(UNESCO, 2010), which it would appear to continue
to exist, though some progress has been made in recent years.
In 2012, the World Bank Report “China 2030: Building a Modern, Harmonious, and Creative Society”
65
,
identified the following weaknesses in the current innovation policies: the weak incentives for
government-funded research institutes to work with commercial users of new technologies; the need
for greater enforcement of intellectual property rights laws; insufficiencies in the evaluation of
government R&D expenditures, among others. This report recommended that government should
help build countrywide research networks to reduce disparities between the coastal and the inland
areas and even link to global networks. It also recommended fostering investment by high-tech
multinational corporations in R&D facilities, and the establishment of public technology platforms to
provide companies (particularly SMEs) with access to laboratory, metrology, testing, and certification
facilities. Higher education reform was also a key area recommended for reform, particularly in terms
of giving greater autonomy to institutions while, at the same time, strengthening ethical standards in
research. Interaction of higher education institutions with employers was encouraged to ensure that
curricula meet industry needs. In regard to increasing the share of basic research it suggested
entrusting sufficient funding to a few institutions with proven high-level of performance, and
maintaining that funding over a long period.
The progress made in addressing the serious lack of investment in basic research has also been
referred to in another recent study
66
(China-United States Exchange Foundation, 2013), which
comments that the implementation of the “Knowledge Innovation Project” and the “Construction of
World-class Universities” initiative, have enabled China’s basic research to make significant progress.
Even so, in January 2014, in the context of a mid-term review of Chinas MLP, as an external expert,
Denis Simon, of Arizona State University, continued to recommend greater emphasis and support for
basic research
67
. Other recommendations, by Denis Simon, in the context of the MLP review, included
better financial resources management, especially in terms of ensuring greater accountability for

64 UNESCO Science Report 2010: The Current Status of Science around the World, United Nations Educational, Scientific and Cultural
Organization, Paris, France, 2010.
65 China 2030: Building a Modern, Harmonious, and Creative Society, World Bank, 2013
66 US-China 2022: Economic Relations in the Next 10 Years", Chapter 12 Science and Technology Cooperation, China-United States Exchange
Foundation, 2013, http://www.chinausfocus.com/2022/wp-content/uploads/Part-02-Chapter-122.pdf
67 https://asunews.asu.edu/20140129-simon-china-innovation-strategy
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grant monies received from the government. It would appear that this is an issue already being
addressed. Pilot reporting began by MOST in 2013
68
.
Finally, in a recent article in the Guardian
69
, Cao Cong, of the School of Contemporary Chinese Studies,
University of Nottingham, cited a number of current issues with the STI system in China. One of those
mentioned included the need for greater coordination between the various government agencies with
responsibility for science, technology and innovation. This is an issue that the government has tried to
address in the establishment of its National Technology Innovation Project Coordination Group
including 15 ministries, among which NDRC, MOST, and MOF and the National Development Bank in
May this year.
4.2. Overview of STI funding
This section includes R&D funding instruments, incentives directed at industry and analyses the
opportunities and barriers of this funding for international cooperation.
4.2.1 R&D funding

The major funding agencies in China are the Ministry of Science and Technology (MoST), the National
Natural Science Foundation of China (NSFC), and the China Scholarship Council (CSC) affiliated to the
Ministry of Education (MoE). The Chinese Academy of Sciences (CAS) also has programmes to support
the researchers at its institutions in R&D activities including international collaboration. More details
on these instruments can be found in documents provided by the EU FP7-funded project
ChinaAccess4EU (www.access4.eu/China/). This report will list the main programmes following this
brief introduction.
In addition to the above, there are also several regional agencies providing science and technology
funds. The major funding agencies include Beijing Municipal Commission of Science and Technology
(BMCST), Science and Technology Commission of Shanghai Municipality (STCSM) and Guangdong
Provincial Department of Science & Technology (GPDST). Each of these agencies has special
programmes dedicated to international cooperation.

68 http://www.most.gov.cn/xinwzx/xwzx/twzb/kjbgfwxt/twzbwzsl/201403/t20140304_112124.htm (in Chinese). Last accessed on 20th
May 2014.
69 The science and innovation challenge for China's new leaders, Cao Cong, October 2013, http://www.theguardian.com/science/political-
science/2013/oct/08/science-innovation-china-leaders. Last accessed on 20th May 2014.
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Further, in 2012, the “Innovation Talent Promotion Project” was launched. This is a joint initiative of
seven central ministries with the goal of cultivating world-class scientists, engineers and business
leaders in China. The Chinese Academy of Agricultural Sciences (CAAS) has also recently launched the
Chinese Agricultural Science and Technology Innovation Programme (ASTIP) for 2013-25 to address
important agricultural issues in China, such as breeding, animal disease control and quality standards
on agricultural products, which will include international cooperation from 2016.
MoST
MoST is a ministry of the Chinese government that coordinates science and technology activities in
the country. MoST is the major funding agency of the central government that supports several
national level science and technology programmes. Its funding programmes are as follows:
1. National Basic Research Programme (973 Programme) - open to European researchers if
working at a Chinese host organization, focuses on basic research;
2. National High-Tech Research and Development Programme (863 Programme) – officially open
to European participation, focuses on pre-commercial high-tech projects;
3. National Key Technologies R&D Programme – not open to EU participation, promotes
technical upgrading and restructuring of industries;
4. National S&T Major Projects – not open to EU participation, currently 13 projects operating
on their own budgets as well as an umbrella scheme pooling funds from other programmes;
5. Agriculture S&T Achievement Industrialisation Fund – not open to EU participation, supports
the commercialization of mature agricultural technologies;
6. National New Products Programme - open to EU participation with a Chinese partner, for new
technologies, with indigenous IP, high impact or adopting international standards;
7. National Soft Science Research Programme – not open to EU participation, aims to provide
consultancy to the governmental decision makers;
8. International S&T Cooperation Programme (ISTCP) - supports Chinese scientists in
international research activities, covers projects under multilateral and bilateral agreements;
9. EU-China SME energy conservation and emission reduction research collaboration fund – for
SMEs registered in China with established EU partnerships in energy conservation and
emission reduction technologies;
10. Torch Programme – funding for building more than 50 national high-tech zones across China.

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NSFC
The current Development Plan of the National Science Foundation of China for 12th Five-Year Period
(2011-2015)70,71 has defined eight research areas for funding across a broad range of scientific
disciplines including management science. The plan mentions the following funding programmes:
1. General Programme - to promote the development of natural science disciplines and to
stimulate academic innovation, research topics are selected freely within the scope of NSFC;
2. Key Programme - frontier research, innovation resources integration and key scientific
breakthroughs, topics are structured according to the Five Year Plans;
3. Major Programme - scientific issues with strategic significance in China’s basic research;
4. Major Research Plan - forms groups of projects and coordinates with other programmes;
5. International Collaborative Research projects – open to EU participation, basic research.
NSFC also has the following programmes funding human resources (see section 4.4.) as well as funding
for particular activities related to Science and Technology including:
• Special Fund for Basic Research on Scientific Instruments- open to researchers in China,
supporting indigenous innovation and manufacturing capabilities in scientific instruments;
• Programmes of Joint Funds, the Programme for Public Understanding of Science;
• Special Fund for Scientific Activities for Teenagers;
• Special Fund for Key Academic Journals;
• Programme for International (regional) Academic Conference and Exchanges.
CSC
CSC is a non-profit institution affiliated to the MoE. It offers financial support to Chinese citizens
studying abroad and to international students and scholars studying in China (see section 4.4).
CAS
CAS is currently guided by a strategy entitled “Innovation 2020”
72
. It has the following programmes
funding human resources at its institutions (see section 4.4.): Einstein Professorship Programme;
Fellowships for Young International Scientists; CAS 100 Talent Programme; CPCCC 1000 Talent Plan;
and CAS Visiting Professorships.

70 Development Plan of the National Science Foundation of China for 12th Five-Year Period (2011-2015), National Science Foundation of
China, 2012 (in Chinese), http://www.nsfc.gov.cn/nsfc/cen/bzgh_125/index.html. Last accessed May 2014.
71 Development Plan of the National Science Foundation of China for 12th Five-Year Period (2011-2015), Summary, ERAWATCH.
72 Chinese Academy of Sciences. http://english.cas.cn
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4.2.2 Incentives directed at industry

This sub-section includes the policy instruments available for financing R&D and innovation, as well as
the current conditions for private funding including banking, venture capital and angel investment.
Government Financing
Among the different government funding programmes available for companies, it is important to
highlight the Innovation Fund for Small Technology-based Firms - InnoFund; and the availability of tax
incentives for high-tech and new-tech enterprises located in specific areas such as Science parks.
InnoFund
73
(Innofund, 2014) is run by MOST and MOF and is aimed at SMEs focusing on high-tech
R&D. The Chinese equity in the firm must be more than 50% and priority is given to high-tech and new
enterprises as well as start-ups founded by overseas returnees. It provides subsidized loans, which in
2012, totalled 4.37 billion RMB (0.52 billion Euros -1€ = 8.47 RMB).
Tax incentives are provided to high-tech and new-tech enterprises. They are taxed at a rate of 15%
instead of 25% and are entitled to “2-year tax exemption and 3-year 50% deduction” if located in
stipulated areas such as Science Parks
74
(ERAWATCH, 2013). In 2013 discussions about the use of
science and technology related incentives, the recommendation was for an expansion of this policy
75
.
The government is still considered to be the main player in the financing of innovation in China,
according to this study’s findings. It was pointed out that a large proportion of STI funding goes to
large SOEs and universities/institutions and not private companies. The current situation with SME
financing has been described in the China SME Finance Report 2013
76
(Shi, 2013). Although there are
government funding programmes to support companies, some interviewees commented that there is
still a lot of bureaucracy to obtain funds and that the low level of funding granted per project does not
compensate the effort required to obtain it. It was also stated that a lot of limitations still exist for
foreign companies. Nevertheless, it was pointed out that there are special incentives for foreign
owned Chinese companies that want to start new businesses (e.g. access to buildings and tax refunds).



73 Innofund, http://www.innofund.gov.cn/. Last accessed 18th May 2014.
74 ERAWATCH COUNTRY REPORT 2012: CHINA, ERAWATCH, 2013.
75 http://www.most.gov.cn/tpxw/201311/t20131111_110282.htm (in Chinese). Last accessed on 20th May 2014.
76 China SME Finance Report 2013, Shi Jian Ping, Mintai Institute of Finance and Banking / Central University of Finance and Economics
(CUFE).
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Bank Financing
State-owned banks in China dominate the financial system, providing loans at better rates to SOEs
over SMEs, which suffer credit shortages, particularly for R&D businesses
77
(Kirsten Bound, 2013).
SMEs account for around 20-25% of bank loans. Therefore, many SMEs still do not rely on bank
financing and prefer profit-based funding or trusts, credit guarantees, micro-credit companies and
pawn shops. As of the end of 2012, the number of microfinance companies had reached 6,080, an
increase of 2,000 or 41.99% from the end of 2011 and pawning enterprises reached 6,084, a year-on-
year increase of 16.20% (China SME Finance Report 2013). To overcome this, the China Banking
Regulatory Commission (CBRC) has established a set of rules aiming to incentivise the banks to finance
SMEs. Some progress has been made in this direction. In 2006, over 50% of bank loans were made to
large corporations
78
(Mckinsey, 2013). By 2011, the same source shows that this had decreased to
39%, with predictions of 33% by 2016.
There is also a lack of financing of innovation activities and new ventures by banks. This is also
confirmed by the STI China project findings. Perhaps the situation is beginning to change. One
evidence of this could be the foundation SPD Silicon Valley Bank in August 2012, as China’s first bank
committed to serving innovative sci-tech enterprises. This bank is collaborating with SPDB Shanghai
Branch, Shanghai Re-guarantee Co., Ltd and the Minhang District Government to provide credit
services to technology and innovation companies in the Minhang District
79
. Also, as of the end of 2012,
18 commercial banks had established a total of 40 various credit franchises and specialty branches in
the Zhongguancun National Innovation Demonstration Zone. One final point to note is that banks
mostly do not offer loans to foreign companies.
Venture capital in China
Venture capital (VC) indicators have been discussed in Chapter 2 of this report. There has been an
overall increasing trend in investment with declines in 2009 and 2012 and an overall peak in 2011
80

(EY, 2013). 2013 saw some recovery from the 2012 decline. Recently technology stocks have been
reported to be increasingly popular
81
(Crunchbase, 2014). Other popular sectors include finance,
consumer services and biotechnology, since the government is supporting these sectors or

77 CHINA’S ABSORPTIVE STATE Research, innovation and the prospects for China-UK collaboration, NESTA, 2013
78 http://www.mckinsey.com/insights/financial_services/a_new_direction_in_chinese_banking. Last accessed June 2014.
79 http://en.spd-svbank.com/_d276180977.htm. Last accessed June 2014.
80
http://www.ey.com/Publication/vwLUAssets/Global_VC_insights_and_trends_report_2012/$FILE/Turning_the_corner_VC_insights_2013
_LoRes.pdf Last accessed June 2014.
81 http://info.crunchbase.com/2014/06/vcs-say-ni-hao-to-chinese-startups/ Last accessed June 2014.
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encouraging other investment into these industries
82
(Techsource, 2013). Consumer services is the
most prominent sector (EY, 2013).
The government has begun to see VC as essential to encouraging indigenous innovation
83
and is a
major contributor to funding along with foreign funds. The establishment ChiNext in 2009, which aims
to attract innovative and fast-growing enterprises, especially high-tech firms, is also evidence of this,
providing a means for investors to recoup their investments via an Initial Public Offering (IPO) exit
84
.
Moreover, two other factors were mentioned by the China SME Finance Report 2013 that may
facilitate exits by share transfer - the “New Three Boards Expansion” approved in August 2012, and
the launching of the national SME share transfer system in January 2013, as a means to gradually shift
small regional pilot programmes of non-listed company share transfers to a national scale.
Government Guidance Funds have also seen an increase – totalling 102 in 2012 and raising 29 billion
RMB (3.42 billion Euros -1€ = 8.47 RMB)
85
. Most interviewees questioned in this study believed that
the risk and uncertainty are increasingly high for investors though and that there is still a lack of capital
to support entrepreneurs, particularly for early-stage investment.
Angel Investors in China
86

With the rapid growth of China’s economy and global entrepreneurship, even though the concept of
angel investment is relatively new in China, angel investors are increasing. China Business Angels
Network (CBAN) was established in 2008 in order to provide funding, business expertise as well
assistance to promising early stage companies in China. Moreover, the Angel Investment Network
opened a branch in China, providing communication channels between entrepreneurs and investors
as well as helping foreign businesses to form partnerships with investors in China. Recently, due to
domestic angel investment, many high tech industries and businesses have succeeded in China.
According to the interviews conducted by the STI China project, business angel investment is still
scarce in China and it was felt that the government could do more to improve this.


82 http://blogs.wsj.com/venturecapital/2014/04/27/china-venture-capital-lures-investors-back-as-fundraising-rises/. Last accessed June
2014.
83 http://www.chinabusinessreview.com/a-new-welcome-for-venture-capital/. Last accessed June 2014.
84 www.szse.cn/main/en/chinext/. Last accessed June 2014.
85 http://www.angelcapitalassociation.org/data/MannieLiu-2013ACASummit.pdf. Last accessed June 2014.
86 http://www.investmentnetwork.cn, last accessed in May 2014.
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4.2.3 Challenges and Opportunities for international cooperation

According to the interviews and surveys conducted by the past ChinaAccess4EU project financed
by the EC and also comments gathered in this study, international cooperation under Chinese
funding programmes presents some challenges that need to be addressed in order to improve
reciprocity and European access to Chinese funding. The main challenges identified include:
• Difficulty for EU researchers accessing information on funding opportunities. It is challenging
to find accurate and detailed information published in languages other than Chinese, which
limits access to Chinese speaking researchers or those with existing Chinese collaborators;
• Short call deadlines. Many calls are published only a few weeks before their deadline (often
3-4 weeks), although some regularity has been noted (i.e. calls published in the same period(s)
each year), which can present a significant challenge for international collaborative activities;
• A “good cooperation basis” between applicants is often a precondition for participation.
Hence, partners must be able to prove that they have already worked successfully together;
• Lead applicant must normally be Chinese or established in China. Lead applicants are normally
individuals and not organisations one-to-one contacts with individuals are very important;
• Low budgets compared to European projects. Personnel costs are not usually funded and
financial support is normally restricted to travel and equipment costs;
• Lack of transparency in terms of the selection procedures. It is not usually disclosed whether
peer review is implemented or whether the successful projects are selected administratively.
To turn some of these challenges into to opportunities it is necessary to:
• Leverage existing relations with Chinese partners to facilitate access to information and ease
the complex application procedures;
• Work with Chinese partners who have already extensive cross-cultural experience, which will
also help overcome cultural differences;
• Take advantage of contacts with Chinese scientists in Europe to support the establishment of
collaborative activities;
• Source funding from Europe to supplement participation in Chinese programmes (e.g. the new
EU-China Research and Innovation Partnership see section 4.6).



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4.3. Industrial Innovation, Indigenous innovation and its impact on foreign firms
This sub-section discusses industrial and indigenous policy, the approaches of Chinese companies to
STI, such as the modes for technology development / acquisition, the specific cases of SMEs and mid
cap companies, state owned enterprises, and large Chinese companies, as well as the impact of
indigenous innovation on foreign firms.
4.3.1 Existing industrial and indigenous innovation policy

The Twelfth Five -Year-Plan for Science and Technology Development stresses the promotion of
indigenous innovation and the contribution of S&T to societal challenges. It recognises this will require
the development of important emerging industries and technologies. Thus, the following main policies
were developed:
• Development Plan of National Strategic Emerging Industries during the 12th Five-Year-Plan
Period (2011-2015)
87,88

• National Plan for Building Indigenous Innovation Capabilities in the 12th Five-Year-Plan Period
(2011-2015)
89,90

In addition, individual plans have been published for particular sectors. Those that include a large
technology component include, for example: Environmental Protection; Waste Recycling Technology;
Solar Power Development; or the Bio-industry Development.
Development Plan of National Strategic Emerging Industries during the 12th Five-Year-Plan
This plan aims to promote and develop energy saving technology, next-generation information
technology, biotechnology, high-end equipment manufacturing, new energy, new materials, and new
energy vehicle industries to be implemented through 20 projects. The objective is that the value share
of these industries should reach 8% of GDP by 2015 and 15% by 2020, while the average annual growth
is expected to be above 20%, increasing fiscal and financial policy support, improving technical
innovation and human resources policies and encouraging a desirable market environment.



87 Development Plan of National Strategic Emerging Industries during the 12th Five-Year-Plan Period (2011-2015), State Council, 2012, (in
Chinese) http://www.gov.cn/zwgk/2012-07/20/content_2187770.htm. Last accessed on 15th May 2014.
88 Development Plan of National Strategic Emerging Industries during the 12th Five-Year-Plan Period (2011-2015), Summary, ERAWATCH.
89National Plan for Building Indigenous Innovation Capabilities in the 12th Five-Year-Plan Period (2011-2015), State Council, 2013 (in
Chinese) http://www.gov.cn/zwgk/2013-05/29/content_2414100.htm. Last accessed on 15th May 2014.
90 National Plan for Building Indigenous Innovation Capabilities in the 12th Five-Year-Plan Period (2011-2015), Summary, ERAWATCH.
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National Plan for Building Indigenous Innovation Capabilities in the 12th Five-Year-Plan
91

This plan builds on the document “Strategies on deepening the reform of the science and technology
governance and speeding up the construction of a national innovation system”
92
, which proposes a
number of actions to improve linkages between industry, universities, and research institutes. It
suggests the provision of R&D tax credit and deductions for SMEs to encourage business R&D. It also
highlights the need to facilitate cross-sector planning and S&T resource integration through investing
in intermediate agencies, public knowledge platforms and regional innovation planning mechanisms.
Further, strengthening IPR enforcement is emphasised to encourage international cooperation.
Thus, the plan, published in January 2013 includes the building of 50 world-class scientific research
centres and 100 national engineering centres to provide research infrastructure for universities and
industry by 2015. It targets agriculture, manufacturing, emerging strategic industries, energy and
transportation. It also addresses: strengthening university-industry linkages, attracting overseas
talent, improving intellectual property rights protection and management, and strengthening
international cooperation. The document stresses the strategic function of enterprise-driven
technology innovation, and the need for a stronger focus on collaborative innovation.
12th Five-year Plan on Environmental Protection
93

This plan suggests the following industrial policy actions to encourage the development of “green”
industries: offering incentives to enterprises engaged in sewage treatment, sludge treatment,
desulfurization, denitrification and waste disposal; improving the pollution charging system so that
high-pollution production faces higher costs; encouraging bank loan issuance for “green” projects; and
increasing the portion of “green products” on government’s procurement list.
12th Five-Year Plan Waste Recycling Technology
94

This plan proposes actions to support the development of technologies to recycle materials/re-use
products with priorities including scrap metal, electronic/ electro-mechanical products, and polymers,
industrial waste such as fly ash, coal gangue, or gypsum, as well as scale dissolution of smelting waste

91
ERAWATCH Summary,
http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/cn/policydocument/policydoc_0015?tab=template&co
untry=cn. Last accessed June 2014.
92 http://www.most.gov.cn/eng/pressroom/201211/t20121119_98014.htm. Last accessed June 2014.
93 China Briefing, December 23, 2011.
94 China Briefing, June 25, 2012.
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residue recommending enhanced financing for high-tech enterprises specialized in this area and
improved product certification.
12th Five-Year Plan for Solar Power Development
95,96
This plan highlights various areas in which R&D and innovation are required to support the
competitiveness of the solar power technology industry. This includes R&D to improve production
equipment used for polysilicon, silicon ingots/silicon wafers, cells and modules, thin-film cells, and
power generation applications in order to enhance product quality and PV conversion efficiency, and
to reduce energy consumption during production. It also proposes the strengthening of R&D and
applications of PV products in industries such as agriculture, transportation, and architecture. R&D
priorities for different types of PV technology are pin-pointed including: production techniques for
electronic-grade polysilicon; cutting technology for silicon carbide and steel wires; low-reflectivity
texturing technology; selective emitter technology; electrode alignment technology; plasma
passivation technology; low-temperature electrode technology, and full back junction technology as
well as system integration technology for solar PV power generation, among others.

Bio-industry Development Plan
97,98
The bio-industry is one of China’s emerging industries, pin-pointed as of key importance for the
country’s development. In terms of areas for R&D priorities, this plan highlights the following areas:
biotech drug development; high performance medical equipment development; breeding of new
varieties including molecular breeding technology and equipment; green technologies, new processes
and equipment, biological vaccines and veterinary drugs, biological pesticides, bio-feed, bio-fertilizers
and other important agricultural bio-products; bio-ethanol and biodiesel research; and large-scale and
high-throughput genome sequencing technology and equipment, massive biological information
processing and analysis techniques. The plan also makes proposals for the improvement of support at
all levels from industrial innovation incentives (including guidelines for venture capital) to
development of standards; improved coordination of actors in the innovation system; training and
attracting skilled personnel; as well as market conditions.


95 China Briefing September 19, 2012.
96 http://www.americansolarmanufacturing.org/news-releases/chinas-five-year-plan-for-solar-translation.pdf
97 http://www.gov.cn/zwgk/2013-01/06/content_2305639.htm (Chinese). Last accessed June 2014.
98 China Briefing, January 15, 2013.
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4.3.2 Approaches to STI

According to the survey conducted in this study, most respondents mentioned the approach of
cooperation with or outsourcing to universities/ CAS institutes as one of the most common means for
Chinese companies of dealing with STI. This cooperation would be particularly important for SMEs,
since respondents reported that they do not usually have in-house R&D activities. It would appear,
according to these opinions, that State-owned enterprises (SOEs) do not contribute greatly to STI.
However, SOEs still have a strong presence and are at a prominent position comparing to private
business in terms of assets and human capital. In addition, a number of studies, indicate that the
prevalent monopoly of SOEs impedes innovation, despite China’s effort to privatize them.
99
As to how
large Chinese companies use newly acquired dimension for STI development, most respondents
mentioned increasing in-house spending on STI and cooperating with higher education and public
research organizations. This situation suggests that opportunities for collaboration may exist for
European research institutes, however, a number of respondents considered it essential to have the
support of intermediary agencies in this process.
The translation of Public R&D investments into high quality scientific results and innovation
According to the survey conducted in the context of this study, the extent to which public R&D
investment is converted into high quality scientific results and innovation in China is still rather low or
even considered to be very low. Further, when asked to what extent they believe that the research
results are utilized by the business sector in China, although some indicated that China has
tremendous demand for technology, and government is facilitating the transfer of scientific research
outcomes to industries, the majority of the respondents considered that the extent to which the
results are used is still low/very low. It is not surprising that one of the key policy areas of action is
strengthening the links between research institutions and industry.
According to the report “Chinese Patterns of University-Industry Collaboration” research, Chinese
universities collaborate with the industrial organizations in technology and industrial fields via the
following mechanisms
100
:
 Technology transfer: This is usually done through license deals for research outputs that
generate patents;

99China’s Programme for Science and Technology Modernization: Implications for American Competitiveness, 2011
100 Chinese Patterns of University-Industry Collaboration, Asian Journal of Innovation and Policy, 2012
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 Collaborative R&D: Direct research projects for or with industrial firms are normally seen as
the best way to collaborate on specific solutions with industrial technologies and engineering
development and can be promoted by increasing research funds to industries. Joint R&D
centres with companies are still immature in Chinese universities. Chinese companies are
better at developing and improving existing products rather than doing research and inventing
new ones. China is a world leader in second-generation, process and production innovation,
but is still weak at novel-product innovation
101
(Breznitz and Murphree, 2010). Multi-National
Enterprises (MNE) from developed countries recognize China’s strong capabilities in science
and technology, as they set up new R&D labs near domestic universities or research
labs
102
(Wang et al., 2011);
 University-run high-tech companies: This occurs when industries operate on industrial
production based on the intellectual property or technology resources of the universities.
Although university-run high-tech firms are smaller in numbers compared to all companies in
high-tech zones, their innovative performances are among the best, being key forces for
innovation in China.
EU organizations are in possession of new technologies, which Chinese industry may be interested in
making use of, and also often used to providing practical solutions for industry, which may provide an
opportunity for collaborative activities. For those not experienced in collaborating with Chinese
organizations, intermediary support may be obtained via organizations such as the EU SME Centre,
the EU Chamber of Commerce in China or from consultancy companies working in China.
The main mode for technology acquisition
Regarding the main mode for Chinese companies to acquire technology, the majority of respondents
to the survey conducted by this study considered importing technology from abroad as the most
common mode. In-house development was also widely used followed by joint venture with foreign
companies, acquisition of Chinese technology, and collaboration with foreign universities/research
institutes. To tackle the challenge of acquiring technology, China launched the Catalogue for the
Guidance of Foreign Investment Industries in 2007. It requires technology transfer as a condition for
foreign firms to invest in China.

101How China innovatesRun of the Red Queen,CHINA ECONOMIC QUARTERLY, 2010
102 How Chinese firms employ open innovation to accelerate the development of their technological capability, Social Science Research
Network Paper, 2011
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The main barriers for Chinese SMEs in developing STI
The STI China survey respondents indicated that the high cost of innovation is the most important
barrier for Chinese SMEs in developing STI. In addition, insufficient funds, uncertain demand for
innovative goods or services, and lack of qualified personnel are also considered to be barriers.
According to a recent report, the lack of access to low-cost finance and the significant inefficiencies in
their financial supply chain are two major obstacles for SMEs innovating in China
103
(MasterCard
Worldwide, 2013). The same report recommends subjecting SOEs to market discipline; developing an
SME lending focus; reforming the interest rate regime and leveraging innovative solutions to improve
financial supply chain efficiency in order to address these. The role of bond markets in promoting the
development of financial services has also increased and various regions have begun to explore
financial reform, with online financing, as represented by Peer-to-Peer (P2P) lending, generating
controversy within the traditional financial sector
104
. One way to overcome the lack of innovation
facilities and resources faced by SMEs is to develop “clusters”, which can provide a platform for SMEs
in a region to share innovation facilities, or production resources. These will be discussed further in
section 4.5 on STI infrastructure.
4.3.3 Impact of indigenous innovation on foreign firms

Indigenous Innovation is designed to enhance “original innovation through co-innovation and re-
innovation based on the assimilation of imported technologies.” This sub-section examines the impact
of indigenous innovation policy for foreign firms.
FIEs, European companies in particular have been participating in China’s R&D initiatives and
contributing to the development of innovative capabilities of the Chinese economy through licensing
agreements with Chinese partners and R&D investments. The Chinese government encourages FIEs
to offer their expertise and establish R&D centres in China, as well as cooperate with Chinese research
institutions jointly participating in key S&T programmes, such as 863 and 973. FIEs which invest in a
joint venture (JV) and share its technology with a Chinese SOE would be granted privileged access to
the Chinese domestic market and such JV companies enjoy priorities in receiving loans from domestic
financial institutions and obtain tax incentives and favourable tariff schemes. It is worth mentioning

103 New Wave of Growth in China Innovation through Developing SMEs, MasterCard Worldwide, 2013.
104 China SME Finance Report 2013, Shi Jian Ping, Mintai Institute of Finance and Banking / Central University of Finance and Economics
(CUFE).
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that a JV agreement between China and FIEs in terms of technology transfer, including R&D,
production, sub-contracting, marketing, after-sale services, and local human resource training, can
occur in two ways: production localization and training of engineers. In addition, the government also
offers a series of incentives to foreign-invested R&D centers, and such incentives include exemptions
of customs duties on imported equipment, business and income tax deductions.
The Chinese government is seeking to minimize the country’s dependence on foreign technology and
brands through indigenous innovation, aiming at promoting the creation and commercialization of
Chinese-owned technology and intellectual property, thus foreign firms see indigenous innovation
policies as a means to limit their business opportunities in China’s economy. The Chinese
governmental organizations at the central and local level have issued indigenous innovation catalogue
and procurement policies to give preference to products that are certified as indigenous innovation
products (very few products are produced by Foreign Invested Enterprises (FIEs) in China) and
introduced incentives such as financing and tax relief schemes to encourage the development and use
of indigenous innovation products by Chinese companies. Indigenous innovation policies also
increased the patenting of Chinese inventors, especially on utility model and design patents as they
were inexpensive and easy to obtain.
According to the project survey, in regard to how the indigenous innovation strategy has been
performing since its launch in 2006, most interviewees refer to an improved innovation system.
Improvements indicated concern increased collaborative innovation and increasing
acknowledgement among firms regarding the need to innovate. On the other hand, the survey
conducted in this study found that the indigenous innovation strategy has made access to public
procurement opportunities in China more difficult for FIEs, due to barriers to market entry,
preferential treatment of domestic firms and products, as well as a higher risk of IPR infringement for
foreign firms. Others believe that since the procurement market is rather small compared to other
opportunities for EU firms, that it is not a significant barrier.
4.4. Human capital for innovation
Human capital is crucial for the development of an innovation ecosystem. Having acknowledged this
fact, the Chinese government has increased investments in education, health care, early childhood
development, among others. This sub-section will discuss human resources policies, funding to
support human resource development (excluding instruments that are mainly directed at
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international collaboration, which will be discussed in section 4.6) and the main issues concerning
human capital for innovation.
4.4.1 Human resources policies

In 2010, the State Council published a White Paper on Human Resources
105
, which summarises the
main policy actions that have been promoted to improve human resources development and the
mechanisms to train, attract, use and support talented people. The documents that most concern STI
include:
• National Plan for Medium- and Long-term Educational Reform and Development (2010-2020);
• The National Outline for Medium and Long-term Talent Development Plan (2010-2020).
National Plan for Medium- and Long-term Educational Reform and Development (2010-2020)
106

This plan addresses educational reform and improvement at all levels including issues such as equal
access, quality, life-long learning, and modernization, among others. Most relevant to human capital
development for STI are the strategies and reforms of the vocational and higher education systems.
In this respect, the higher profile of innovation and entrepreneurship is worth noting. In May 2010 the
government issued “Guidelines for Promoting Innovation and Entrepreneurship Education in HEIs and
Self-employment Activities of University Graduates” with the aim to encourage universities to create
courses and curricula on creativity, innovation and entrepreneurship. This aspect of entrepreneurship
education was then written into the current plan.
With respect to vocational education development, one of the main aims is to encourage a greater
cooperation between vocational schools and enterprises and a greater engagement of employers in
vocational training such that training more closely meets the needs of industry. The plan mentions
incentives for enterprises to invest more in vocational education, or to accept internees. Another
important area that the plan aims to address is the uneven level of education between urban and rural
areas and between different regions.
With respect to higher education development, the plan mentions the introduction of a “double
mentor system” and a postgraduate education innovation plan. Projects 985 and 211, allocating large
amounts of funding to certain universities and establishing National Key Universities were referred to

105 White Paper on Human Resources, State Council, 2010: http://english.gov.cn/official/2010-09/10/content_1700448.htm
106 https://www.aei.gov.au/news/newsarchive/2010/documents/china_education_reform_pdf.pdf. Last accessed June 2014.
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for continuation, although no new organizations have be added to project 985 from 2011, which
currently funds 39 universities.
The National Outline for Medium and Long-term Talent Development Plan (2010-2020)
107

This plan contains objectives for the enlargement of China’s S&T workforce over the next ten years
such that by 2020, China will have over 2 million researchers; 4.3 R&D personnel per 10,000 workers;
and R&D expenditure per researcher increases from the current €0.05m (RMB0.44m) to €0.12m
(RMB1m), approximately on par with the averages in the moderately developed countries.
In terms of Science and Technology personnel the focus will be on improving independent innovative
capacity, further reform of the science and technology system in terms of evaluation, intensify the
attraction of high-level overseas innovative talent. In this context, the continuation of the 100-Talent
Program, Chang Jiang Scholars Program, and National Science Fund for Distinguished Young Scholars
was mentioned. Increasing inter-disciplinarity and strengthening industry-university cooperation were
also stated as objectives for the coming years.
The plan further includes measures for increasing the number of trained personnel in areas where
there are shortages. Fields such as equipment manufacturing, information technology, biotechnology,
new materials, aerospace, international business, environmental protection, new energy,
communication and transportation, and agriculture technology were highlighted. The introduction of
demand forecasting was mentioned as was attracting talent to remote areas.
4.4.2 Funding for human resources development

Funding for human resources development is provided through programmes implemented directly by
the Ministry of Education (MOE) or as part of a range of STI funding programmes e.g. those funded by
NFSC or CSC (affiliated to MOE). CAS also provides programmes for researchers at its institutions that
support human resource development. Further, the Ministry of Human Resources and Social Security
has established a RMB 6 billion programme (0.71 billion Euros) with the objective to provide vocational
training to high school graduates and migrant workers.


107 http://cfd.seu.edu.cn/s/583/t/2172/73/24/info95012.htm Last accessed June 2014.
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MOE
The Yangtze River Scholar Award Scheme
108
aims to support the implementation of the National
Programme for Long-Term and Medium-Term Educational Reform and Development (2010-2020), and
the National Programme for Long-Term and Medium-Term Talents Development (2010-2020) by
attracting international talents, promoting existing talent, strengthening school education, and
improving the quality of higher education. High education institutions in central and western China
will be particularly strengthened. It is also important to note that this programme is open to European
researchers.

NFSC
The NFSC development plan for 2011-2015 list the following programmes for supporting human
resource development in S&T:
• National Science Fund for Talent Training in Basic Science
109
- aims at fostering practical ability,
preferential support to the bases in the western and north-eastern regions;
• Young Scientists Fund
110
- supports young scientists to freely choose their research topics
within the funding scope of NSFC to conduct basic research;
• Fund for Less Developed Regions
111
- supports scientists in specified regions to conduct
creative research within the funding scope of NSFC, facilitating the construction of the
regional innovation system as well as the social and economic development of the region;
• National Science Fund for Distinguished Young Scholars
112
- supports young scholars who have
made outstanding achievements in basic research to select their own research directions;
• Science Fund for Creative Research Groups
113
- supports research groups which carry out basic
research or applied basic research in China focusing on key research orientations and which
have prominent young scientists as pacemakers or backbones;
• Research Fellowships for International Young Scientists (see section 4.6).



108 http://english.jsjyt.gov.cn/news/keynews/folder612/2012/03/2012-03-142378.html Last accessed June 2014.
109 http://www.nsfc.gov.cn/Portals/0/fj/english/fj/pdf/2010/101.pdf, last accessed May 2014
110 http://www.nsfc.gov.cn/Portals/0/fj/english/fj/pdf/2013/051.pdf, last accessed May 2014
111 http://www.nsfc.gov.cn/Portals/0/fj/english/fj/pdf/2011/061.pdf, last accessed May 2014
112 http://www.nsfc.gov.cn/Portals/0/fj/english/fj/pdf/2011/041.pdf, last accessed May 2014
113 http://www.nsfc.gov.cn/Portals/0/fj/english/fj/pdf/2009/081.doc, last accessed May 2014
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CSC
The main CSC programmes open to European researchers include the following:
 CHINA/UNESCO - the Great Wall Fellowship - full scholarship programme set up by MOE for
candidates recommended by the United Nations Educational, Scientific and Cultural
Organization (UNESCO), only available to applicants who come to study as general scholars
and senior scholars;
 Chinese Government Scholarship Scheme - established by MoE in accordance with
educational exchange agreements or MoUs (memorandum of understanding) signed between
the Chinese government and governments of other countries, organizations, education
institutions and relevant international organizations to provide both full scholarships and
partial scholarships. The programme supports students who come to study in China on
undergraduate, postgraduate programmes, Chinese language training programmes, general
scholar and senior scholar programmes;
 Distinguished International Students Scholarship - set up by MoE to sponsor outstanding
international students who have finished their Bachelor’s degrees or above in China and have
been enrolled by designated Chinese HEIs (Higher Education Institutions) for higher education
or are now doing their Masters or Doctoral degrees in those institutions.
CAS
The main CAS programmes open to European researchers include the following:
 Einstein Professorship Programme - aims to enhance the science and technology links,
cooperation and exchange between CAS scientists and respective Einstein Professors and
their laboratories, and training of future generations of scientists in China, funds distinguished
international scientists actively working at the frontiers of science and technology to conduct
lecture-tours in China with a duration of one or two weeks;
 Fellowships for Young International Scientists - aim to facilitate academic exchanges and
cooperation between CAS institutes and international institutes and universities, and
development of talented scientists by attracting young international scientists to conduct
cooperative research at CAS institutes for 12 months.
 CAS 100 Talent Programme - aims to support and invite experts of the following categories to
China: overseas talent (Category A); domestic talent (Category B); project-based domestic and
overseas talent (Category C); winner of “National Excellent Young Scientist Fund” (Category
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D); winner of “Youth 1000 Programme” (Category Y); overseas and domestic talent funded by
individual employers (Category Z);
 CPCCC 1000 Talent Plan – aims to attract around 2000 leading individuals under the age of 55,
who hold professorships or equivalent positions in renowned foreign universities or research
institutes, for a period of 5 to 10 years. Besides this, another initiative was launched in 2011
– The Thousand Youth Talents Programme for Distinguished Young Scholars – which aims to
attract around 2000 excellent young overseas scholars, under the age of 40, by 2015
114
.
4.4.3 STI Human resource issues

Figures revealed by the Chinese Ministry of Science and Technology illustrate that the number of
Chinese researchers is increasing rapidly, it almost doubled in two years (from 1.05 million in 2008 to
2 million in 2010). It is estimated that by 2030, China will have around 200 million college graduates,
more than the working population of the United States. The quality of higher education has also made
fast progress: in 2003 there were 9 universities in the top-ranked 500 universities of the world, and in
2010 there were 22. There is, however an uneven geographic distribution of talent across the country
with a concentration in cities such as Beijing, Shanghai, Shenzhen and Guangzhou. There is also an
issue reported by interviewees in the current study of maintaining human capital. This could be
justified by often insufficiencies in training plans or even a lack of them, high competition between
companies for human capital, particularly in areas of shortage, and the attraction of working abroad.
Returnees have been seen as an important source of knowledge that could help push China´s progress
forward. Returnees are believed not only to act as an instrument “to strengthen the nation through
science and technology”, but also as a valuable linkage to the international scientific community,
helping to keep China more connected to the latest scientific advancements. As Hannah Sieber
115

(2013) mentioned in the report “Chinese ‘Sea-Turtles’ and Importing a Culture of Innovation: Trends
in Chinese Human Capital Migration in the 21
st
century”, the knowledge that returnees have acquired
has helped close the technological gap between China and the more developed countries. These

114 http://academicexecutives.elsevier.com/articles/china-building-innovation-talent-program-system-and-facing-global-competition-
knowledge, last accessed January 2014
115 Hannah Sieber, 2013. Chinese ‘Sea-Turtles’ and Importing a Culture of Innovation: Trends in Chinese Human Capital Migration in the
21st century, Duke University. Available at:
http://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/7560/Hannah%20Sieber,%20Chinese%20Sea-
Turtles%20and%20Importing%20a%20Culture%20of%20Innovation.pdf?sequence=1
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aspects were also brought to bear in the current study’s survey and interviews with interviewees
emphasizing the need to increase the incentives to attract returnees.
4.5. Research and technology infrastructure
In the following an overview of the role of the developing research and technology infrastructure, with
in particular the avenues offered in terms of cooperation between research centres and firms is
presented.
Chinese research and technology infrastructure has been developing rapidly due to the support from
the government.
4.5.1 Existing policies

China’s latest policy concerning research infrastructure is contained in the document “National
Medium- and Long-term Plan for Building Key Science and Technology Infrastructure (2012 -
2030)”
116,117
.

This plan calls for improvement in 7 strategic areas: energy, life science, earth system
and environment, materials, particle physics and nuclear physics, space and astronomy, and
engineering technology. The document proposes 16 major R&D infrastructure projects until 2015:
seabed scientific observation network, validation device for the high-energy synchrotron radiation
light source, an accelerator-driven transmutation research facility, a comprehensive experimental
facility for extreme conditions, an intense heavy-ion accelerator, efficient and low-carbon gas turbine
test equipment, a high-altitude cosmic ray observatory, a future network test facility, a ground
simulator for space environment, a translational medicine research facility, a south pole observatory,
a high-precision gravity measurement facility, a large-scale low-speed wind tunnel, a SSRF beam-line
station, a model animal phenotype and heredity research facility, a numerical simulator for earth
systems. The infrastructures are to be open to outside users and the need for increasing international
collaboration is emphasised.

There are two current Five-year plans that are also related to research infrastructure and
strengthening the link between research institutions and industry, one for High-tech Parks and the
other for incubators.

116 National Medium- and Long-term Plan for Building Key Science and Technology Infrastructure (2012 - 2030), State Council, 2013,
http://most.gov.cn/yw/201303/t20130306_99983.htm (in Chinese): Last accessed on 15th May 2014
117 National Medium- and Long-term Plan for Building Key Science and Technology Infrastructure (2012 - 2030), Summary, ERAWATCH.
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12th Five-year Plan for National High-tech Parks (2011-2015)
118


This plan aims to accelerate the development of high-tech parks and increase their innovation
capacity. The goal is to attract 3,000 overseas high-calibre professionals and establish 15
internationally competitive clusters with annual revenue of over 100 billion RMB (11.8 billion Euros -
1€ = 8.47 RMB). Strategic emerging industries will be prioritised as well as the service sector.
12th Five-year Plan for National High-tech Business incubators (2011-2015)
119


This plan aims to increase the total number of incubators nationwide to 1,500, of which 500 will be at
national-level. It also foresees that more than 30% of national-level incubators will have built business
nurseries and accelerators; more than 50% will have the facility to make angel investment; over 60%
of the employees will have received training on incubators; 80% will have created public technology
service platforms; and 90% will have established a start-up mentor system.

4.3.2 Current academia-industry infrastructures


In spite of support from the government, however, according to interviews conducted by the STI China
project team, close links between universities and industries appear to be quite scarce. The gap
between universities and industries is one of the main barriers to innovation in China. Incubators
/High-tech parks /clusters are types of infrastructures that can foster greater contact and
collaboration between these entities. This sub-section will discuss the current status of this type of
infrastructure in China.
The Torch Programme started in 1988, aiming to stimulate industrialization of high tech technology,
creating incubators and high tech zones. It represents a major institutional effort to support start-ups,
and, in 2011, 89 high-tech zones were overseen by this programme, contributing to over a third of the
national industrial output (e.g., Zhongguancun Science Park in Beijing) (Bound, 2013)
120
.
Incubators are mainly considered as a place for technology transfer coming from universities and
research institutes to meet the market by participants in this project’s survey and its interviewees.
China’s first incubator was born in 1987. Now there are a total of 614, of which 197 are certificated as

118 China Science and Technology Newsletter, MOST, January 2013.
119 Science and Technology Newsletter, MOST, February 2013.
120 Micah Springut, Stephen Schlaikjer, and David Chen, China’s Programme for Science and Technology Modernization: Implications for
American Competitiveness, 2011
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national incubators by Ministry of Science and Technology (MoST). The first technology business
incubator (TBI) was founded in Wuhan of China, and these have been growing since then. In 2010
there were 896 TBIs in China (China Torch Programme survey
121
). Also, there were 56.382 tenants in
TBIs in 2010, providing 1.170.000 jobs. From all of the 36,485 graduated tenants, 80% of the
companies survived the market competition, about 600 companies have annual revenues exceeding
CYN 100 million, and over 50 companies have successfully executed (Guo et al., 2012).
Interviewees also stated that there are a significant number of science parks in China, but that they
are not fully utilized. Many science parks are very far away from the city’s downtown, thus not
attracting Chinese or foreign staff. However, examples of successful science parks and incubators,
provided by those interviewed in the course of this study include: Zhongguancun hi-tech park and the
Tsinghua Science Park both located in Beijing, and the Zhangjiang hi-tech park in Shanghai.
Interviewees considered that incubators and parks play an important role in the promotion of
innovation clusters, technology transfer, and commercialization of research results in China. In
particular, they work as a networking, collaboration and resource-sharing platform for different types
of innovators. Clusters are also one way to overcome the lack of innovation facilities and resources
faced by SMEs, providing a platform for SMEs in a region to share innovation facilities, or production
resources. Cluster strategy has thus become one of the key solutions for policy makers in different
countries and SME clusters also have become a hub for researchers to seek cooperation with industry.
China is no exception. The clusters are mainly located in the coastal areas where the market system
and supporting schemes are more mature than those in other areas. Meanwhile, recently the western
part of China has also become a popular place for SME clusters as the government is developing the
region
122
(Chen, 2006).
Besides incubators and science parks, interviewees also pointed out that other intermediaries
facilitating the innovation process include foundations for industry-university joint research and
subsidies available at provincial level for cooperation, most of which are for Chinese companies and
universities.


121 China Torch Statistical yearbook 2011
122
SME clusters in China One way to build up innovation capabilities, Xiangdong Chen and Li-li Cao, 2006
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4.6. Patterns of international cooperation
The “open door” policy in China has enabled easier access to foreign capital and technologies and
spurred its knowledge-intensive activities. Indeed, China has emerged as an important research,
development and innovation (R&D&I), player and partner to many countries and organizations around
the world. This has led to the large majority of European Member State governments as well as many
institutes in Europe to establish concrete science and technology cooperation activities with China
such as joint R&D programmes, joint R&D centres or joint PhD programmes. This sub-section explores
international cooperation strategy and its implementation, in particular that with the EU. It comments
on the role of international cooperation in developing STI capabilities, its patterns for both private and
public stakeholders and the role of international researcher mobility in acquiring scientific and
technological information.

4.3.1 EU-China R&D cooperation strategy

The partnership between the EU and China has deepened over the years incorporating a greater
number of topics. For example, in the area of STI, in 2003 a Framework Agreement for establishing
industrial policy dialogue was established
123
(European Commission, 2003), in 2012, the setting-up of
the EU-China Higher Education Platform for Cooperation and Exchange was agreed
124
, while in January
2014, New EU-China Intellectual Property Cooperation was launched building on two previous
projects in this area
125
. The current basis for EU-China cooperation is summed up in the EU-China 2020
Strategic Agenda for Cooperation
126
(European Commission, 2013), which was adopted on 21st
November 2013 at the occasion of the 16th EU-China Summit. An important vehicle for STI
cooperation recently established is the EU-China Innovation Cooperation Dialogue, whose first
meeting took place in November 2013
127
. The meeting acknowledged cooperation progress in areas
such as food, agriculture and biotechnology, sustainable urbanisation, and aviation, as well as EU-
China cluster cooperation. It was also proposed to strengthen ICT cooperation in key topics such as
future telecommunications (5G), smart cities and the internet of things. Furthermore, the setting up

123
Framework Agreement for establishing industrial policy dialogue, 30 October 2003:
http://eeas.europa.eu/china/docs/ipd_291003_en.pdf. Last accessed on 21
st
May 2014.
124
http://ec.europa.eu/education/international-cooperation/documents/china/follow_en.pdf. Last accessed on 22nd May 2014.
125
http://eeas.europa.eu/delegations/china/press_corner/all_news/news/2014/20140116_en.htm. Last accessed on 22nd May 2014.
126
EU-China 2020 Strategic Agenda for Cooperation, http://eeas.europa.eu/china/docs/eu-china_2020_strategic_agenda_en.pdf. Last
accessed on 21st May 2014.
127 1st EU-China Innovation Cooperation Dialogue Joint Statement, 2013:
http://ec.europa.eu/research/iscp/pdf/policy/china_statement.pdf#view=fit&pagemode=none. Last accessed on 22nd May 2014.
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of an Expert Task Force on Innovation Cooperation to identify and promote successful practices in the
EU and in China, and to report on the EU-China Joint S&T Steering Committee Meeting and the next
Innovation Cooperation Dialogue was agreed. Since then, in March 2014, a Joint Statement was issued
by both sides entitled “Deepening the EU-China Comprehensive Strategic Partnership for mutual
benefit”
128
, which reaffirmed commitment to the aforementioned strategic agenda. At the same time,
China issued its own policy paper on the EU “Deepen the China-EU Comprehensive Strategic
Partnership for Mutual Benefit and Win-win Cooperation”
129
, which mentions areas in which China is
interested in STI cooperation.
EU-China cooperation related to research and innovation has followed a two pronged strategy with
on the one hand striving for increasing openness and access to each other’s funding programmes and
on the other specific cooperation in strategic fields and key thematic areas. Currently there are EU-
China research & innovation partnerships in the following areas:
• Food, agriculture, biotechnologies (FAB) - Collaboration context agreed through the EU-China
flagship initiative for research and innovation in FAB between the EC and CAAS in November
2013
130
;
• Sustainable urbanisation - Collaboration context agreed through the research pillar of the EU
China Partnership on Urbanisation. In May 2013, the agreed main topics for research and
innovation on sustainable urbanisation were: city planning, including urban governance and
institutional innovation; green urban mobility and transport; sustainable energy solutions for
cities; and Smart Cities
131
;
• Aviation and aeronautics – In March 2014, initial workshop discussed potential collaboration
topics. It was agreed to conduct a second round of bidding for projects that would be assessed
jointly in 2015 and start in 2016
132
(Mission of the People's Republic of China to the European
Union, 2014). The Ministry of Industry and Information Technology is the main organization
overseeing this collaboration on the China side;
• Peaceful uses of nuclear energy – For this topic, the organizations involved are specialised and
are based on the PUNE R&D agreement. "Nuclear Security and Safeguards" collaboration
takes place between the Chinese Atomic Energy Authority (CAEA) and the Joint Research

128 http://www.eeas.europa.eu/statements/docs/2014/140331_02_en.pdf Last accessed June 2014.
129 http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1143406.shtml Last accessed June 2014.
130 http://eeas.europa.eu/delegations/china/documents/eu_china/science_tech_environment/20131108_1_final_report.pdf
131 EU-China workshop “TOWARDS INNOVATIVE JOINT SOLUTIONS FOR COMMON URBANISATION CHALLENGES” Foshan China 30-31 May
2013, EU - CHINA JOINT RECOMMENDATIONS
132 http://www.chinamission.be/eng/kj/t1136195.htm. Last accessed on 23rd May 2014.
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Centre (JRC). "Fission Coordinated Actions" are defined between CAEA and the DG Research
and Innovation (RTD). MOST and RTD decided on "Fusion Energy Research" collaboration and
"Nuclear Safety" collaboration is decided between the National Nuclear Safety Administration
(NNSA) of the Chinese Ministry of Environmental Protection, and Joint Research Centre (JRC).
In addition, there is strong collaboration in research and innovation in the following thematic areas:
• Environment/Water – through the China-Europe Water Platform (CEWP) launched in 2012
133
;
In March 2014 experts from both sides met to develop draft Work Packages for the Co-lead
Partnerships within the CEWP
134
;
• Information and communication technologies – the FP7 funded projects OpenChina-ICT
135

and now CHOICE
136
and EU-China FIRE
137
comprise vehicles for supporting the definition and
strengthening collaboration in this area. EU-China Expert Groups now exist for collaboration
on future internet and Internet of Things (IoT), smart cities and broadband policy;
• Space – the EU-China Space Technology Cooperation Dialogue and the Group of Earth
Observation provide the framework for defining areas of collaboration with current
cooperation on the Civil Global Navigation Satellite System (GNSS)-GALILEO, and agreement
to foster new cooperation areas in satellite navigation science and its application;
• Energy - project twinning has taken place with MoST on concentrated solar panels and
innovative batteries, as well as a Joint Call with the Natural Science Foundation of China on
biomaterials. An EU-China SME energy conservation and emission reduction research
collaboration fund has been established as well as an EU-China Low Carbon Economy
Platform
138
.

4.3.2 EU-China R&D cooperation programmes

EU-China R&D cooperation in strategic areas, is being implemented via increasing access to each
other’s funding programmes. The EU’s FP7 and now Horizon 2020 are completely open to participation
from China including International Incoming/ Outgoing Fellowships, supporting researcher mobility.
Previous chapters of this report have also alluded to which Chinese programmes are accessible to EU

133 China-Europe Water Platform, http://cewp.org/. Last accessed May 2014.
134 http://cewp.org/news/co-lead-partnerships-successfully-launched. Last accessed May 2014.
135 OpenChina-ICT project website: http://openchina-ict.eu/. Last accessed May 2014.
136 CHOICE project website: http://euchina-ict.eu/. Last accessed May 2014.
137 EU-China FIRE project website: http://www.euchina-fire.eu/ Last accessed June 2014.
138
http://www.chinalce.eu/ Last accessed June 2014.
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researchers. In addition, two programmes have recently been specifically designed to provide specific
support to EU-China R&DI cooperation.
The first of these programmes relates to funding from the Chinese side, the China-EU Science and
Technology Cooperation Special Program
139
. Launched on January 22, 2013 by MOST, it is designed
to fund China-EU Science and Technology Cooperative Projects in themes from urbanisation and
renewable energy to ICT and health. Projects require at least 2 European partners and funding of up
to 3 million RMB (0.35 million Euros) is for the Chinese side only.
To ensure funding for EU researchers, in April 2014, the EU-CHINA RESEARCH AND INNOVATION
PARTNERSHIP (ECRIP) was launched by the EC offering 4 Million Euros to fund mobility of EU
Researchers to China
140
and distributed across five lots of EUR 800 000 each, corresponding to five
projects identified under the following strategic thematic areas: Lot 1: Renewable energy, energy
efficiency, sustainable energy solutions for cities; Lot 2: Sustainable urban development and urban
planning, green urban mobility and transport; Lot 3: Health, public health and welfare policies - life
sciences; Lot 4: Information and communication technologies, smart cities; Lot 5: Food, agriculture,
bio-technologies and water.

4.3.3 Cooperation between China and other countries

By way of comparison, it was noted that the US is collaborating with China in biotechnology by setting
up the Biotechnology Pilot Program. There is long standing cooperation in the area of energy and the
environment under the U.S.-China Ten-Year Framework (TYF) on Energy and Environment
Cooperation and through the EcoPartnerships programme. Furthermore, the US Department of
Energy and CAS have ongoing collaborations in high energy physics, nuclear physics, fusion energy,
and basic energy sciences.
Australia is collaborating with China through the Australia-China Council (ACC), which makes
recommendations to the Australian Government on strengthening the Australia-China relationship in
ways that support Australia's foreign and trade policy interests. The ACC has just released its strategic
programme for cooperation for the period 2014-2018
141
, which details the proposed focus of its grant

139
http://news.nost.org.cn/2013/03/china-launches-new-funding-round-for-st-cooperation-with-europe/ Last accessed June 2014.
140
http://ec.europa.eu/euraxess/index.cfm/links/singleNews/46520
141
Australia-China Council Strategic Plan 2014–2018, http://www.dfat.gov.au/acc/corporate-information/strategic-plan/
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programme and provide seed funds for innovative proposals. The Department of Industry oversees
the Australia-China Science and Research Fund
142
, which is funding 6 joint research centres in Australia
in specific areas of energy, materials, agriculture, and water resources, as well as group missions,
symposia, and mobility of young researchers.
There are also many examples of collaboration between China and individual Member States whether
by Joint Research Centres, programmes or calls for joint projects. Joint Research Centres can be
physical infrastructures or virtual activities. While there are many joint research programmes or funds
that address a number of particular strategic areas of collaboration there are also joint research
centers or programmes targeting specific individual topics. A collection of 20 randomly selected
examples are included below by way of illustration.




















142
Australia- China Science and Research Fund:
http://www.industry.gov.au/Science/InternationalCollaboration/ACSRF/Pages/default.aspx. Last accessed June 2014.
China-Italy Design and Innovation Center (CIDIC)
Sino-Swedish Joint Research Center of Photonics (JORCEP)
Sino-UK Geospatial Engineering Centre
UK-China Network of Clean Energy Research
UK-China Stem Cell Partnership Initiative
Sino-French Research Program in Mathematics
Joint Research Institute for Science and Society (Sino-French research)
Sino-French Laboratory in Computer Science, Automation
Sino-French Research Center for Life Sciences and Genomics
Sino-French Institute for Engineering Education & Research
Sino-German Life Science Platform
Sino-German Center for Research Promotion in Beijing
Sino-German Initiative on Marine Sciences
Sino Austria Bio-marker Center
Portugal-China Joint Innovation Centre for Advanced Materials
China - Croatia Ecology International Joint Research Centre
Danish-Chinese Center for the Theory of Interactive Computation
Danish-Chinese Center for Molecular Nano-Electronics
Danish-Chinese Centre of Breast Cancer Research
“Smart Energy in Smart Cities”, China – Netherlands Joint Scientific Thematic
Research Programme (JSTP) 2014
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Institutional collaborations: the main forms of international research/ innovation cooperation
China´s approach to international STI collaboration takes on many forms - from joint academic
research to technology transfer and licensing, FDI, mergers and acquisitions – which enable it to be
connected to various sources of expertise. China´s willingness “to buy expertise off the shelf” is what
differentiates its innovation approach from that of Japan or South Korea
143
( Bound, 2013).
Joint Venture is one of the main forms for Chinese companies (SOEs in particular) to promote
international research/ innovation cooperation and access foreign technology and funding, as well as
management and marketing expertise. This is consistent with the survey conducted by this study
which indicated joint ventures and sending personnel abroad as the main forms of international
research/ innovation cooperation.
Joint campuses, programmes and research networks are popular forms of academic collaboration. The
main benefits to open a joint research centre or lab in China could be to obtain access to data, research
facilities, funding, or knowledge. In November 2012 a joint workshop, organised by the by the EU
delegation and EU Member State embassies in Beijing was held to exchange views and experiences
with joint structures
144
.
The EU SME Centre, the IPR China SME Helpdesk, the EU Delegation to China and EURAXESS Links
China have recently developed a handbook with guidelines on the issues to consider when setting up
and developing a Europe-Chinese joint research structure in China including some of the main
challenges that may be faced
145
(EU SME Centre, 2013). This publication noted that over 60 joint
structures existed between public universities as of the end of 2012.
Sending personnel abroad is also another important form of international research/ innovation
cooperation for Chinese public research organisations according to the survey conducted by the
current study, besides participating in international collaboration projects and fellowship
programmes. In this context, the difficulty of EU researchers in going to China in comparison with
Chinese researchers going to the EU was highlighted. The substantial information asymmetries

143
CHINA’S ABSORPTIVE STATE Research, innovation and the prospects for China-UK collaboration, NESTA, 2013
144
http://news.nost.org.cn/2013/01/research-report-available-on-joint-research-centres-and-laboratories-in-china/ Last accessed June
2014.
145
How to establish a Europe-China Joint Research Structure?, November 2013:
http://ec.europa.eu/euraxess/data/links/china/docs/Handbook%20How%20to%20Establish%20an%20EU%20China%20Joint%20Research
%20Structure.pdf Last accessed June 2014.
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regarding the support for EU researchers to go to China and support available for them in Chinese
partner institutions were key aspects associated with this.
Several respondents to the survey conducted by this study also said that establishing contacts with
research organizations through visits, international conferences and co-authoring were also important
forms of cooperation.
Finally, it is important to note that with the increased support available to overseas returnees from
universities and research organizations, they are likely to play an increasingly important role in
bringing in new scientific and technological information and improving the research and teaching
performance in China as well as in promoting international collaboration.

The main function of international cooperation in developing China’s STI capabilities
International R&D&I cooperation has opened new opportunities for China, namely to attract
international partners to get involved in the development of joint activities, products, service and
business models, in particular for Chinese SMEs that can benefit from the resources of large research
consortia.
The interviews and survey conducted by the STI China project team also highlighted that international
cooperation has attracted foreign technologies and human capital, as well as facilitated China’s ability
to learn and assimilate the latest knowledge in relevant fields, catching up with the developed
countries. This is in particular an important topic, as China strives to develop itself by embracing
various technology transfer methods. Moreover, as reported by most respondents, the international
influence of foreign firms and international cooperation has upgraded the technological platform of
China, and brought new perspectives in the S&T field, thus improving its quality. International
cooperation was also seen as helping in the identification of gaps/opportunities for improving STI
capabilities. Exchange programmes, and setting up networks (e.g. alumni networks) were pointed out
as good ways to encourage and promote continued collaboration with individuals returning from
Europe. Similarly, most interviewees stated that the EU can benefit from the knowledge of the EU
nationals that have experience in China by promoting the organization of a network of EU citizens that
live or have lived and worked in China via such networks, workshops or discussion panels, among
others.

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5. Framework conditions for STI in China


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5. Framework conditions for STI in China
This chapter provides an overview of the Chinese innovation system and of the consequences for
innovative operators in China with each sub-section assessing any relevant policies and programmes
related to the topic and commenting on the adequacy of the framework conditions to the
development of a truly innovative economy.
This chapter includes:
• Sub-section 5.1 on “Development of firms”, which discusses the regulations with respect to
the creation and development of firms, including the specific case of non-Chinese firms, in
particular SMEs and mid cap companies operating in China;
• Sub-section 5.2 on “Public procurement”, which examines the indirect impact of regulations
on public procurement on foreign firms;
• Sub-section 5.3 on “The role of the “Investment Catalogue”, which specifies conditions fixed
for this type of investment and the impact on technological and scientific development in
China;
• Sub-section 5.4 on “The patenting and licensing system”, which covers the policies and main
issues associated with the development and progress of the patenting and licensing system
especially with respect to IPR protection and its compatibility with international standards and
patent systems;
• Sub-section 5.5 on “The development of Chinese standards”, which describes the
development of these standards and their impacts for foreign stakeholders participating in
RSI activities in China.
5.1. Development of firms
There are five main types of Foreign invested enterprise (FIE) which may be established in China:
Wholly foreign-owned enterprises (WFOE), Sino-foreign joint ventures which can either be equity joint
ventures (EJV) or cooperative joint ventures (CJV), Foreign-invested companies limited by shares
(FICLS), and Foreign-invested partnerships. Most foreign companies establish themselves either a
WFOE or an EJV.
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Current incentives for foreign investment into China
FIEs with an operating period exceeding 10 years can have tax exemption in the first two years of
operation and three years of tax concession at half rates, starting in the third year of operation. These
tax breaks start in the first profit-making year.
Many development zones in China, such as Tianjin Economic – Technological Development Area,
provide different incentives (including reduced income tax) to foreign service providers and high-tech
companies operating in the zone.
Challenges for Foreign SMEs in China
Foreign SMEs in China encounter greater difficulties in dealing with economic, regulatory and market
challenges than larger companies. Despite the government’s efforts to improve the business
environment, the system is still favouring large enterprises. The key challenges for foreign SMEs in the
Chinese market are detailed below.
Financing Restrictions
European SMEs in China have limited resources to surpass illiquidity: they do not have access to the
same range of financing channels as Chinese companies have.
New restrictions on Representative Offices
New restrictions were issued in January 2010 regarding representative offices of foreign companies,
in terms of maximum number of representatives, shorter validity of the Registration Certificate, and
at least two years of operations prior to opening the representative office.
The interviews conducted by the STI China project confirm that many newly established foreign
companies choose WOFE as their legal form in China rather than representative offices as in the past.
This may be justified by the restrictions mentioned above.
Regulatory barriers and Access to Information
Foreign SMEs have limited access to relevant regulatory information, difficulty in understanding the
changes in the regulations and do not have the resources and expertise to effectively deal with high
volume of administration work. The interviews conducted by the STI China project confirmed that it is
difficult for European SMEs to get accurate information on laws and regulations, there are lengthy
administrative procedures and it is hard to find a reliable partner. Moreover, there are regional
differences regarding the implementation of national policies due to the autonomy of local
governments such as the ones located on the east coast side of China where most R&D investment is
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made
146
(Bound et al, 2013). In general, interviewees felt that Beijing, Shenzhen and Shanghai are
stricter with the implementation of rules and thus it is easier for EU SMEs to do business in these
regions than in others.
Increasing Tax Burdens
Foreign SMEs do not enjoy any more reduced taxes as before. A single enterprise income tax rate of
25 per cent applies now to both FIEs and purely domestic enterprises. Since 2010, foreign enterprises
and FIEs have been required to pay a city construction tax (7% in city areas, 5% in country and township
areas and 1% in other areas) and an education surcharge of 3%, from which they had been previously
exempted.
Protectionism and compulsory technology transfer
Some Chinese policies such as those concerning Joint Ventures require compulsory technology
transfer to Chinese companies if foreign companies wish to operate in the Chinese market. This leads
to the risk of Chinese companies becoming their competitors in the world (China vs. the World: Whose
Technology Is It?, 2010).
Human resources
The interviews conducted by the STI China project found that there are many limitations for foreign
companies to hire people from abroad. The new visa policy also introduces further barriers. Hence,
more and more R&D activities have to be carried out by the Chinese staff. Meanwhile, finding and
maintaining suitable Chinese employees is also a challenge for foreign companies.
5.2. Public procurement
Due to the fast-growing economy and government policy to increase the procurement volume and
scope, public procurement in China has seen an average annual growth rate of 25% over the past
seven years
147
(2013 White Paper, AmCham China). The European Chamber estimated that China’s
public procurement market is worth about 20% of China’s GDP
148
(EUCCC Position Paper on Public
Procurement 2013/2014).
Under the 12th Five-Year Plan, infrastructure projects in areas such as civil aviation, railways, airports,
and energy are proposed to expand rapidly. This plan also includes guidelines to standardize

146
CHINA’S ABSORPTIVE STATE Research, innovation and the prospects for China-UK collaboration, NESTA, 2013
147
American Business in China, AmCham China, 2013
148
Public Procurement in China: European Business Experiences Competing for Public Contracts in China, EUCCC Position Paper, 2013
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government procurement level and terms for product specification across administrative levels. If
successfully implemented, evaluation transparency and accountability should be enhanced.
The MLP describes the role of public procurement in encouraging indigenous innovation and the
objective till 2020 (around 40% of total procurements), stimulating demand and investment in R&D.
Priority is given to companies which can transfer technology and provide training and other forms of
compensation in government procurement activities
149
(Tang and Li, 2011). Circular 618 from 2009,
clearly links indigenous innovation to government procurement. To be considered as “indigenous
innovation” the product manufacturer must own IP in China, with a trademark belonging to a Chinese
company, be registered in China and incorporate a high degree of innovation. However, in 2010
China’s government released revised draft provisions, under which most products by foreign
companies in China can be certified as indigenous innovation products and be eligible for preference
in government procurement.
Challenges for foreign companies
Chinese government policies related to public procurement present several challenges to foreign
companies, including difficulties with access, a lack of transparency in the procurement process, and
the decentralization of this process.
Access to Public Procurement
The Chinese public procurement market is not easily accessible for foreign companies. FIEs are
normally excluded from participating in the Tendering and Bidding Law (BL), including most
infrastructure and public work projects. The Government Procurement Law (GPL) does not include the
projects offered by public entities and SOEs that are of public interest and/or use public funds. For
those that are accessible, Chinese companies seem to be the preferred ones. The third offer that China
submitted to the WTO in 2011 still had a limited coverage and contrasts with the reality in which local
government procurement is conducted through projects by SOEs. The fact that foreign interviewees
consulted in this study want equality with Chinese companies suggests that the situation of
discrimination is not entirely resolved despite legislation stating to the contrary.
Also according to opinions gathered through the survey conducted in this study, public procurement
in China lacks transparency, as it often happens that the winner is already chosen before the public
tender has been announced. Opinion was that local companies and industries benefit from it while

149
Mini Country Report/P. R. China under Specific Contract for the Integration of INNO Policy TrendChart with ERAWATCH (2011-2012), 2011
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foreign companies have difficulty in accessing such opportunities and need to use agencies. Further,
European SMEs do not have good access to public procurement information, nor the proper channels
to apply for them, thus leading to unfair competition. Barriers were believed to exist for foreign
companies especially in the areas of IT, banking and insurance.
Non-transparent drafting of procurement catalogues
Central and local government procurement can only cover goods or services listed in the Central
Procurement Catalogue. The catalogue is updated by the State Council at central level and by
provincial government at local level. Foreign companies usually are not aware of any public
consultations during the drafting of national or local government procurement catalogue
150
(EUCCC
Position Paper on Public Procurement 2013/2014).
Decentralization of the tendering and approval process
In China, the majority of public bidding for government procurement is for the ministry or a public
entity, and any tender of public interest has to go through public bidding. Most provinces have their
own local regulations on government procurement with different requirements to the GPL. The public
tendering and approval process is increasingly decentralized. For example, there is no centralized
website available with information on new GPL tenders. Thus, companies need to build and maintain
a contact network at different levels of government to stay informed about opportunities. It is
therefore hard for SMEs, which have less resources than large companies to compete.
5.3. The role of the "investment catalogue"
The first Foreign Investment Catalogue was promulgated in 1995, and is now on its fifth revision. The
aim of the catalogue is to categorize foreign investment in China in specific industries as “encouraged”,
“restricted” or “prohibited”. If an industry is not referred to in the catalogue, it is considered as
“permitted”
151
(Keene, 2012).
Foreign investments in “restricted” industries need to meet more complicated and more burdensome
application requirements than those “encouraged” or “permitted”, as well as stringent government
review. Meanwhile, foreign investments in “encouraged” industries are eligible for investment

150
Public Procurement in China: European Business Experiences Competing for Public Contracts in China, EUCCC Position Paper, 2013
151
http://www.allens.com.au/pubs/asia/foasia22feb12.htm, last accessed in November 2013
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preferences, and companies can benefit from the less strict government review and the fewer
ownership restrictions.
The Catalogue also states the specific forms that investment should take, such as a Sino-foreign equity
joint venture. In addition, it also defines the foreign shareholder’s maximum stake in the enterprise.
The Investment Catalogue and the five-year plan by the Chinese government allow the foreign
companies to know where to concentrate their efforts (for instance, environment, energy and public
health), areas in which the Chinese government encourages and allocates more funds. They are thus
an indicator of demand.
2012 Newly Revised Foreign Investment Catalogue - Encouraged Category
Aims of the 2012 Amendments to the Catalogue are:
• Gradual opening of China’s economy to foreign investment;
• 12th Five Year Plan focuses on the “strategic emerging industries” (please see below the seven
industries addressed);
• 12th Five year Plan promotes the development of less developed regions of the country,
aiming to overcome the inequalities between eastern and southern cities and the western,
central and north eastern cities of China.
The encouraged industries in the 12th Five year Plan are the following: 1) Energy saving and
environmental protection; 2) New-generation information technology; 3) Biotechnology; 4) High-end
equipment manufacturing; 5) Renewable energy; 6) New materials; 7) Clean energy vehicles.
These and other changes to the encouraged category reflect China’s willingness to liberalize some
sources of investment capital, assisting the development of small businesses and promote innovation
technologies (Herrold et al., 2012).
According to interviews conducted in the current study, further opening of the permitted industries
would be desirable – the automotive sector, areas such as new materials, space and new energy were
all areas where joint ventures were proposed as a means to transfer technology required by China and
allow participation of FIEs in these activities.
Challenges for foreign companies
Generally, foreign investors would invest in any non-prohibited or non-limited industries after they
obtain the approval from the Chinese government. However, according to interviews conducted by
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the STI China project team, China’s investment approval authorities sometimes may favour domestic
competitors over foreign investors. Hence, the investment catalogue for foreign firms is still viewed
by many foreign firms as a domestic protection mechanism, not facilitating fair competition. The
current solution for this is the free trade zone, although even here, many consider that not many
changes have occurred.
5.4. Patenting and licensing system
In the following sub-section an overview of the development and progress of the patenting and
licensing system especially with respect to IPR protection and its compatibility with international
standards and patent systems has been developed.
IPR organization
With the integration in the World Intellectual Property Organization (WIPO) in 1980 and the accession
to WTO in 2001, China complied with the requirements of the WTO Trade-Related Aspects of
Intellectual Property Rights (TRIPS) Agreement, which addressed IPR and created laws and tools to
have a good IPR protection.
The State Intellectual Property Office (SIPO) is the authority that receives and analyses patent
applications in China. There are 3 ways of filing a patent: 1) direct filing in China (for foreigners, they
must use a local patent agent); 2) file a patent in the foreign country and then file an application in
China within 12 months, prioritizing on the first application; 3) file an international patent under the
Patent Cooperation Treaty (PCT). This way the patent could be filed in an EU country and the national
phase with SIPO should be no later than 30 months after the first application with PCT. It is essential
to apply for patent protection in China when there are innovation activities. The evaluation of patent
applications takes around three years and is performed by SIPO
152
(Delegation of the EU to China,
2011).
Copyright registration in China is free, easy and is highly recommended. It works in the same way as
in Europe, arising automatically upon the creation of copyrightable work. The registration is a proof
of ownership evidence, but if the copyright is not registered, it is advisable to keep evidence of the
creation and ownership of the copyright. Also, the work has to contain the author’s name, date of
creation and use of the © symbol. In China, the commissioned party owns the copyright for the work.

152
IPR in China: Guidance for Researchers, Delegation of the European Union to China, 2011
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Policy context
China has made huge progress in recent years with respect to IPR protection. In 2011, a study
identified areas still requiring improvement including political measures to pursue enforcement, lack
of coordination between government agencies, lack of resources for enforcement, local protectionism
and lack of judicial independence (James McGregor, 2011).
To prevent counterfeiting goods, China has established anti-piracy and anti-counterfeiting laws and
regulations. Since 2006, there have been criminal penalties for breaking these laws (Brad Herrold,
2012). However, one criticism was that these laws were not sufficiently enforced. Efforts have
intensified in recent years in this area through a “Special Campaign”. Figures in the White Paper on IP
protection
153
providing the results of this campaign state that from October to December of 2010, a
total of 805 patent cases were settled, 44.16% of the yearly amount. In terms of patent prosecution,
China has also joined the Patent Prosecution Highway mechanism, promoting the acceleration of
patent prosecution procedures. This will benefit both foreign and domestic companies that want to
file patents abroad. Moreover, the Supreme People’s Court (SPC) has adopted some US techniques
for judicial interpretations of patent infringement.
The 3rd revision of Patent Law, whose regulations for implementation came into force on 1
st
February,
2011 has brought further improvements at a legal level.
In April 2011, the China National Intellectual Property Strategy Office published “China’s Action Plan
on Intellectual Property Protection 2011”. This action plan intends to amend IP laws and regulations
in order to support IPR enforcement. It also refers to the need to strengthen the cooperation between
China and international institutions.
In November 2011, at the 22nd Session of the Joint Commission on Commerce and Trade (JCCT), a
number of IPR concerns were presented. The IPR Working Group committed to deepen the dialogue
about patent quality issues, government benefits regarding the owning and development of IP. In line
with China’s 2011 JCCT commitments, in November 2011 the State Council issued an internal circular
entitled “Notification Regarding Deepening the Work for Removal of Documents Linking Innovation
Policies to Government Procurement Policies” repealing national regulations that impose domestic IP
requirements for government procurement.

153
White Paper on IP Protection, SIPO, 2010, http://english.sipo.gov.cn/news/official/201303/t20130326_789188.html. Last accessed on
16th May 2014.
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The State Intellectual Property Office (SIPO) formulated and promulgated the 12th Five-Year Plan for
IP Talents in order to improve human resources available to tackle IPR issues. SIPO has also introduced
a series of partial regulations, such as “patent administrative law enforcement”, “patent examination
guidelines”, “patent pledge registration" system, among others, which makes the process more
transparent.
Regarding the National IP Strategy Plan for 2013
154,155
, SIPO has announces that it will:
• Prepare a work plan for intellectual property in China’s Strategic and Emerging Industries;
• Prioritize patent examination for industries such as clean energy;
• Improve copyright reporting, particularly the economic contribution of these industries;
• Increase hearings for IP cases, and experiments combining civil, criminal and administrative IP
cases;
• Promote openness in administrative proceedings as well as improve coordination between
administrative and criminal enforcement;
• Stimulate software legalization by the government and pre-installation of legal software;
• Continue effort on patent administrative enforcement;
• Conduct preparatory work for China to join the Hague Convention on industrial designs;
• Enhance the protection of geographical indications (GIs), and continue negotiation of the Sino-
European agreement on GIs;
• Develop access and benefit sharing rules for genetic resources;
• Enhance IP Management in national science and technology projects;
• Develop new rules and practices for transgenic biotechnology, including new rules on IP
protection in this area;
• Foster conditions for development of indigenous IP for overseas students returning to China;
• Continue to advance IP knowledge among students, as well as the IP service professions.
In April 2013, the SIPO Commissioner said that IPR protection in China is a long-term and complex
process, but it has been improving, and it needs cooperation with other countries, instead of
confrontations. Indeed dialogue between the EU and China on IP issues has taken place since 2003
156
.
The EU-China IP Dialogues and related IP Working Group, as well as two previous joint IPR

154
http://chinaipr.com/2013/03/25/national-ip-strategy-plan-for-2013/
155
Promotion Plan for the Implementation of the National Intellectual Property Strategy in 2013, SIPO, March 2013,
http://english.sipo.gov.cn/news/official/201303/t20130326_789188.html. Last accessed on May 16th 2014.
156
http://eeas.europa.eu/delegations/china/press_corner/all_news/news/2014/20140116_en.htm
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collaborative projects have taken place are demonstration of significant cooperation in this area
during these years. Since January 2014 a new joint project will begin between the Office for
Harmonization in the Internal Market (OHIM) and the European Patent Office on the EU side and the
Department of Treaty and Law of the Ministry of Commerce, on the Chinese side coordinating the
participation of more than 15 Chinese IP authorities. Among its proposed activities are EU-China
Customs cooperation on IPR, exchanges on legal and administrative IP issues - including best practices,
assistance in drafting IP law revisions and implementing regulations - and the compilation and
publication of databases on IPR issues.
Opinions on the current situation
The interviewees questioned in this study confirmed the government efforts in this area and
considered that these measures have brought positive achievements recognized by the international
community. It was generally believed that future measures of improvement are likely to align China’s
policies more closely with other international ones. Some suggested further improvements could
involve simplifying the rules for evidences and procedures before court as well as creating specialized
courts. Also, further efforts in regard to transparency were also suggested.
Challenges for foreign companies
Since for Joint Ventures compulsory technology transfer rights are required, it may result in the total
sharing of the know-how with the Chinese partner, dealing with the challenges associated with this
topic is of high importance. There are challenges with regard to access to information since there are
different patent strategies in different regions in China and the central government regulations are
constantly changing which makes it difficult for foreign companies to keep themselves updated. Many
illegal copies/counterfeit products still exist in China. It is very hard for a foreigner to get an invention
patent and the majority of patents are owned by Chinese universities. Moreover, trademark law is not
yet finalized. Foreign companies protect their IP by having support from the local embassy or
consulate, by a lawsuit or by non-official measures. To lower the risk of IP leakage of licensing in China,
foreign companies are adopting different strategies: 1) “modular strategy”: using different suppliers
to provide different components for a product; 2) “phased implementation” for research
collaborations: first agreeing a limited license to test the partner, and then later the additional transfer
of technology; 3) Close collaboration: developing a comprehensive IP agreement, identifying the role
of each partner. EU research institutions which tend to enter the Chinese market may be willing to
transfer their technology to their Chinese partners, although this sometimes results in the loss of
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competitiveness and market share in the mid/long term. Considering this, licensing is sometimes
preferred rather than ownership transfer.
5.5. The development of Chinese standards
According to the European Committee for Standardization (CEN), standardization “can be a bridge
between research, innovation and the market, which will in turn bring significant economic benefits”.
CEN quotes the World Bank view that, one of the most important economic benefits of standards is
increased productivity and innovative efficiency
157
(CEN, 2014). Thus standards are relevant to Science
Technology and Innovation because they support the innovation process by providing an important
basis for developing solutions and are essential for market update. This sub-section seeks to provide
an overview of the status of Chinese standards and their development describing the main bodies
involved with overseeing development, the main strategies used and their potential impacts, as well
as recent developments in collaborative efforts with the EU.
According to the Chinese Standardization Law, Chinese standards are categorized into 4 different
groups, namely: National Standards, Sector Standards, Provincial Standards and Enterprise Standards.
In 2011, China had around 3000-4000 National Compulsory standards, around 25,000 Voluntary
National Standards. Similarly it is estimated that there are between 40,000 and 100,000 Sectorial/
Industry/ Ministerial Standards with perhaps only around 20 % actively used and again around 15%
being mandatory. Beyond this, there are perhaps around 20,000 Provincial Standards of which 20-30%
are mandatory. Compliance with compulsory National Standards is a pre-condition for placing
products and services on the Chinese market. In addition, and unlike in Europe, compliance with such
standards is also required for the export of products and services from China
158
(Ernst, 2011).
One of the most recent phases of standards development in China kicked-off in 2002, with a multi-
year research project, which was also part of the 10th Five-Year Plan, aiming to provide future
recommendations for this area. In 2005, the results of the project were published, and inspired the
Chinese government officials to think further on China’s standards system. The results suggested that
a complete national technical standards regime aligning with international systems should be built to
increase Chinese participation in standard-setting activities at both regional and international level, as
well as to increase the adoption of Chinese standards by international standards-setting bodies.

157
http://www.cencenelec.eu/research/Pages/default.aspx: Last accessed on May 10
th
2014.
158
Indigenous Innovation and Globalization – The Challenge for China’s Standardization Strategy, Dieter Ernst , 2011
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Chinese standard development is based on a top down approach, normally managed by the Chinese
players, affecting the R&D system in China. In the EU, there is a “bottom-up” approach, where the
market drives the whole process. However both processes mostly compile standards within Working
Groups (WGs). In China these are part of various Technical Committees (TCs), which, for National
Standards, are supervised by the Standardization Administration of China (SAC), which has the overall
coordination of standardization work in China. SAC is administered by the ministerial body General
Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). For sectorial standards, the
respective ministry supervises the TCs. Another important body is the China National Institute of
Standardization that carries out research on standardization. There are also some important sectorial
bodies involved in standardisation such as the China Electronics Standardization Institute (CESI) or the
China Communications Standards Association (CCSA) (McGregor, 2011).
Some are of the opinion that the Chinese standards system is overly complex and subject to
fragmentation due to the number of stakeholders involved or that there is a lack of structured defined
concepts
159
(Ernst, 2011). The consequence of these factors means that the standards policy in China
does not exclude the participation of foreign companies, but it gives preference to Chinese firms. This
limits the ability of foreign firms to help develop the standard technology system.
In its 2008 review of China’s Innovation Policy, the OECD pointed out that China’s strategy seems to
be to set up technical standards as a means to promote indigenous innovation, while also participating
in international standards setting, aiming to promote its standards in this context
160
(OECD, 2008).
Some have suggested that this creation of national standards to compete with international ones, acts
as barrier to market access, forcing foreign firms to adopt Chinese technologies so that they can do
business in China
161
(Breznitz and Murphree, 2012). Others see China’s policy on standardisation as
one of the most significant issues that inhibit transfer of technology to China
162
(Atkinson, 2012).
Other studies point out that China also faces difficulties in competing against developing countries
whose standards require acquisition of expensive IPR, and thus its development of its own standards
is a strategy to overcome these difficulties and compete alongside developed countries such as the US
by reducing exposure to royalty and at the same time acting as a co-shaper of international

159
Indigenous Innovation and Globalization – The Challenge for China’s Standardization Strategy, Dieter Ernst , 2011
160
OECD, OECD Reviews of Innovation Policy: China, Framework Conditions for Innovation, (2008)
161
How China innovates: Run of the Red Queen, CHINA ECONOMIC QUARTERLY, 2010
162
Assessing China’s Efforts to Become an Innovation Society, A Progress Report, Dr. Robert D. Atkinson, May 2012.
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standards
163
(Ernst, 2011). Certainly, the intention is to use standards as an enabler of indigenous
innovation, which is seen through the integration of policies on standards with those on innovation,
IPR protection, and industrial development. However it is thought that the disconnection to security
policies could have a disruptive effect on this process.
According to the survey conducted in the context of this study, a number of responders pointed out
that Chinese standards are being developed and improving, with the collaboration between the
Chinese patenting authorities and the IEEE Standards Organization cited as a proof of this. When asked
about the cooperation methods that the interviewees consulted in this study have with international
partners in the areas of IPR and standards, some interviewees also stated that China is promoting
international cooperation with other countries through bilateral agreements. These agreements
reflect the Chinese government’s initiative to promote international partnerships. An example of one
such agreement may be demonstrated in the newly signed agreement between China and France to
strengthen the development of International Standards and facilitate the adoption of commonly
agreed standardization documents on March 26, 2014
164
(CNIS, 2014). This agreement commits both
sides to jointly develop international standards and adopting mutual standards in the areas of agro-
food, railway transport, e-health /silver economy, and in the sustainable development of cities. As a
means to overcome barriers for Germany and Chinese companies, Germany and the Standardization
Administration of China (SAC) have developed a Germany-China Standards Information Portal
(http://cn-e.standards-portal.de/) to provide a source of information for the standards and standards
systems of both countries including over 60,000 standards and this is updated monthly.
Cooperation is also evident with major industry. Similarly in December 2013, the British Standards
Institution (BSI) signed an agreement with the Standardization Administration of China (SAC), meaning
that industry can put forward British and European standards for potential recognition or adoption by
China
165
(BSI group, 2014).
At EU level, increasing collaboration can also be evidenced. For example the project “China EU
Information Technology Standards Research Partnership”, was co-funded by the EU under FP7’s
‘Socio-economic sciences and the Humanities’ programme from 2008-2010
166
.This project produced

163
Indigenous Innovation and Globalization – The Challenge for China’s Standardization Strategy, Dieter Ernst , 2011
164
China National Institute of Standardization (CNIS), http://en.cnis.gov.cn/zdxw/201404/t20140410_19169.shtml: Last accessed on 9th
May 2014.
165
http://www.bsigroup.com/Global/our-services/developing-standards/BSI-Standards-Outlook-2014-UK-EN.pdf. Last accessed on 9th May
2014.
166
http://www.china-eu-standards.org/: Last accessed on 9th May 2014.
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a set of policy recommendations for standards development in this field and its policy brief provides
some particularly revealing differences in the way that standards are viewed from Europe and from
China
167
(China-EU Information Technology Standards Research Partnership, 2011). In both cases
standards present barriers for trade, but for different reasons. They highlight increased cooperation
as the means to overcome these difficulties, including R&D and Innovation as a contributor to
standardization processes.
One recent step in increased collaboration between the EU and China is the establishment of the
Europe-China Standardization Information Platform (CESIP). Launched in 2012, it is designed as a
practical information tool for strengthening mutual trade and investment flows between Europe and
China by increasing the accessibility of standards and related technical regulations
168
(CEN/CENELEC,
SAC 2012). It currently has information on standards in 9 sectors: electrical equipment; medical
devices; machinery; environmental protection; aerosol containers; packaging; textiles; toys; child care
articles including over 4 500 European Standards, 3 000 Chinese National Standards and 16 000
Chinese Industry Sector Standards with information presented in English and Mandarin.
Thus, it can be concluded that although China has some way to go in terms of addressing certain
challenges associated with standardisation. It has certainly come a long way in recent years and
collaboration in standardization can be an important way to improve market access and conditions
for European companies in China and for Chinese companies in Europe, stimulating global competition
and thus, with positive consequences for innovation. Interviews conducted by this study were also in
agreement with further collaboration on this topic.

167
China EU Information Technology Standards Research Partnership European Policy Brief, March 2011,
ftp://ftp.cordis.europa.eu/pub/fp7/ssh/docs/china-eu-policy-brief_en.pdf: Last accessed on 10th May 2014.
168
http://www.cencenelec.eu/intcoop/projects/visibility/CESIP/Pages/default.aspx: Last accessed on May 9th 2014.
6. Conclusions and recommendations

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6. Conclusions and Recommendations


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6. Conclusions and Recommendations
This section aims to draw conclusions from the information gathered and activities provided within
this study as regard the challenges and opportunities provided by the development of China the short
and medium term (5 years) for the EU, thus up to 2020. These conclusions on challenges and
opportunities brought about by the development of China seek to provide information to guide the
decision making process in the context of an EU (and its Member States) /China STI strategy, in
particular the overall strategy described in the EU-China 2020 Strategic Agenda for Cooperation
169

(European Commission, 2013).
In line with the ToR for the study, this chapter includes specific sections on the following:
• Thematic areas of common interest – including challenges and opportunities for EU- China
collaboration in specific thematic areas including specific technology fields and/or subfields
for which China currently has the strongest position, as well as those in which China has a
future interest;
• Challenges and opportunities for EU higher education and research establishments including
cooperation strategies and development of working relationships with Chinese actors in the
research and higher education sector (joint research labs or other initiatives, mobility of
researchers, etc.);
• Challenges and opportunities for industrial stakeholders with respect to future domains of
competition with China in which China might become a S&T supplier in the short to medium
term. Challenges and opportunities for SMEs brought about by cooperation with STI
infrastructure in China and Chinese firms are also addressed;
• Current gaps identified in the understanding of China's STI system development and solutions
to improve understanding on China’s STI system on an on-going basis beyond the end of this
study.
Recommendations mainly addressed to EU and Chinese policy-makers have also been developed,
focusing on the ways in which the reality of China can be integrated in STI policy making and support
strategy development as well as help maximise the performance of the different EU actors in the way
that they interact with the STI system.

169
EU-China 2020 Strategic Agenda for Cooperation, http://eeas.europa.eu/china/docs/eu-china_2020_strategic_agenda_en.pdf
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6.1. Thematic areas of common interest
This sub-section discusses the challenges and opportunities for collaboration associated with specific
technology fields or subfields where China has currently a strong position, as well as those in which
China has a future interest. It considers the strategic areas of cooperation as defined by the EU-China
2020 Strategic Agenda for Cooperation and the corresponding activities specific thematic activities
that support them including the existence of collaborative research structures or programmes and
includes recommendations for future collaboration in each area.
According to the DRAGONSTAR project, which is supporting EU-CHINA STI cooperation activities,
regarding future innovation drivers “the quest or resources and the environmental problems (local and
global) will continue to be an important driver, and we could safely expect new technologies on
alternative materials, new-generation nuclear plants, as well as on renewable energy.” Thus
opportunities may continue to be expected in these areas.
Our study found data on R&D investment and research outputs such as patents and publications
suggests increasing competition in: ICT; environmental technologies and renewable energy.
EU-China 2020 Strategic Agenda cooperation for STI include: Food, agriculture, biotechnologies (FAB);
Sustainable urbanisation; Aviation and aeronautics; and ICT. Thus we have considered the
opportunities associated with each area and provide recommendations on ways in which EU-China
collaboration might be improved in them.

6.1.1 Food Agriculture and Biotechnology

Opportunities
In terms of the thematic areas for collaboration, with FAB, opportunities for collaboration are foreseen
in addressing the challenges of food waste; in Integrated Pest Management and biological control;
organic and low input farming systems; water and soil management; animal husbandry; urban
agriculture; and biotechnologies, according to the EU-China flagship initiative for research and
innovation in FAB, which is defining the strategic direction for collaborative activities in this area.
Regarding opportunities to obtain funding for collaborative activities under these themes, it should
be noted that the Chinese Academy of Agricultural Sciences (CAAS) has launched the Chinese
Agricultural Science and Technology Innovation Programme (ASTIP) for 2013-25, which will address
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important topics such as breeding, animal disease control and quality standards on agricultural
products. International cooperation will be undertaken in the second phase of this programme from
2016-2020. Also, the EU FP7 funded project LinkTADs will provide further opportunities for
strengthening cooperation with China in this area.
In addition, there is an increasing focus on the Green Economy by the EU and China, including
considerable development in environmental protection laws, stimulating green economy products
and technology. This situation is expected to increase opportunities for R&D and Innovation
collaboration in this area since environmental technology R&D and Innovation as well as
environmental technology possessed by EU organizations is likely to be in greater demand. In terms
of opportunities for collaboration related to the area of FAB and environmental technology, it is
relevant to note that the China-Europe Water Platform (CEWP), established in 2012 for supporting
dialogue and setting the direction of collaborative activities in this area identified that there are
opportunities for collaboration on mitigation of water shortage, flooding and impacts of climate
change. Opportunities are also thought to exist for EU enterprises in niche markets. The Green
Economy is also likely to be the subject of policy support instruments such as R&D funding
programmes which will provide opportunities for collaboration. For example, R&D relevant to the
Green Economy was the subject of a collaborative call for proposals funded by NSFC China, Agence
Nationale de la Recherche (ANR France), Deutsche Forschungsgemeinschaft (DFG Germany), the
Economic and Social Research Council (ESRC UK), and the Nederlandse Organisatie voor
Wetenschappelijk Onderzoek (NWO Netherlands) in December 2013
170
.
Challenges
The EU-China flagship initiative for research and innovation in FAB identified some important
challenges that need to be tackled to facilitate collaboration in this area, some of which were also
alluded to in interviews conducted in the context of this study.
The first two challenges identified by the FAB initiative include financing collaboration and raising
awareness about the opportunities for collaboration among the research community. A number of
interviewees consulted during this study also confirmed these challenges, particularly regarding
accessing information about reciprocal programmes and their potential benefits. The third issue that
has been detected by the FAB initiative, that will need to be overcome in order to stimulate

170
Europe- China call for collaborative research on The Green Economy and Understanding Population Change. Closing date: 16:00 GMT 3rd
December 2013
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collaborative research and innovation in this area, relates to market entry barriers for bio-based
products.
Further challenges related to environment and water identified by the CEWP include adapting
products to the specific needs of the market; protecting IPR; and finding the Chinese organizations
interested in partnering with European enterprises for joint projects in China
171
(CEWP, 2013).
Finally, although EU is a global leader in biotechnology (accounting for nearly 50% of global patent
applications over the whole time period considered in this study), evidence of European IPR concerns
remains, acting as a barrier to collaboration.
Recommendations
A key recommendation highlighted by the FAB initiative is to set up a mechanism in which approval
of a project by either side (EU or China) initiates co-funding from the other side. As far as EU funding
is concerned for SMEs, the possibility of using phase 3 of the SME instrument, in particular the equity
facility of the ‘access to risk finance’ instrument, has been suggested as a potential means to
encourage dynamic European SMEs to enter the Chinese market with innovative products and
solutions that are close to the end-users and markets.
Concerning the removal of bio-based product market entry barriers, the FAB initiative recommended
measures such as legislation to promote the use of such products and the development of their
market, green public procurement, or addressing standards/labelling claims about these products
(e.g. bio-degradability, bio-based content, renewable carbon, recyclability, and sustainability).
Interviewees consulted during this study also recommended strengthening support to structures that
can raise awareness of funding opportunities. This is an area where international collaboration
projects such as the EU funded Dragon star can play a role. EU member states along with specific
collaboration structures such as the Austria-China Research Center for Environment Protection, the
China-UK Sustainable Agriculture Innovation Network, which can also facilitate such activities. In
addition, dialogue between existing initiatives, e.g. the EU-China Flagship initiative for research and
innovation in FAB and China-EU Water Platform, would encourage mutual learning and exchange.


171
http://cewp.org/wp-content/uploads/2014/03/E1-CEWP-Business-Pillar-Report_EN.pdf. Last accessed on 22nd May 2014.
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6.1.2 Sustainable Urbanisation
Opportunities
Thematic areas in which opportunities for collaboration under the topic of sustainable urbanization
are foreseen have been identified in the areas of: City planning, including urban governance and
institutional innovation Green Urban Mobility and Transport, Sustainable Energy Solutions for Cities,
Smart Cities, by the EU China Partnership on Urbanisation, which is setting the strategic direction of
collaborative activities in this area.
In the area of sustainable energies, the existence of the EU-China SME energy conservation and
emission reduction research collaboration fund represents an opportunity for collaboration and for
EU organizations to provide R&D and Innovation services or technology in China. Also, since the area
of renewable energy is one of the emerging industries identified for particular policy support in China,
policy instruments to increase R&D and Innovation and help bring new technology to the Chinese
market will represent opportunities for collaboration and for EU organizations to help supply the
demand for new technology and innovative solutions. For example, collaboration opportunities have
been seen recently through project twinning with MoST on concentrated solar panels and innovative
batteries, as well as a Joint Call with the Natural Science Foundation of China on biomaterials.
Opportunities for collaboration in renewable energy, clean coal, smart grids, energy efficiency, green
buildings, e-mobility and carbon markets have also been identified by the EU China Low Carbon
Economy Platform. Joint EU-China research centres - China-EU Institute for Clean and Renewable
Energy-ICARE and Europe-China Clean Energy Centre-EC2 as well as a number of joint centres between
EU Member States (e.g. TU Delft joint centres in Water (Nanjing), and Urban Systems & Environment
(Guangzhou), the Sino-Finnish Environmental Research Centre – SFERC, or the LIA – Laboratoire
franco-chinois sur les énergies renouvelables) also represent established collaborations in this area
upon which there is an opportunity to build.
Challenges
Key challenges associated with the area of sustainable urbanisation were raised in the report of an
EU-China workshop “Towards Innovative Joint Solutions for Common Urbanisation Challenges”, that
took place in Foshan China from 30-31
st
May 2013. The first challenge is related to reciprocal
knowledge on urbanisation processes, in view of the widely different approaches to urban planning,
as well as historical and cultural differences. Another challenge is the fact that urban transport
collaboration requires compatible standards for energy storage, recharging infrastructure and journey
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planning. Concerning energy efficiency of buildings, the main barriers include lack of suitable joint
business models, different standards and restricted public procurement procedures. Finally, it was
noted that interactions with a range of local and regional authorities are required.

Recommendations
A key recommendation associated with the area of sustainable urbanisation identified within the
scope of this study is to strengthen dialogue between this area and collaborative activities in related
areas such as the EU-China Smart Cities collaboration as well as activities such as the SME energy
conservation and emission reduction research collaboration fund and EU-China Low Carbon Economy
Platform.
In addition, it is evident, given that the EU-China Partnership on Sustainable Urbanization is still in its
early stages that strong efforts will be required to the build networks of relevant actors as well as
mechanisms of dialogue between relevant sectors.
In terms of the removal of market entry barriers, the report from the workshop in Foshan also
mentions that the use of public procurement and legislation promoting energy efficiency would be
helpful to promote collaboration in this area.
6.1.3 Aviation
Opportunities
China’s aviation industry has witnessed rapid growth in recent years, transporting around 300 million
passengers in 2012. Thus the increasing demand for innovative solutions to support technology issues
faced by this sector, represents an opportunity for EU organizations or EU-China collaborative
activities to meet the innovation needs of this sector. As far as collaborative activities are concerned,
opportunities for collaboration are currently being identified at strategic level through the EU-China
Civil Aviation Project (EUCCAP). In March 2014 an initial workshop discussed potential collaboration
topics. It was agreed to conduct a second round of bidding for projects that would be assessed jointly
in 2015 and start in 2016. Cooperation opportunities have also been identified on the Civil Global
Navigation Satellite System (GNSS)-GALILEO and in satellite navigation science, by the EU-China Space
Technology Cooperation Dialogue and the Group of Earth Observation.

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Challenges
The EU CCC Position Paper 2013/2014 identified market barriers including restrictions in the area of
licensing that negatively affect the involvement of foreign companies in this sector.
From data compiled in this study, Chinese R&D expenditures in aeronautics appear to be significantly
lower than those of the EU (contributing only 20% of Chinese R&D expenditures for Other Transport
Equipment). Thus there may be some imbalance from the perspective of collaboration in this area.

Recommendations
The EU CCC Position Paper 2013/2014 recommends strengthening of dialogue in this area including
the establishment of regular strategic-level aviation dialogue between the European Union and China;
the resumption of broader platforms for discussion like the EU-China Aviation Summit last held in
2005; and the continuation of activities such as the EU-China Civil Aviation Project (EUCCAP) after it
ends in 2014. The report also suggests continuing work to remove market access barriers.
6.1.4 ICT
Opportunities
In terms of thematic areas representing opportunities for EU-China collaboration, it is relevant to
mention that the OpenChina-ICT project proposed the IoT, cloud computing, broadband mobile
communication, next generation Internet, network and information security, optical communication,
smart terminal and smart cities as priority areas of public cooperation between Europe and China in
the coming years
172
. The CHOICE project, which follows on from the OpenChina-ICT project, represents
an opportunity to build on the previous collaborative activities. Further, the EU-China FIRE project
provides an opportunity for future internet collaboration. In addition, EU-China Expert Groups now
exist for collaboration on future internet and IoT, smart cities and broadband policy, improving
conditions and increasing opportunities for EU-China STI collaboration in this area.
ICT is an area in which China excels not just in R&D, but also in translating knowledge into innovative
products. This is demonstrated by the fact that Electrical and optical equipment is one of China’s
strongest sectors in which production translates into exports. Patent results also show China holding
a share of more than 10% of global PCT patenting in Computers, Electronics and Optical Products.
Further, research fields such as Engineering, Materials science, and Computer science are among

172
http://openchina-ict.eu/files/2014/04/Cooperation_plan-06.04.pdf. Last accessed on 22
nd
May 2014.
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China’s top five strongest fields. Thus, opportunities to collaborate with China in this area are essential
to ensure a strong competitive environment continues to stimulate innovation.
Challenges
Several key challenges associated with cooperation in this area were identified by the OpenChina
project and also expressed in interviews conducted within the scope of this study. Besides technical
challenges such as the lack of a common technology architecture and interoperability issues and lack
of common standards, there are also concerns about market barriers and IPR as well as internet
governance, security and differing privacy policies.
Recommendations
Smart city collaboration was recommended by the OpenChina project to establish knowledge
exchange platforms and help strengthen the link between cities and enterprises. In addition, the
development of joint solutions such as those being developed under the EU-China FIRE project should
be extended to other priority areas. Also, links should be built for collaboration in other strategic areas
(e.g. ICT for agriculture, ICT for health).

6.2. Higher education and research establishments
The study’s conclusions in regard of higher education and research establishments are presented by
comparing the opportunities and challenges associated with different cooperation strategies such as:
• Human Capital Movements;
• Establishing Joint Campuses/Research Centres.

6.2.1 Human Capital Movements
Opportunities
Despite the imbalance between the numbers of Chinese researchers conducting research in Europe
and when compared to the relatively fewer European researchers wanting to re-locate to China, there
are a number of schemes available to support such researchers, which provide opportunities for
human capital movements.
On the European side, these opportunities are increasing. For example, in addition to International
Outgoing Fellowships for career development (IOF) - Marie Curie Actions, a new scheme has recently
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been established to support the strategic areas of cooperation between the EU and China, the
previously mentioned, EU-CHINA RESEARCH AND INNOVATION PARTNERSHIP (ECRIP) which will
provide 4 Million Euros to fund mobility of EU Researchers to China. In fact quite a number of Chinese
programmes are now open to participation from EU researchers.
Opportunities supporting human capital movements on the Chinese side include:
 MoST programmes: Those open to European researchers include the National Basic Research
Programme (973 Programme); the National High-Tech Research and Development
Programme (863 Programme); the International S&T Cooperation Programme (ISTCP); and
the EU-China SME energy conservation and emission reduction research collaboration fund;
 The International (Regional) Cooperation and Exchange Programme as the main NSFC
programme open to European researchers;
 The Einstein Professorship Programme; Fellowships for Young International Scientists; the CAS
100 Talent Programme; and the CPCCC 1000 Talent Plan as the main programmes for CAS
researchers to collaborate with European researchers ;
 The CHINA/UNESCO - the Great Wall Fellowship; the Chinese Government Scholarship
Scheme; and the Distinguished International Students Scholarship as the main CSC
programmes open to European researchers.
Chinese funding appears to be particularly focused on attracting returnees - Chinese researchers
(including those who now have a foreign nationality) who have been resident abroad. Thus, the
opportunities for human capital movement supported by China are increased for this group. Those
that are returning from the EU could also represent an opportunity for EU-China, by facilitating access
to Chinese programmes, since they will have an established network of contacts in the EU as well as a
greater ease in accessing Chinese programmes.
Challenges
According to information from EURAXESS
173
Chinese research institutions can find it a challenge to
promoting themselves internationally. Meanwhile, there is also some lack of knowledge about China
and of the quality of its research system among European researchers. In addition, the salaries in China

173
http://ec.europa.eu/euraxess/data/links/china/docs/Mobility_Meeting_Beijing_7December.pdf Last accessed June 2014.
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are lower than those in Europe and the high bureaucracy of the Chinese research system makes it
difficult to obtain relevant information and visas.
Recommendations
It is important that reciprocity of human capital movements is emphasized to maximise access to
contacts within China. Managing the arrangements through which Chinese researchers return from
Europe to China is also considered an important method through which the EU can improve its access
to Chinese funding programmes, in which it would normally be difficult to participate.
It is clearly in the interest of Chinese laboratories that managed to attract Chinese returnees from the
EU to stay in close contact with their previous European colleagues. It is thus recommended, in order
to encourage and maintain the cooperation with the returning scholars, that this aspect should be
incorporated into existing programmes and financial incentives – to include, for example, in some way
requirement to continue the collaboration with their EU counterpart researchers for Chinese
researchers that return to China after a period in the EU.
Respondents to the survey and interviews during the course of this study also noted that, in order to
encourage continued collaboration with Chinese researchers and students returning from the EU, it
would be beneficial to set up a Chinese alumni network - such as the one in Germany – perhaps
targeting specific research areas to encourage them in continuing collaborative activities with Europe.
EU researchers returning from China could equally be involved in such a network to increase the
impact of their experience in China.
6.2.2 Establishing Joint Research Centres
Opportunities
The project has identified opportunities for EU organizations in accessing incentives offered by the
Chinese government to R&D centres funded through foreign investment – these include exemptions
of customs duties on imported equipment, business and income tax deductions. It also appears easier
for foreign entities that have invested in R&D centres in China to apply for joint participation in key
S&T programs, such as the 863 and 973 programmes. The project interviews also indicated that
permanent sharing of research facilities and infrastructure strongly helps to increase contacts with the
Chinese research community, increasing opportunities for collaboration.


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Challenges
According to the handbook “How to Establish a Europe-China Joint Research Structure” co-edited by
the EU SME Centre, the IPR China SME Helpdesk, the EU Delegation to China and EURAXESS Links
China one of the challenges that may be encountered in such an activity include aligning work between
Chinese and EU academic systems which are quite different. This mechanism of collaboration requires
the allocation of substantially greater levels of investment than other mechanisms of collaboration of
a more sporadic nature. There may also need to be some sensitivity in approaching certain specific
topics given China’s political environment.
Recommendations
Strengthening of EU support for the implementation of Joint Research Structures in China is
recommended to help increase EU access to relevant data, research funding, facilities and talents in
China. These joint structures have been reported as offering valuable support to collaborative
activities from both sides from an educational point of view by students as well as being appreciated
by industry. For example, EU companies have mentioned them in connection with facilitating their
cooperation with Chinese companies or universities. In particular, they can be used to assist EU
companies to commercialize the research results. Continued support to the implementation of such
long-term cooperation mechanisms - providing a "legal and administrative cornerstone" for the
cooperation between EU-China research institutions – is thus required.
Recommendations from the handbook “How to Establish a Europe-China Joint Research Structure”
co-edited by the EU SME Centre, the IPR China SME Helpdesk, the EU Delegation to China and
EURAXESS Links China as well as stakeholders interviewed in this study also consider it important to
carefully select the Chinese partner and sign a non-disclosure agreement before starting the
negotiation, and emphasized EU SME Centre services to support the establishment of research
platforms in China.

6.3. Industrial stakeholders
Section 6.3 examines challenges and opportunities for industrial stakeholders including SMEs and
makes recommendations for:
• Industry-Research Collaboration;
• Infrastructure for Industry cooperation.
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6.3.1 Industry-Research Collaboration

Opportunities
The increase in the amount of foreign-invested R&D centres in China has been identified as creating
more opportunities for collaboration. It is believe that this has been assisted by a series of incentives
that support the implementation of such centres. These also increase opportunities for EU companies
to both access Chinese R&D human resources and develop R&D localization strategies in line with
China's specific market demands.
The increasing clustering of SMEs is also enhancing opportunities for industry-research collaboration
by providing a platform for sharing and exchanging of knowledge, ideas and resources, thus fostering
industrial innovation. These clusters have allowed EU companies, especially SMEs, to better access
their relevant Chinese company and researcher counterparts. The clusters have also become a hub
for (Chinese and EU) researchers to seek cooperation with industry.
In March 2013 the 12th National People’s Congress outlined the strategic document “Further reform
of the S&T system and build enterprise-centred innovation system,” released by the State Council in
2012. This policy is designed to strengthen “Industry-University-Research” linkages, and foster
research and innovation capacity in the business sector. Thus, while the government acknowledges
that a substantial gap remains between industry and academia, a number of initiatives are being
established to improve the situation, which means that opportunities are likely to increase for
industry-research collaboration.
Further, due to the fact that IPR awareness in China is growing, including by Chinese companies, the
conditions for collaborative activities are also improving, thus increasing the probability of industry-
research interaction.
Challenges
The study has shown that there still remains a large gap between research and industry in China in
many sectors. The comments from interviews were that R&D departments of companies in China
mainly focus on development rather than research, whilst Chinese research institutes in general lack
experience relevant to provide innovative solutions that are useful to industry. For instance, the study
analysis shows that whilst there are a growing number of patents being filed in China, many of them
are not then being utilized by industry.
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The Investment Catalogue, viewed as a domestic protection mechanism, still remains as a challenge.
Recommendations
Stakeholders recommended further support from the EU to create more opportunities for EU and
Chinese science and industry to collaborate. In this respect, the EU SME Centre in Beijing is in a unique
position to further the involvement of EU SMEs in clusters (including EU/China cluster-to-cluster
collaboration), and it is thus recommended that the EU SME Centre implement a specific strategy for
this, working alongside the current cluster development programmes that are being implemented by
DG Enterprise and Industry as well as being involved in EU-China dialogue working groups involving
such structures.
The opening of the investment catalogue is regarded as very important – and it should be a key EU
policy objective to reduce the perceived negative of the catalogue in general. Specific sectors in which
interviewees believed the EU could push for further opening include new materials and space
technology – allowing EU companies to cooperate more effectively with Chinese research institutions
and universities, or set up joint ventures with Chinese partners.
More support was requested from stakeholders consulted in this study on the issue of standardization,
in particular pro-active communication with the relevant standards authorities in China to obtain an
improved understanding of the changing regulations as well as a means to disseminate this
information in more centralized way. One that will also allow EU companies to share experiences in a
structured manner. The activity of the current EU-China collaboration in this area CESIP could be
expanded and more widely promoted through existing industry structures such as the EU SME Centre
in Beijing.
6.3.2 Infrastructure for Industry cooperation

Opportunities
Incubators and science parks are seen as playing an increasing role in the promotion of innovation
clusters, technology transfer and possible commercialization of research results in China. In particular,
they work as a networking, collaboration and infrastructure-sharing platform for innovators. In this
sense, they may represent increased the opportunities for EU organizations, by providing improved
conditions for STI activities, in particular the commercialization of research results in the Chinese
market.
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There are also “Technology Transformation Funds” that help to subsidise equipment upgrades for
specific purposes, such as energy saving, emission reduction, and the adoption of new generation
technologies. These may provide opportunities for funding STI infrastructure in private organizations.
Significant investments in physical infrastructure that can support industry, with very large
investments in renewable sources of power, smart grids and rail transport has been identified,
representing improved opportunities for conducting STI activities in China. According to the document
entitled “Strategies on deepening the reform of the science and technology governance and speeding
up the construction of a national innovation system”, China aims to build 50 world-class scientific
research centres and 100 national engineering centres, which will also provide improved opportunities
for STI collaboration.
Challenges
Access to R&D infrastructure in China remains difficult for EU companies, although in part this is
helped through the jointly invested R&D centres.
Another challenge is related to the fact that Joint R&D centres with companies are still immature in
Chinese universities. Chinese companies can be focused on developing and improving existing
products, rather than research and innovation. For example, China is a world leader in second-
generation, process and production innovation, but is still weak at novel-product innovation.
Recommendations
One key recommendation to improve infrastructure for industry cooperation is to increase the role of
EU SME Centre in Beijing in clustering initiatives being developed in China. This will support liaison
with Chinese companies and allow foreign invested companies (particularly SMEs) to better take
advantage of specific policy instruments and programmes as well as to gain access to specific
infrastructure – including that specified in the Medium and Long Term S&T Development Plan 2006-
2020 seeking to encourage indigenous innovation through government procurement of high-tech
equipment. Increasing access of industry to funds is also seen as a means to promote research projects
with EU and Chinese firms.



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6.4. Recommendations for improving the EU’s understanding on China’s STI
Since up-dating the data related to the indicators can be done more efficiently than collecting it for
the first time, it is recommended that the European Commission comes to a structured agreement for
a period of a few years to do an up-date of a given basic list of indicators, for which international
comparison is possible and to show the trends in time. Concerning publications, the data is always
available, that is: it can be retrieved from the Scopus database at any time by anybody, but here again
it is less time-consuming when the up-dating is organized in a structured way and at pre-set moments
in time (e.g. same month in the year).

Proposals for such structured agreements should be discussed with others who are engaged in data-
gathering activities such as the OECD and Eurostat, in order to avoid duplication and in order to agree
on the specifics in terms of method and definitions of the indicators and for instance the aggregation
level of the fields of publication concerning the bibliometric data.
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STI Performance of China
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Science, Technology and Innovation (STI)
Performance of China

D9: Final Report
Annex
July 2014
STI Performance of China
D9: Final Report Annex

iii
Contents


1. Introduction ................................................................................................................................................. 2
2. Chinese indicators definition, sources & notes – Chapter 2 ................................................................. 4
3. Further results from Chapter 3 ............................................................................................................... 19
4. Summary of the survey results ............................................................................................................... 31


STI Performance of China
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1





1. Introduction
STI Performance of China
D9: Final Report Annex

2
1. Introduction
This document is the annex to Deliverable 9: Final Report of the Science, Technology and Innovation
(STI) Performance of China study.
The contents are presented as follows:
• Section 2 Chinese indicator definitions, sources & notes – relating to Chapter 2 of the main
report;
• Section 3 Further results from Chapter 3 of the main report;
• Section 4 Summary of the survey results – relating to Chapters 4-6 of the main report.

STI Performance of China
D9: Final Report Annex

3

2: Chinese indicator definitions, sources & notes
– Chapter 2

STI Performance of China
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4
2. Chinese indicators definition, sources & notes – Chapter 2
This section presents complementary information relevant to Chapter 2: Measuring China's STI
development of the report on the study - Science, Technology and Innovation (STI) Performance of
China (N° RTD-2011-C6-China). It provides the definitions, sources and notes necessary for the
understanding of the Chapter.

Indicator: Percentage of the population aged 25-34 having completed secondary stage tertiary
education (e.g. a Ph.D.)
o Definition of numerator: number of doctorate graduates, resulting in a value of
50,289 graduates in 2011 (Source: China Statistical Yearbook 2012, Table 2-20)
o Definition of denominator: population between 25 and 34 years divided by 1000,
resulting in a value of 201,662,073.4 for 2011 (China Statistical Yearbook 2012
Table 3-1)

Percentage population aged 30-34 having completed tertiary education
o Definition of numerator: number of persons aged 30–34 with some form of post-
secondary education (ISCED 5 and 6), resulting in a value of 14,782,030 for 2010
(Source: 2010 population census of the People’s Republic of China, Part 1, Table 4-1)
o Definition of denominator: population between 30 and 34 years resulting in a value
of 97,138,203 for 2010 (Source: 2010 population census of the People’s Republic of
China, Part 1, Table 4-1)

Percentage youth aged 20-24 having attained at least upper secondary education
o Definition of numerator: number of young people having attained at least upper
secondary education, resulting in a value of 58,701,838 for 2010 (Source: 2010
Population Census of the People’s Republic of China, Part 1, Table 4-1)
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o Definition of denominator: population between 20 and 24 years, resulting in a value
of 127,412,518 for 2010 (Source: 2010 Population Census of the People’s Republic of
China, Part 1, Table 4-1)

Non-EU doctorate students as a % of all doctorate holders
Note: This is a highly skewed indicator and a square root transformation has been used to reduce the
volatility and skewed distribution of this indicator. It is also not clear whether the European indicator
uses number of enrolment, number of graduate students or number of students in school.
• Chinese indicator definition: enrolment of non-domestic doctorate students in 2011 as a % of
doctorate students enrolled in 2011
o Definition of numerator: number of non-domestic doctorate students enrolled in
2011, resulting in a value of 6,923 for 2011 (Source: News from Chinese Ministry of
Education website:
http://www.moe.gov.cn/publicfiles/business/htmlfiles/moe/s5987/201202/131117.
html)
o Definition of denominator: number of doctorate students in 2011 enrolled, resulting
in a value of 63,762 for 2011 (Source: China Statistical Yearbook 2012, Table 20-2)

Venture capital (% of GDP)
• Chinese indicator definition: venture capital investment as a % of GDP in China
o Definition of numerator: venture capital investment in China in 2011. The
accumulated venture capital investment till 2010 and 2011 was CNY 149.13 billion
(approx. EUR 16.50 billion) and CNY 203.66 billion (approx. EUR 22.09 billion)
respectively. Therefore, the venture capital investment in 2011 was CNY 203.66 billion
(approx. EUR 22.09 billion) - CNY 149.13 billion (approx. EUR 16.50 billion) = CNY 54.53
billion (approx. EUR 5.59 billion) (Wang Yuan, et al., 2012)
o Definition of denominator: GDP in China which for 2011 was recorded as CNY 47,288.2
billion (approx. EUR 5,188.9 billion) (China Statistical Yearbook 2012, Table 2-1)

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Non-R&D innovation expenditures (% of turnover)
• Chinese indicator definition: Non-R&D innovation expenditures as a % of total turnover for all
enterprises
o Definition of numerator: Non-R&D innovation expenditure resulting in a value of CNY
371,982,795,300 (approx. EUR 37.2 billion) for the period 2004-2006 (Source:
Statistics of 2007 Innovation Survey of Industrial Enterprises, Table 4-1,
582,132,700,000*(55.8%+8.1%) =371,982,795,300)
o Definition of denominator: total turnover for all enterprises resulting in a value of CNY
31,251,046,890,000 (approx. EUR 3.1 billion) for the period 2004-2006 (Source:
Statistics of 2007 Innovation Survey of Industrial Enterprises, Table 2-1)
• Note: In 2007, National Bureau of Statistics of China conducted a nation-wide innovation
survey, using a questionnaire similar to that of the Community Innovation Survey IV. All the
state-owned enterprises and non state-owned enterprise whose revenue is greater than CNY
five million (approx. EUR 0.48 million) were surveyed. These enterprises are called above-scale
enterprises. The statistical data of the survey is published in National Bureau of Statistics,
2008, Statistics of 2007 Innovation Survey of Industrial Enterprises, China Statistics Press.

SMEs innovating in-house (% of SMEs)
• Chinese indicator definition:
o Definition of numerator: number of medium and small above-scale enterprises which
had in-house innovative activities during the period of 2004–2006: number of
innovative medium firms * percentage of medium innovative firms with in-house
innovative activities + number of innovative small firms * percentage small innovative
firms with in-house innovative activities, i.e. 16,547*55.9%+67,561*63.3%=52,016
(Source: Statistics of 2007 Innovation Survey of Industrial Enterprises, Table 3-3)
o Definition of denominator: For the period 2004-2006, the number of medium and
small above-scale enterprises: number of medium above-scale enterprise (29,622) +
number of small above scale enterprise (267,699) = 297,321 (Source: Statistics of 2007
Innovation Survey of Industrial Enterprises, Table 1-1)
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7
• Note: Medium firms in China are defined as the firms employing equal to or more than 300
but less than 2000 employees. Small firms in China are defined as the firms employing equal
to or more than 20 but less than 300 employees.

Innovative SEMs collaborating with others (% of SMEs)
• Chinese indicator definition A: number of small and medium above-scale enterprises which
have product innovation and cooperate with other enterprises/organizations in product
innovation (% of number of total small and medium above-scale enterprises)
o Definition of numerator: For the period 2004-2006, the number of small and medium
above-scale enterprises which have product innovation and cooperate with other
enterprises/organizations in product innovation (Number of medium innovative
above-scale enterprises 16,547* (percentage of collaborating with other enterprises
5.4% + percentage of collaborating with other S&T institutions 5% + percentage of
collaborating with higher education institutions 3.6% + percentage of collaborating
with foreign organizations 1.7%) = 2,598. The calculation for small firms is similar to
the above for medium firms (Source: Statistics of 2007 Innovation Survey of Industrial
Enterprises, Table 1-1)
o Definition of denominator: For the period 2004-2006, the number of total small
(267,699) and medium (29,622) above-scale enterprises (Statistics of 2007 Innovation
Survey of Industrial Enterprises, Table 1-1)
• Chinese indicator value A: SMEs with product innovation collaborating with others (% of SMEs)
(2004 - 2006): 4.85
• Chinese indicator definition B: number of small and medium above-scale enterprises which
have process innovation and cooperate with other enterprises/organizations in process
innovation (% of number of total small and medium above-scale enterprises).
o Definition of numerator: For the period 2004-2006, the number of small and medium
above-scale enterprises which have process innovation and cooperate with other
enterprises/organizations in process innovation (Number of medium innovative
above-scale enterprises 16,547* (percentage of collaborating with other enterprises
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8
9.8% + percentage of collaborating with other S&T institutions 5.2% + percentage of
collaborating with higher education institutions 3.3% + percentage of collaborating
with foreign organizations 1.4%) = 3,260. The calculation for small firms is similar as
the above for medium firms (Source: Statistics of 2007 Innovation Survey of Industrial
Enterprises, Table 1-1)
o Definition of denominator: For the period 2004-2006, the number of total small
(267,699) and medium (29,622) above-scale enterprises (Source: Statistics of 2007
Innovation Survey of Industrial Enterprises, Table 1-1)
• Chinese indicator value B: SMEs with process innovation collaborating with others (% of SMEs)
(2004–2006): 4.98
• Note: There are no Chinese indicators available on general SMEs collaborating with others.
There are indicators on product innovative SMEs collaborating with others and on process
innovative SMEs collaborating with others. Hence, the percentage for product and process
innovators is provided respectively. The overall share of innovative SMEs collaborating with
others in total SMEs would be greater than the smaller value (4.85) but smaller than the sum
of the two values (9.83) because product and process innovators overlap.

Community trademarks per billion GDP (in PPP Euro)
• Note: The Chinese data and EU data are not comparable because the Chinese trademark
applications are different from the EU-wide community trademark applications. In order to
compare results, it is necessary to compare national trademark applications in individual
European countries.

Community designs per billion GDP (in PPP Euro)
• Note: The Chinese data are not comparable because the Chinese design applications are
different from the EU-wide community design applications. In order to compare results, it is
necessary to compare national trademark applications in individual European countries.


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9
SMEs introducing product or process innovations (% of SMEs)
• Chinese indicator definition:
o Definition of numerator: The number of small and medium above-scale enterprises
which have product or process innovation, for the period 2004-2006, recorded as
67561+16547=84108 (Source: Statistics of 2007 Innovation Survey of Industrial
Enterprises, Table 1-1)
o Definition of denominator: For the period 2004-2006, the number of small and
medium above-scale enterprises, recorded as 267,699+29,622=297,321 (Source:
Statistics of 2007 Innovation Survey of Industrial Enterprises, Table 1-1)
• Chinese indicator value: 28.29 (2004–2006)

SMEs introducing marketing or organizational innovations (% of SMEs)
• Note: In 2007, the National Bureau of Statistics of China conducted a nation-wide innovation
survey, using a questionnaire similar to that of the Community Innovation Survey IV. However,
in that survey there were no questions asked about marketing or organizational innovations
of the firms.

Employment in knowledge-intensive activities as % of total employment
• Chinese indicator definition:
o Definition of numerator: The number of individuals employed in knowledge-intensive
activities in China in 2010, recorded as 10,361,895 (Source: 2010 Population Census
of the People’s Republic of China, Part 2, Table 4-6)
o Definition of denominator: Total employment in 2010, recorded as 71,547,989
(Source: 2010 Population Census of the People’s Republic of China, Part 2, Table 4-6)
• Chinese indicator value: 14.5 (2010)
• Note: The data regarding number of employment in knowledge-intensive activities and total
employment in China in 2010 are from Part 2 of the 2010 Population Census of the People’s
Republic of China. Only 10% of the total population of China answered Part 2 of the
STI Performance of China
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10
questionnaire. Therefore, the value of the numerator and denominator is both about 10% of
the value for the whole country. However, the ratio of the numerator to denominator is not
affected.

Sales of new-to-market and new-to-firm innovations as % of turnover
• Chinese indicator definition: Sales of new-to-market and new-to-firm innovations as % of
turnover for product sales
o Definition of numerator: Sales of new-to-market and new-to-firm innovations
recorded as CNY 3,960.61 billion (approx. EUR 400 billion) for 2006
o Definition of denominator: Total product sales recorded as CNY 31,251.05 billion
(approx. EUR 3,1 billion)) for 2006, (Source: China statistics of industry innovation
2006, Table 6)

Business expenditure on R&D by SMEs (0-249 employees), millions of euro
• Chinese indicator definition: Total R&D expenditure by small above-scale enterprises, in
millions of euro, R&D expenditure by total above-scale enterprises recorded as CNY
599,380,550,000 (approx. EUR 65 billion) for 2011 - R&D expenditure by large and medium
above-scale firms recorded as CNY 503,069,600,000 (approx. EUR 54 billion) for 2011 = CNY
96,310,950,000, equivalent to 11,913 million Euro (Source: China Statistical Yearbook 2012,
Table 20-45)
• Note: Small firms in China are defined as the firms employing a minimum of 20 employees but
less than 300 employees.

Business expenditure by SMEs (0-249 employees) as % of GDP
• Chinese indicator definition: Total R&D expenditure by small above-scale enterprises as % of
GDP
o Definition of numerator: Total R&D expenditures by small above-scale enterprises,
recorded as CNY 96.31 billion (approx. EUR 10.45) for 2011 (Source: China Statistical
Yearbook 2012, Table 20-45)
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o Definition of denominator: GDP, recorded as CNY 4,7288.16 billion (approx. EUR
51,289 billion) for 2011 (Source: China Statistical Yearbook 2012, Table 3-1)
• Chinese indicator value: 0.20 (2011)
• Note: Small firms in China are defined as the firms employing equal to or more than 20 but
less than 300 employees.

Inward R&D expenditure by foreign affiliates, millions of euro
• Chinese indicator definition: R&D expenditure by enterprises funded by Hong Kong, Macau
and Taiwan and foreign investors, recorded as CNY 104,828,020,000 in 2010 and equivalent
to 12,967 million Euro (Source: China Statistical Yearbook on Science and Technology 2011,
Table 2-8)

Inward R&D expenditure as % of R&D expenditure by business enterprise
• Chinese indicator definition:
o Definition of numerator: R&D expenditure by enterprises funded by Hong Kong,
Macau and Taiwan and foreign investors, recorded as CNY 104,828,020,000 (approx.
EUR 11.6 billion) for 2010 (Source: China Statistical Yearbook on Science and
Technology 2011, Table 2-8)
o Definition of denominator: (Domestic) R&D expenditure by business enterprise
recorded as CNY 401,539,652,000 (approx. EUR 44.4 billion) for 2010 (Source: China
Statistical Yearbook on Science and Technology 2011, Table 2-8)

Investment in knowledge (R&D and Education), millions of euro
• Chinese indicator definition: Investment in education recorded as CNY 1,956,184.71 million
(approx. EUR 216,392 million) for 2010 (Source: China Statistical Yearbook 2012, Table 20-39)
+ Investment in R&D recorded as CNY 706,260 million (approx. EUR 78,126 million) in 2010
(Source: China Statistical Yearbook 2012, Table 20-41) = CNY 2,662,444.71 million which is
equivalent to 334,403 million Euro

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Investment in knowledge (R&D and Education) as % of GDP
• Chinese indicator definition:
o Definition of numerator: Investment in education recorded as CNY 1,956,184.71
million (approx. EUR 212,168 million) for 2011 (Source: China Statistical Yearbook
2012, Table 20-39) + Investment in R&D recorded as CNY 706,260 million (approx. EUR
76,600 million) in 2011 (Source: China Statistical Yearbook 2012, Table 20-41) = CNY
2,662.44 billion (approx. EUR 288.78 billion)
o Definition of denominator: GDP recorded as CNY 47,288.2 billion (approx. EUR 5,129
billion) for 2011 (Source: China Statistical Yearbook 2012, Table 2-1)

New doctoral graduates (ISCED 6), total
• Chinese indicator definition: number of new doctorate graduates recorded as 50,289 in 2011
(Source: China Statistical Yearbook 2012, Table 20-13)

Human Resources in Science and Technology aged 25-64, thousand persons
• Chinese indicator definition: Population aged 25-64 with a tertiary education degree (Source:
2010 Population Census of the People’s Republic of China, Part1, Table 4-1)

Human Resources in Science and Technology aged 25-64 as % of labour force
• Chinese indicator definition: population aged 25-64 with a tertiary education degree as % of
population aged 25-64
o Definition of numerator: population aged 25-64 with a tertiary education degree,
recorded as 74,086,103 for 2010 (Source: 2010 Population Census of the People’s
Republic of China, Part 1, Table 4-1)
o Definition of denominator: population aged 25-64, recorded as 765,259,458 for 2010
(Source: 2010 Population Census of the People’s Republic of China, Part 1, Table 4-1)



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New S&T graduates (ISCED 5A) with S&E orientation
• Chinese indicator definition: total number of regular undergraduates (1,163,643), life-long
learning undergraduates (194,946), and on-line undergraduates (75,260) with a major in
science and engineering, recorded as 1,433,849 for 2011 (Source: China statistical yearbook
2012, Table 20-14, 16 and 18)

License and patent revenues from abroad, millions Euro
• Chinese indicator definition: Charges for the use of intellectual property, receipts, in millions
of Euro. World Bank Development Indicators indicate a value of USD 743,301,698 for 2011
which equates to 568 million Euro

Female PhD/doctoral graduates, total number
• Chinese indicator definition: Female PhD/doctoral total enrolment. Total PhD/doctoral
enrolment was recorded as 271,261 for 2011 (Source: China Statistical Yearbook 2012, Table
20-2). The % of females was recorded as 36.13% for 2011 (Source: China Statistical Yearbook
2012, Table 20-2)
• Note: It was only possible to identify the number of enrolment of female PhD students instead
of the number of female Ph.D. graduates.

Share (%) of female PhD/doctoral graduates in total PhD/doctoral graduates
• Chinese indicator definition: % of females of the total number of students enrolled (Source:
China Statistical Yearbook 2012, Table 20-2)
• Note: It was only possible to identify the number of enrolment of female PhD students instead
of number of the female Ph.D. graduates.

Venture capital (early stage, expansion and replacement), millions Euro
• Chinese indicator definition: The venture capital investment of 2011 in China. The
accumulated venture capital investment till 2010 and 2011 was CNY 149.13 billion (approx.
EUR 16.5 billion) and CNY 203.66 billion (approx. EUR 22.1 billion) respectively. Therefore, the
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14
venture capital investment in 2011 was CNY 203.66 billion - CNY 149.13 billion = CNY 54.53
billion, which is the equivalent of 6,773 million Euro. (Wang Yuan, Zhang, et al., 2012)

Cost of patent application and maintenance for SMEs, in Purchasing Power Standards (PPS) Euro
• Chinese indicator definition: Cost of patent application and maintenance for SMEs, calculated
as CNY 88,255, which is equivalent to 14,709 PPS Euro (Source: Authors’ calculation)

Cost of patent application and maintenance for SMEs, per billion GDP in Purchasing Power
Standards (PPS Euro)
• Chinese indicator definition:
o Definition of numerator: The cost of patent application and maintenance for SMEs,
recorded as 14,709.2 for 2011 (in PPS Euro)
o Definition of numerator: GDP recorded as CNY 47,288.16 billion for 2011, equalling
to PPS Euro 875,86 billion (China Statistical Yearbook 2012, Table 2-1)
Table 3 below shows the cost of obtaining and maintaining an invention patent in China.

Table 1. Cost of obtaining and maintaining an invention patent in China
Procedural Fee Items RMB
Filling fee 950
Search fee (including examination fee) 2,500
Renewal fees of the application for the 3rd year 900
Renewal fees of the application for the 4th year 1,200
Fee for grant 255
Claims Tax 150
Total Procedural Fees 5,955
Maintaining costs for 20 years 82,300
Total including maintaining costs (CNY) 88,255
Total including maintaining costs (PPP€) 14,709.2

Source: http://www.sipo.gov.cn/zlsqzn/sqq/zlfy/200905/t20090515_460473.html
Note: The median number of claims of a Chinese invention patent is six.
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Additional Indicators

New ISCED 6 (doctoral) graduates in the fields of science and engineering
• Chinese indicator definition: Graduates in the fields science and engineering (Source: China
Statistical Yearbook 2012 Table 20-11)
• Chinese indicator value: 27,584 (2011)

Scientists and engineers as a % of total employment/ or the labour force
• Chinese indicator definition:
o Definition of numerator: Employment in scientific research, technical service,
geological survey, information transmission, software and computer services,
construction, manufacture of transport equipment, manufacture of communication
equipment, manufacture of computers and other electronic equipment, manufacture
of electrical machinery and equipment, manufacture of special equipment,
manufacture of chemical raw materials and chemical products, pharmaceutical
industry, fiber industry. This was recorded as 78,119,330 for 2010, (Source: 2010
population census of the People’s Republic of China, Part 2, Table 4-4)
o Definition of denominator: Total employment recorded as 715,479,890 for 2010
(Source: 2010 population census of the People’s Republic of China, Part 2, Table 4-4)
• Remark: Part 2 of the 2010 population census of the People’s Republic of China is Long Table
Data, and it is achieved by survey sampling according to a 10% sampling proportion. The raw
data in the table was divided by 10% and the result is the data above.
• Chinese indicator value: 10.92%


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Public expenditure on education broken down by primary, secondary tertiary level, as a % of GDP
and spending on education institutions per students.
• Chinese indicator definition A: Public expenditure on education broken down by primary,
secondary, and tertiary level, as a % of GDP (2010).
o Definition of numerator: Government appropriation for primary schools, secondary
schools and higher schools all together for 2010 (including institutions of higher
education for adults) (120,8575.71 million CNY or 134,697.77 million Euro), and
respectively for primary schools (464,299.53 million CNY or 51746.95 million Euro),
secondary schools (4,47744.12 million CNY or 4,9901.82 million Euro) and higher
schools (including institutions of higher education for adults: 296,532.06 million CNY
or 3,3048.99 million Euro, not including institutions of higher education for adults:
290180.26 million CNY or 32341.07 million Euro ).The Exchange Rate of Euro against
CNY (Period Average of 2010) is 8.9725. (Source: China Statistical Yearbook 2012 Table
20-40 and China Statistical Yearbook 2011 Table 6-2)
o Definition of denominator: GDP 40,120.2 billion CNY, which is equivalent to 4471.46
billion Euro (Source: China Statistical Yearbook 2011, Table 2-1 and Table 6-2)
• Chinese indicator value: 3.012% (primary, secondary and higher all together, including
institutions of higher education for adults). 0.739% (higher, including institutions of higher
education for adults ), 0.723% (higher, not including institutions of higher education for adults,
i.e. just including regular institutions of higher education), 1.12% (secondary schools), 1.16%
(primary schools)
• Chinese indicator definition B: Public expenditure on education broken down by primary,
secondary, tertiary level spending on education institutions per students (2010)
o Definition of numerator: Government appropriation for primary schools, secondary
schools and higher schools all together for 2010 (including institutions of higher
education for adults) (1208575.71 million CNY 134697.77 millions of Euro), and
respectively for primary schools (464299.53 million CNY 51746.95 millions of Euro),
secondary schools (447744.12 million CNY 49901.82 millions of Euro) and higher
schools (including institutions of higher education for adults: 296532.06 million CNY
33048.99 million Euro, not including institutions of higher education for adults:
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290180.26 million CNY 32341.07 million Euro). The Exchange Rate of Euro against CNY
(Period Average of 2010) is 8.9725. (Source: China Statistical Yearbook 2012 Table 20-
40 and China Statistical Yearbook 2011 Table 6-2)
o Definition of denominator: Total enrolment of primary schools, secondary schools and
higher schools all together in 2010 (including institutions of higher education for
adults) (213,333,739 persons), and respectively for primary schools (101,353,616,
persons), secondary schools (77,811,653 persons) and higher schools (including
institutions of higher education for adults and other degree of higher education, such
as employees enrolled, students enrolled in online courses: 34,168,470 persons, just
including regular institutions of higher education: 23,856,345 persons) (Source: China
Statistical Yearbook 2011 Table 20-2)
• Chinese indicator value: 5,665 CNY/person or 631.39 Euro/person (primary, secondary and
higher all together, including institutions of higher education for adults and other degrees of
higher education), 8,678 CNY/person or 967.18 Euro/person (higher, including institutions of
higher education for adults and other degrees of higher education, such as employees
enrolled, students enrolled in Internet-based courses), 12,430 CNY/person or 1355.66
Euro/person (higher, not including institutions of higher education for adults or others, i.e.
just including regular institutions of higher education), 5,754 CNY/person or 641.29
Euro/person (secondary schools), 4,581 CNY/person or 510.56 Euro/person (primary schools).

Private expenditure on education as a % of GDP
• Chinese indicator definition:
o Definition of numerator: Sum of funds from private schools, donations and fund-
raising for running schools and other educational funds recorded as 785,71.38 million
CNY (approx. EUR 95,82) (Source: China Statistical Yearbook 2012 Table 20-40)
o Definition of denominator: GDP 40,120.2 billion CNY (approx. EUR 4,351 billion)
(Source: China Statistical Yearbook 2011, Table 2-1).
• Chinese indicator value: 0.196% (2010)

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3. Further results from Chapter 3
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D9: Final Report Annex

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3. Further results from Chapter 3
This section presents further results relevant to Chapter 3: Mapping of China’s research and
innovation capabilities in selected technologies of the report on the study - Science, Technology and
Innovation (STI) Performance of China (N° RTD-2011-C6-China). It provides an analysis of the
development of the patent output in eight sectors and the development of patent output in three
cross-cutting technologies under consideration in Chapter 3. The patent data for China is compared
with that for the EU
1
, the US, Japan and the rest of the world (RoW).
Development of patent output in eight sectors under consideration
Figure 1 shows the development of the number of PCT applications from 1990-2010 related to
chemical products. Overall, it points to a steep increase of patenting in this sector in the 1990s,
levelling off to a moderate growth in the early 2000s, to a slight decrease since 2006. China’s patenting
behaviour in this sector does not correspond to this overall development. The number of Chinese
patents has been increasing since the year 2001, after a slight decrease from 2000 to 2001. In
particular it is notable that Chinese patent output in Chemical Products also has increased after 2006
which marks a global turnaround to a decrease in global patenting in this sector. However, the
decrease after 2006 is to a large extent devoted to the US patenting behaviour. For the EU27
stagnation is observed in this time period, while growth - as for China - can also be observed for Japan
and RoW.

1 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
STI Performance of China
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Figure 1. Number of PCT patent applications: chemical products (1990-2011)
2

Source: OECD, REGPAT database, January 2014, own calculations
A picture similar to that for Chemical Products can be observed for Pharmaceuticals (Figure 2), which
may be related to the fact that larger global players in these sectors often patent in both IPC classes.
Also for pharmaceuticals there has been significant growth in the number of patents for China after
2001. The year 2000 in this sector seems to constitute some significant outlier, as the number of
Chinese patents in this year is nearly as high as that in 2010. While the US seems much more active in
Chemical Products than in Pharmaceuticals, the contrary is true for EU27 that shows a much higher
number of patents in Pharmaceuticals than in Chemical Products. Japan and RoW show a very high
number of patents in Pharmaceuticals, much higher than that of the US.

2 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
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STI Performance of China
D9: Final Report Annex

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Figure 2. Number of PCT patent applications: pharmaceuticals (1990-2011)
3

Source: OECD, REGPAT database, January 2014, own calculations



Figure 3 presents the results for Fabricated Metal Products. The development of global patenting was
found to differ from the development in Pharmaceuticals and Chemical Products as seen in Figures 1
and 2. It is possible to observe a very regular increase in patenting since the early 1990s until 2007,
followed by a short hiatus in 2008, and a significant increase again in 2009 and 2010. However, the
growth after 2008 was exclusively subject to higher patent applications from China, Japan and RoW,
while patenting in the US and the EU remained at the level of 2008. The Chinese development seems
to be the same as for Chemical Products and Pharmaceuticals; patenting intensity gradually increased
after 2000 which was nearly non-existent in the 1990s.


3 EU refers to the EU15 up to 2003, the EU25 from 2004, and the EU27 from 2007. EU28 data was not available at the time of writing.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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China
ROW
Japan
US
STI Performance of China
D9: Final Report Annex

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Figure 3. Number of PCT patent applications: metal products (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations
The sectors Computers, Electronic and Optical Products (Figure 4), and Electrical Equipment (Figure
5), were found to be the strongest sectors of the Chinese economy with respect to patenting intensity.
As mentioned above, this is related to an immense patent portfolio of the large multinational
companies Huawei and ZTE. In 2010, ZTE and its daughter companies applied for about 3.500 patents,
Huawei and its related daughter companies for around 1.500. With these values they were also the
top actors in patenting in these areas at a global scale in 2010.
The overall development in the two sectors seems relatively similar, both for the global development
and the Chinese development. In Computers, Electronic and Optical Products, Chinese growth seems
to be more pronounced especially in the recent past from 2009 to 2010, and from 2004 to 2005. Also
for RoW and Japan an increasing trend in both sectors was observed; Japan even showing the highest
global patent intensity with a considerable growth over the past few years. For the EU and the US
decreasing or stable figures after 2006 were seen. Extrapolating this trend, China will surpass the US
and the EU with respect to patenting in electronic related products and devices before 2020. Given
the large market size of the Chinese domestic market, competition among the large Chinese players
may further stimulate innovation efforts in the near future.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
N
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China
ROW
Japan
US
EU-27
STI Performance of China
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Figure 4 Number of PCT patent applications: computers, electronic, optical products (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations


Figure 5. Number of PCT patent applications: electrical equipment (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations
0
10,000
20,000
30,000
40,000
50,000
60,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
N
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China ROW Japan
US EU-27
0
1,000
2,000
3,000
4,000
5,000
6,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
N
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China ROW Japan US EU-27
STI Performance of China
D9: Final Report Annex

24
Figure 6 presents a quite similar picture for the sector Machinery and Equipment, though the number
of Chinese patents had not yet reached such a high number as in electronic related products and
equipment by 2010. However, also for Machinery and Equipment there were signs of increasing trends
for the most recent years for China, and decreasing trends for the US and the EU. RoW and Japan have
shown considerable growth in this sector over the past three years.

Figure 6 Number of PCT patent applications: machinery and equipment (1990-2010)
Source: OECD, REGPAT database, January 2013, own calculations
In Figure 7and Figure 8 attention is directed to the transport related sectors, Motor Vehicles and Other
Transport (mainly ship transport and aerospace). The overall development was comparable to that of
Machinery and Equipment in both sectors. It was striking that firms in the EU were by far the most
important performers of transport-related inventions as captured by patents. For China, the results
for transport related sectors were comparable to those of sectors related to chemical and
pharmaceutical industries. Chinese actors began to patent after 2000, showing a rather regular growth
until 2010, also after the usual hiatus in patenting intensity during the crisis in 2008.
Though China is still mainly an importer of transport related equipment, such as the high-speed trains
introduced in the recent past that were constructed by German or Japanese firms, Chinese firms are
improving their technological capabilities in these fields. Having in mind the potential of a huge
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
N
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STI Performance of China
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Chinese market with immense needs for innovations that have to deal with challenging requirements
of the Chinese transport system, the innovation competition between Chinese and foreign actors will
most likely increase considerably in the near future.


Figure 7 Number of PCT patent applications: motor vehicles (1990-2010)
Source: OECD, REGPAT database, January 2013, own calculations

Figure 8. Number of PCT patent applications: other transport equipment (1990-2010)
Source: OECD, REGPAT database, January 2013, own calculations


0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
N
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China ROW Japan US EU-27
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
N
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China ROW Japan US EU-27
STI Performance of China
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Development of patent output in three cross-cutting technologies
While the development of patent output was often quite similar across the eight sectors - as
demonstrated above - the development of patent output in the cross-cutting technologies was much
more diverse and differs to a larger extent from the overall development. In the following paragraphs
an analysis of the number of PCT patent applications for the three cross-cutting technologies under
consideration is presented. With regard to Environmental Technologies, a more detailed investigation
is provided - next to the overall development in Environmental Technologies by disaggregating the
key subcategories Wind Energy and Photovoltaics.
Figure 9 initially illustrates the development of the number of PCT patent applications in
Biotechnology, clearly a key industry over the past decades in its contribution to worldwide economic
growth. It was found that the development of patenting was significantly different from global
patenting as a whole. A rather steep growth of biotechnology patenting was seen in the 1990s, with
an enormous increase in the number of patents between 1999 and 2000. After 2000, annual patenting
in biotechnology rather stagnated or slightly decreased, with the exception in 2007. Surprisingly, China
had a very large share of biotechnology patents in the boom year 2000.

Figure 9. Number of PCT patent applications: biotechnology (1990-2010)
Source: OECD, REGPAT database, January 2013, own calculations
However, this was related to a very high number of patent applications by one single biotechnology
company (Biowindow based in Shanghai) that did not patent in the following years. After the year
0
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2,000
3,000
4,000
5,000
6,000
7,000
8,000
199019911992199319941995199619971998199920002001200220032004200520062007200820092010
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2000, the share immensely decreased between 2000 and 2001 before it gradually increased again
between 2001 and 2010. There are no policy documents or scientific works that provide an
explanation for this development. The EU was the undisputed global leader in patenting in
biotechnology over the whole time period under consideration, accounting for nearly 50% of global
biotechnology patent applications.
Figure 10 shows the number of PCT patent applications in Nanotechnologies. It becomes obvious that
the extensive growth phase in nanotechnology research was in the late 1990s and early years of the
millennium. Following this, patenting in nanotechnology decreased considerably, in particular after
2007. It may be the case that nanotechnology applications have been more and more directly
integrated in concrete products and thus patented in other IPC classes, such as electrical devices and
electrical equipment. China showed a low level of patenting in Nanotechnologies over the whole time
period under consideration. Although China has high publication intensity in this field, it seems that
actors that patent new technological devices integrating nanotechnology rather apply in other IPC
classes.

Figure 10. Number of PCT patent applications: nanotechnologies (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations
As to Environmental Technologies, Figure 11 initially presents the number of PCT patent applications
for the whole sector during the time period under consideration. As illustrated a regular growth was
seen between 1990 and 2009, with very high growth rates between 2006 and 2009. The year 2010
0
500
1,000
1,500
2,000
2,500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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28
shows a decline to a scale slightly below 2007. However, this decline was mainly subject to the EU, the
US and RoW which may be related to economic constraints in these countries. For China, the results
show that patenting was marginal before 2004, but gradually increased after 2004, also during the
global decline in 2010. This underlines that massive investment in green technologies by the Chinese
government and regional authorities has led to a significant increase in patenting in environmental
technologies. Facing huge environmental problems related to increasing emissions of green-house
gases and the deterioration of natural resources, the Chinese government and regional authorities
have devoted the highest funds globally to new environmental and energy technologies over the past
years which may to a large extent explain these results.

Figure 11. Number of PCT patent applications: environmental technologies (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations
Figure 12 and Figure 13 underpin China’s catching up in environmental technologies by zooming
deeper into two key fields of this cross-cutting area. Figure 12 visualizes the global development in
patenting in the field of Wind Energy. After a moderate growth between 1998 and 2005, patenting in
wind energy increased after 2005. As for environmental technologies as a whole, a sharp decline in
the year 2010 was experienced, again presumably related to economic constraints. Although China’s
patent output also slightly declined in 2010, the decrease was marginal compared to other countries,
in particular as compared to the US that showd the largest decline in 2010. A rather similar picture
was found for photovoltaic technologies (Figure 13). The development of patenting followed a very
similar trend to that of wind energy, including the hiatus in the year 2010. However, China was the
0
5,000
10,000
15,000
20,000
25,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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29
only country that did not show a decreasing trend in 2010, while the EU, the US and RoW together
nearly decreased by 50%.

Figure 12 Number of PCT patent applications: wind energy (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations

Figure 13 Number of PCT patent applications: photovoltaic (1990-2011)
Source: OECD, REGPAT database, January 2014, own calculations


0
200
400
600
800
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1,200
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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China ROW Japan US EU-27
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1,500
2,000
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3,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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4. Summary of the survey results
STI Performance of China
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31
4. Summary of the survey results
This section presents a summary of the responses provided during the survey performed in the study.
The survey aimed at analysing and identifying the main trends in policy-making and funding system
for STI development in China, and to analyse China's international strategy concerning STI.
The survey questions covered:
• Current features of STI policies;
• Policy evaluaton;
• Patterns of international cooperation;
• Human capital for innovation;
• Industrial innovation;
• Indigenous innovation and its impact on foreign firms.

The responses have been divided between the Chinese and European respondents so that any
differences in opinions can be extracted.
Current Features of STI policies
As shown in Figure 14 and Figure 15, survey respondents were asked their opinion about what the
current features are for China’s STI policy development when compared to those at EU level. Since the
overwhelming majority of Chinese respondents (78%) and half of European respondents indicated
that China’s STI policy development is driven to larger extent by societal needs and problems, if these
views are confirmed by other evidence. This may increase opportunities for collaborative efforts, as
EU policy is also increasingly driven by societal challenges, particularly since these challenges often
need global solutions and have global impacts. However, 57% of European respondents and a large
proportion of Chinese respondents (72%) also indicated a focus on market-driven research for
economic growth rather than basic/applied research, which seems to contrast a little with the first
point and may mean that social/ environmental aspects are currently not been given sufficient
consideration within these societal challenges.
STI Performance of China
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32

Figure 14 Current features for China’s STI policy (Chinese)

Figure 15 Current features for China’s STI policy (European)




34%
72%
78%
24%
23%
18%
41%
4%
4%
0% 20% 40% 60% 80% 100%
Defense related research plays a large role
Focus more on market-driven research for economic
growth rather than basic/applied research
It is driven to a larger extent by societal needs and
problems (e.g. personal health, environmental
protection, sustainable urbanism, water, pollution,
natural catastrophes, food supply, employment)
In your view what are the current features for China’s STI (Science, Technology and
Innovation) policy development when compared to the whole European Union (EU)?
Yes No Don't know
50%
50%
57%
18%
43%
27%
32%
7%
17%
0% 20% 40% 60% 80% 100%
Defense related research plays a large role
It is driven to a larger extent by societal needs and
problems (e.g. personal health, environmental
protection, sustainable urbanism, water, pollution,
natural catastrophes, food supply, employment)
Focus more on market-driven research for economic
growth rather than basic/applied research
In your view what are the current features for China’s STI (Science, Technology and
Innovation) policy development when compared to the whole European Union (EU)?
Yes No Don't know
STI Performance of China
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33
On the other hand, only 34% of Chinese respondents considered that defence related research plays
a large role, compared to 50% of European respondents Nevertheless it is perhaps interesting to note
that a large proportion of stakeholders (41%) stated that they did not know whether or not defence
related research played a large role in STI policy development. Such a result could be interpreted in a
number of ways. For example, it could mean that respondents didn’t have information about this,
which could mean that the funding of such sensitive research is not publicised within STI policy or that
respondents had not the ability to make the comparison between the situation in China and that in
the EU, among other reasons. Thus, this aspect perhaps needs further investigation to determine the
reasons behind the answer provided.
Based on the respondents’ answers, current features for China’s STI Performance are driven to larger
extent by societal needs and problems and market-driven research for economic growth rather than
by the desire for basic/applied research. Some European respondents believed that Chinese STI tends
to follow or copy promising technology Western with application to Chinese societal issues. Chinese
respondents pointed out that China’s technology innovation focuses more on quantity than on quality,
and that the government cannot protect new technologies emanating from Chinese companies. In
addition, the government appears to have more inputs on the policy concerning technology
innovation, but in many cases they do not meet the social needs. Cooperation between universities
and enterprises needs to be strengthened.
Policy evaluation
Figure 16 and Figure 17 below present areas in which respondents consider Chinese STI plans and
programmes to be most successful. The answers suggest that the plans and programmes for the
promotion of international collaboration, increasing patents submitted, and enhancement of
innovation by enterprises have been more successful than those for mobilising human resources
quickly, raising international awareness about the strengths of the Chinese S&T system and increasing
the number of companies formed. It would of interest to examine the reasons behind this success or
lack thereof.
STI Performance of China
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34

Figure 16. Most successful Chinese STI plans and programmes (Chinese)

Figure 17 Most successful Chinese STI plans and programmes (European)
When asked about some less successful STI plans and programmes, as illustrated in Figure 18 and
Figure 19, all except one of the possible areas included in the study were considered to be less
successful by the majority of respondents. In particular, 82 % of the respondents agreed that the
30%
42%
45%
51%
62%
65%
70%
71%
53%
45%
36%
34%
31%
25%
22%
23%
0% 20% 40% 60% 80% 100%
Increase in the number of companies formed
Raising international awareness of strengths of
Chinese S&T system
Capacity to mobilise human resources quickly
Increase in the number of new scientists and
engineers hired
Increasing the share of high impact publications
Enhancement of innovation by enterprises
Increase in the number of patents submitted
Promotion of international collaboration
In which of the following areas are Chinese STI plans and programmes most successful? Please explain
the reason for your answer
Yes No Don't know
32%
33%
40%
45%
47%
52%
68%
70%
26%
40%
33%
32%
10%
16%
16%
13%
0% 20% 40% 60% 80% 100%
Increase in the number of companies formed
Raising international awareness of strengths of
Chinese S&T system
Enhancement of innovation by enterprises
Capacity to mobilise human resources quickly
Increase in the number of new scientists and
engineers hired
Increase in the number of patents submitted
Increasing the share of high impact publications
Promotion of international collaboration
In which of the following areas are Chinese STI plans and programmes most successful? Please explain
the reason for your answer
Yes No Don't know
STI Performance of China
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35
promotion of indigenous innovation was less successful. Such consensus suggests that there is general
agreement about the lack of success in this area and it would be of interest to determine the reasons
behind this. The area considered more successful was STI plans and programmes to increase
employment opportunities. It is worth noting that the number of respondents selecting don’t know
for EU researchers was high for this question (between 19 and 33%), suggesting that EU researchers
did not have sufficient knowledge of Chinese policies to comment.

Figure 18 Less successful Chinese STI plans and programmes (Chinese)

Figure 19 Less successful Chinese STI plans and programmes (European)
47%
64%
65%
69%
73%
82%
38%
24%
22%
20%
14%
13%
0% 20% 40% 60% 80% 100%
Increase of employment opportunities
Reduction of regional S&T and innovation disparity
Improvement of efficiency
Improvement of competitiveness
Development of market and innovation culture and support
to the creation and growth of innovative enterprises
Promotion of indigenous innovation
Where are Chinese STI plans and programmes less successful?
Yes No Don't know
40%
42%
43%
52%
57%
61%
27%
35%
33%
29%
17%
6%
0% 20% 40% 60% 80% 100%
Improvement of competitiveness
Development of market and innovation culture and
support to the creation and growth of innovative…
Increase of employment opportunities
Promotion of indigenous innovation
Improvement of efficiency
Reduction of regional S&T and innovation disparity
Where are Chinese STI plans and programmes less successful?
Yes No Don't know
STI Performance of China
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36
China has been expanding the strength of its scientific research, and its innovation plans and projects
have effectively promoted innovation in enterprises and the visibility. However, the inputs of capital
tend to concentrate on a few groups in certain locations, which are not effective to allocate highly
skilled human capital. Some respondents stated that the most important is to improve the
organization of innovation management in order to improve the core innovation team in state-owned
enterprises. European respondents that commented on Chinese policies believed that they have
succeeded in mobilizing enterprises and improving international cooperation, but that they remain
mired in bureaucratic and patron-client networks which reduce their effectiveness. In addition, they
mention that there is a lot of focus on publications and patents perhaps because it is easier to
measure.
Other respondents noted that the gap of scientific research between Chinese and foreign countries is
still large. By choosing highly qualified employees and making high quality technology outcomes, they
can attract attention from international talent and increase the visibility of China’s technology
innovation plan. On the other hand, scientists and engineers are the core of innovation, so they can
lead the process of promoting international cooperation and facilitate innovation in enterprises.
Some believed that Chinese government has already supported a large number of indigenous
innovation related programmes, but not much has been done about increasing innovation efficiency.
Moreover, a number of respondents mentioned that many ideas come from foreign countries. For
example, some Chinese projects were announced as indigenous innovation, while in fact they were
results taken from foreign countries. In general, respondents were of the opinion that although the
level of China’s technology innovation has been increasing, it is still far from its goal of competing with
more developed economic regions such as the US and the EU. They felt that this is mainly due to the
incomplete innovation culture and concept, and insufficiencies which exist in both innovation inputs
and in support for enterprise innovation.
In regard to the less successful Chinese STI plans and programmes, one respondent mentioned that
there are not enough jobs for all the graduates and higher degrees coming out of universities.
The survey respondents were asked what the future focus of STI funding should be in China. Figure 20
and Figure 21 below illustrate the answers provided, where the focus is ranked by importance
including: “High importance”, “Medium importance”, “Low importance”, “Not relevant” and “Don’t
know”. In general, most survey respondents gave a high or medium importance to increasing the
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37
different aspects mentioned in the survey. Consensus was most evident for increasing support for
research aiming at tackling societal challenges with 92% of the Chinese respondents and 97% of
European respondents rating this as of high/medium importance. This percentage drops to 73% and
81% for “increasing support for high-risk research”, leading to the conclusion that this was seen as
least important, in terms of future focus. These areas of interest, if corroborated by other evidence,
could also be important in decisions about collaborative activities with the EU.

Figure 20 Future focus of S&T funding in China (Chinese)

Figure 21 Future focus of S&T funding in China (European)
23%
37%
39%
40%
43%
50%
50%
50%
48%
49%
22%
11%
9%
10%
6%
3%
1%
2%
2%
1%
3%
1%
1%
1%
0% 20% 40% 60% 80% 100%
Increasing support for high-risk research
Increasing support for academic research
Increasing funding support for technology-based SMEs
Increasing the share of private enterprises in national
expenditures on research and innovation
Increasing support for research aiming at tackling societal
challenges
In your opinion what should be the future focus of S&T funding in China?
High Importance Medium Importance Low Importance Not Relevant Don't know
23%
29%
45%
45%
58%
61%
52%
42%
42%
39%
16%
13%
10%
10%
3%
0% 20% 40% 60% 80% 100%
Increasing funding support for technology-based SMEs
Increasing support for high-risk research
Increasing the share of private enterprises in national
expenditures on research and innovation
Increasing support for academic research
Increasing support for research aiming at tackling societal
challenges
In your opinion what should be the future focus of S&T funding in China?
High Importance Medium Importance Low Importance Not Relevant Don't know
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38
Chinese respondents considered that the most important focus should be increasing support for
research aiming at tackling societal challenges. On the other hand, European respondents stated that
the future focus of S&T funding in China should be the increasing share of private enterprises in
national expenditures regarding research and innovation, increasing the support for academic
research and aiming at tackling societal challenges. The importance is to have the system (not single
elements as in the questions) working, i.e. interplay between the elements.
Some respondents stated that the government needs to support innovation by SMEs and other private
enterprises, and to increase the efficiency of funding allocation. Compared to large enterprises and
research institutes, the research activities by SMEs are considered to be more specific and active.
Respondents highlighted a desire to focus on international cooperation increasing the inputs on basic
science and support to young researchers.

Patterns of international cooperation
The survey respondents were asked what has been the main function of international cooperation in
developing China’s STI capabilities. From Figure 22, it is possible to see that Chinese respondents
mainly viewed international cooperation not from the perspective of any access to funding that it
might provide, but rather from the perspective of helping in the identification of gaps/opportunities
for improving STI capabilities, in the introduction of advanced technologies or in providing training
and education of scientific personnel. However, from Figure 23, it is possible to see that 90% of
European respondents stated that introduction of advanced technology has been the main function.
It would be important to see how these views compare to other investigations about international
collaboration with China, but if substantiated they may provide an indication of China’s interests and
thus influence the development of future collaborative activities in this sense.
STI Performance of China
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39

Figure 22 Main function of international cooperation in developing China’s STI capabilities (Chinese)

Figure 23 Main function of international cooperation in developing China’s STI capabilities (European)
Figure 24 and Figure 25 display the opinions of respondents regarding the main forms of international
research/innovation cooperation. For Chinese public stakeholders (public research organizations and
firms). It shows evidence of two-way collaboration i.e. both the sending of personnel and the receiving
of foreign researchers by Chinese public stakeholders. Both Chinese and European respondents have
stated that sending of personnel has been the main form of international research cooperation than
those that state hosting a foreign researcher as the main form. This aspect, if verified to be true, could
be indication that there are greater opportunities/ or greater perceived benefits for Chinese
researchers to go abroad than for their EU counterparts to go to China, or it could be that EU
32%
36%
76%
79%
84%
59%
49%
22%
19%
11%
0% 20% 40% 60% 80% 100%
Increase of availability of financial investment
Compensation for low Chinese expenditures for
basic research
Training and education of scientific personnel
Introduction of advanced technologies
Identification of gaps/opportunities for improving
STI capabilities
What has been the main function of international cooperation in developing China’s STI capabilities?
Yes No Don't know
35%
42%
68%
87%
90%
42%
39%
16%
3%
3%
0% 20% 40% 60% 80% 100%
Increase of availability of financial investment
Compensation for low Chinese expenditures for basic
research
Identification of gaps/opportunities for improving STI
capabilities
Training and education of scientific personnel
Introduction of advanced technologies
What has been the main function of international cooperation in developing China’s STI capabilities?
Yes No Don't know
STI Performance of China
D9: Final Report Annex

40
researchers don’t access the opportunities available to them for one reason or another (whether
because the opportunities are not viewed to be attractive or they have difficulties in accessing them,
for example). Such aspects might deserve further investigation.

Figure 24 Main forms of international research/innovation cooperation for Chinese public stakeholders (Chinese)

Figure 25 Main forms of international research/innovation cooperation for Chinese public stakeholders (European)
54%
62%
75%
85%
33%
28%
14%
12%
0% 20% 40% 60% 80% 100%
Setting up joint ventures with foreign organizations
Acting as hosting organizations in China for foreign
researchers
Participating in international collaboration projects and
fellowships (through funding by MOST and NSFC, EU
Framework Programme, and EU member states’ bilateral
programmes with China)
Sending personnel abroad for scientific education and
research collaboration
What have been the main forms of international research/innovation cooperation for Chinese public
stakeholders (research organizations and firms)?
Yes No Don't know
55%
71%
77%
94%
32%
19%
13%
3%
0% 20% 40% 60% 80% 100%
Setting up joint ventures with foreign organizations
Acting as hosting organizations in China for foreign
researchers
Participating in international collaboration projects and
fellowships (through funding by MOST and NSFC, EU
Framework Programme, and EU member states’ bilateral
programmes with China)
Sending personnel abroad for scientific education and
research collaboration
What have been the main forms of international research/innovation cooperation for Chinese public
stakeholders (research organizations and firms)?
Yes No Don't know
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41
For Chinese public stakeholders, respondents indicated the main forms as below:
• Sending personnel abroad for scientific education and research collaboration;
• Participating in international collaboration projects and fellowship.
In addition to the answers above, some respondents had other opinions, including establishing
international innovation cooperation projects, building research institutions overseas, and creating
international cooperation platforms.
Questionnaire respondents were also asked what have been the main forms of international
research/innovation cooperation for Chinese private stakeholders (private research organizations and
firms) in China. The responses, illustrated in Figure 26 and Figure 27 below, again show evidence of
two-way collaboration with sending of personnel abroad and the receiving of foreign researchers by
Chinese private stakeholders being designated as main forms of international research /innovation
cooperation and again it appears to be more common for Chinese personnel to go abroad than for
foreign researchers to go to China. It would certainly be worth further examination of the reasons
behind such a situation.
Of particular note, in the case of private stakeholders, is the major role of joint ventures, with 74 % of
Chinese respondents considering this to be the main form of international research/innovation
cooperation. It would be interesting to investigate further the reason why this the main form of
collaboration, whether because it is perceived as most beneficial by both parties, whether is necessary
for other reasons (e.g. to satisfy certain regulations), is the most flexible, has the least barriers or even
just because there are more opportunities than say participating in international collaboration
projects. For European respondents, joint ventures and sending personnel abroad are both considered
by 58% of respondents.
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42

Figure 26 Main forms of international research/innovation cooperation for Chinese private stakeholders (Chinese)

Figure 27 Main forms of international research/innovation cooperation for Chinese private stakeholders (European)
For Chinese private stakeholders, respondents indicated the main forms as below:
• Setting up joint ventures with foreign organizations;
• Sending personnel abroad for scientific education and research collaboration.
39%
50%
64%
74%
41%
35%
27%
16%
0% 20% 40% 60% 80% 100%
Participating in international collaboration projects and
fellowships (through funding by MOST and NSFC, EU
Framework Programme, and EU member states’ bilateral
programmes with China)
Acting as hosting organizations in China for foreign
researchers
Sending personnel abroad for scientific education and
research collaboration
Setting up joint ventures with foreign organizations
What have been the main forms of international research/innovation cooperation for Chinese
private stakeholders (research organizations and firms) in China?
Yes No Don't know
26%
48%
58%
58%
45%
10%
16%
16%
0% 20% 40% 60% 80% 100%
Acting as hosting organizations in China for foreign
researchers
Participating in international collaboration projects and
fellowships (through funding by MOST and NSFC, EU
Framework Programme, and EU member states’ bilateral
programmes with China)
Setting up joint ventures with foreign organizations
Sending personnel abroad for scientific education and
research collaboration
What have been the main forms of international research/innovation cooperation for Chinese private
stakeholders (research organizations and firms) in China?
Yes No Don't know
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43
Other main forms of international research for private stakeholders include: hiring foreign employees,
importing technologies and starting cooperation projects with foreign firms in China.
Human capital for innovation
Survey respondents were asked what has been the main impact of Chinese researchers’ mobility in
acquiring scientific and technological information. As illustrated in Figure 28 and Figure 29, all of the
options seem to be considered as main impacts with at least 50% of the respondents giving positive
results. Respondents appear to believe that researcher mobility is more important for gaining access
to knowledge and connections to the international community than for raising awareness about
Chinese S&T and improving language skills. Market aspects are also viewed as a significantly less
important aspect, perhaps because respondent’s experience of research mobility was more related to
the academic domain and less linked to business opportunities.

Figure 28 Main impact of Chinese researchers’ mobility in acquiring scientific and technological information (Chinese)
49%
51%
54%
74%
76%
86%
87%
92%
49%
41%
36%
20%
19%
12%
12%
7%
0% 20% 40% 60% 80% 100%
Improvement of language skills
Raising visibility and awareness about Chinese S&T
Help with identifying foreign markets
Acquisition of state of the art knowledge on organisational
innovation and management practices
Important source for developing cross-border collaboration
Connection to and integration into the international S&T
community
Acquisition of state of the art scientific and technological
information
Development of knowledge, connection and access to front edge
of basic research
What has been the main impact of Chinese researchers' mobility in acquiring scientific and technological
information?
Yes No Don't know
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Figure 29 Main impact of Chinese researchers’ mobility in acquiring scientific and technological information (European)
The following answers have been indicated by respondents as main impacts:
• Connection and access to front edge of basic research;
• Acquisition of state of the art scientific and technological information;
• Connection to and integration into the international S&T community.
Apart from the answers above, one more answer was indicated by European respondents as a main
impact:
• Development of knowledge, connection and access to front edge of basic research.
Figure 30 and 31 below represent the main forms by which respondents believe Chinese research and
technology infrastructure is opening to foreign researchers. It is clear from figures that respondents
believe that the academic research environment is more open than the business environment for
researchers. It would appear that the openness is considered to be more favourable for Chinese
scientists with a foreign nationality due to the existence of specific programmes to attract these
individuals.
52%
52%
55%
65%
74%
81%
81%
84%
16%
32%
35%
16%
16%
3%
10%
10%
0% 20% 40% 60% 80% 100%
Help with identifying foreign markets
Raising visibility and awareness about Chinese S&T
Improvement of language skills
Acquisition of state of the art knowledge on
organisational innovation and management practices
Important source for developing cross-border
collaboration
Development of knowledge, connection and access to
front edge of basic research
Connection to and integration into the international S&T
community
Acquisition of state of the art scientific and technological
information
What has been the main impact of Chinese researchers' mobility in acquiring scientific and
technological information?
Yes No Don't know
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Figure 30 Main forms of Chinese research and technology infrastructure opening to foreign researchers (Chinese)












Figure 31 Main forms of Chinese research and technology infrastructure opening to foreign researchers (European)
The following have been indicated by respondents as main forms:
• Programmes designed to promote return of Chinese scientists with foreign nationality;
• Job positions for foreign researchers at universities or public research centres;
• New scholarships/grants available for international students/scholars to work in China.

33%
61%
70%
80%
45%
27%
20%
12%
0% 20% 40% 60% 80% 100%
Increasing business opportunities for start-ups by
foreign researchers
New scholarships/grants available for international
students/scholars to work in China
Job positions for foreign researchers at universities or
public research centres
Programmes designed to promote return of Chinese
scientists with foreign nationality
What have been the main forms of Chinese research and technology infrastructure opening to
foreign researchers?
Yes No Don't know
26%
55%
58%
77%
35%
29%
23%
10%
0% 20% 40% 60% 80% 100%
Increasing business opportunities for start-ups by
foreign researchers
New scholarships/grants available for international
students/scholars to work in China
Job positions for foreign researchers at universities
or public research centres
Programmes designed to promote return of Chinese
scientists with foreign nationality
What have been the main forms of Chinese research and technology infrastructure opening to
foreign researchers?
Yes No Don't know
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Targeted Questions -Research Stakeholders
The survey respondents considered to be research stakeholders were asked the extent to which they
believe that public R&D investment is being developed into high quality scientific results and
innovation in China. Figure 32 below illustrates the answers, ranked by “Low”, “Very Low”, “Neutral”,
“High”, “Don’t know”. One response “low” received many more responses than the others - 41% of
respondents believed that there is little development of public R&D investment in to high quality
scientific results and innovation in China, 19% of respondents considered that it is very low, while only
6% considers it as high. Such an agreement about the lack of conversion of investment into results,
might lead one to question whether this had something to do with the way in which current
investment is provided or how investment is linked to or intended to be converted into results.

Figure 32 The extent of public R&D investment into high quality scientific results and innovation in China
The majority of research stakeholders considered to a low/very low extent that public R&D
investments are being developed into high quality scientific results and innovation in China. Many
believed that the current scientific research is focusing on paper work/report rather than practical
social needs. In fact, some respondents stated that the goal of scientific research is to turn the
research outcomes into industrial productivity, but few research institutes can use the investment of
government appropriately. As a result, most research outcomes are not ready to be commercialized,
and even the innovation ability in general is still weak among most industries.
41%
19%
20%
6%
14%
To what extent do you believe that public R&D investments are being developed into
high quality scientific results and innovation in China?
Low
Very Low
Neutral
High
Don't know
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47
When asked to what extent they believe that the research results are utilized by the business sector
in China, although some indicated that China has tremendous demand of technology, and government
is facilitating the transfer of scientific research outcomes to industries, the majority of the respondents
considered that it is still low/very low. Most respondents believed that the research outcomes hardly
meet enterprises’ needs and cannot be commercialized as they are quite theoretical. Some mentioned
the IPR protection schemes and the market itself is still immature. The form of cooperation between
industry and research institution has been focused on improving manufacturing in industry, which
solves part of mechanical issues but it is still not considered as innovation. It seems to be important
to bridge the gap between research institution and industry so that both sides can understand what
the needs are.
In the next question, the research stakeholder respondents were asked what the main avenues are
for public R&D investment to be developed into scientific results and innovation in China. At least 50%
of respondents agreed with all four avenues suggested in the survey. As Figure 33 and Figure 34
illustrate below, the two avenues, which most respondents agreed with (71% for Chinese
respondents) were “funding earmarked for industry or academia” and “government projects by
Ministry of Science and Technology (MOST) or National Science Foundation of China (NSFC)”
suggesting that these two avenues are more successful/ or more commonly used for having a means
of linking investment to results /or achieving the conversion of investment into results. The European
researchers however thought that university-industry alliance for industrial innovation is the main
avenue (59%), perhaps due to the perception that academia-industry links need strengthening.
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48

Figure 33 The main avenues for public R&D investments to be developed into scientific results and innovation in China
(Chinese)

Figure 34 The main avenues for public R&D investments to be developed into scientific results and innovation in China
(European)
When asked to what extent they believe that the research results are utilized by the business sector
in China, some believed that the private sector benefits a lot from the 863 MOST programme, or
incentives from the local government.

48%
51%
71%
71%
36%
40%
20%
22%
0% 20% 40% 60% 80% 100%
University-industry strategic alliances for industrial
innovation
University and/or research institute spin-offs linking
private sector and public research institutes
Government projects by MOST or NSFC
Funding earmarked for industry or academia
What are the main avenues for public R&D investments to be developed into scientific results and
innovation in China?
Yes No Don't know
50%
50%
55%
59%
18%
9%
23%
9%
0% 20% 40% 60% 80% 100%
Government projects by MOST or NSFC
Funding earmarked for industry or academia
University and/or research institute spin-offs linking
private sector and public research institutes
University-industry strategic alliances for industrial
innovation
What are the main avenues for public R&D investments to be developed into scientific results and
innovation in China?
Yes No Don't know
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49
As illustrated in Figure 35, the research stakeholder respondents were asked to what extent they
believe that the research results are utilized by the business sector in China. Basically, the majority of
respondents considered that this use is still low/ very low. This opinion ties in with opinions expressed
about the conversion of investment into high quality innovation or with the desire for increasing the
expenditure of enterprises on research and innovation, reported earlier from this survey.

Figure 35 Utilization of research results by the business sector in China

Industrial innovation
Targeted Questions - Industry Stakeholders
Industry stakeholder respondents were asked how Chinese companies deal with STI. As illustrated in
Figure 36 and Figure 37, a range of approaches are believed to exist. Most respondents agreed with
the approach of cooperation with or outsourcing to universities/ institutes of CAS, suggesting that this
is one of the most common means of dealing with this issue. It is also interesting to note that this
cooperation would be particularly important for SMEs, since respondents reported that they do not
have in-house R&D activities, whilst most believed that larger companies would have these, a factor
that will have implications for STI policy. It would appear, according to these opinions, that State-
owned enterprises do not contribute greatly to STI and that the main focus for Chinese companies for
these activities is experimental development. It turns out that the major difference between Chinese
52%
14%
26%
5%
3%
To what extent do you believe that the research results are utilized by the business sector in China?
Low
Very Low
Neutral
High
Don't know
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50
and European respondents is the focus on experimental development; European respondents didn’t
think that focusing on experimental development was an important way of dealing with STI for
Chinese companies.

Figure 36 How do Chinese companies deal with STI (Chinese)

Figure 37 How do Chinese companies deal with STI (European)

21%
40%
40%
68%
75%
76%
81%
73%
52%
41%
19%
16%
19%
14%
0% 20% 40% 60% 80% 100%
Most large Chinese private companies do not have in-
house R&D activities
State-owned Chinese enterprises are the main domestic STI
performers
Cooperation with universities and R&D institutes in foreign
countries
Focus is mainly on experimental development
Cooperation with or outsourcing to institutes of CAS
Most small Chinese private companies do not have in-
house R&D activities
Cooperation with or outsourcing to universities
How do Chinese companies deal with STI?
Yes No Don't know
22%
22%
33%
33%
56%
78%
89%
78%
67%
56%
44%
11%
22%
11%
0% 20% 40% 60% 80% 100%
Most large Chinese private companies do not have in-
house R&D activities
State-owned Chinese enterprises are the main
domestic STI performers
Focus is mainly on experimental development
Cooperation with universities and R&D institutes in
foreign countries
Cooperation with or outsourcing to institutes of CAS
Most small Chinese private companies do not have in-
house R&D activities
Cooperation with or outsourcing to universities
How do Chinese companies deal with STI?
Yes No Don't know
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51
The following answers indicated how Chinese companies deal with STI:
• Cooperation with or outsourcing to universities;
• Most small Chinese private companies do not have in-house R&D activities;
• Cooperation with or outsourcing to institutes of CAS.

As Figure 38 and Figure 39 show, industry stakeholder respondents were asked what the main mode
is for technology acquisition for Chinese companies. Importing technology from abroad was thought
to be a main mode by the greatest number of respondents (82% and 89%), suggesting that this is the
most common method used by Chinese companies. In-house development, joint venture with foreign
companies and acquisition of Chinese technology are also considered by more than 50% of
respondents as main modes.

Figure 38 Main mode for technology acquisition of Chinese companies (Chinese)

Figure 39 Main mode for technology acquisition of Chinese companies (European)
45%
68%
71%
75%
82%
46%
20%
25%
20%
14%
0% 20% 40% 60% 80% 100%
Collaboration with foreign universities/research
centres
Acquisition of Chinese technology
In-house development
Joint ventures with foreign companies
Technology import from abroad
What is the main mode for technology acquisition of Chinese companies?
Yes No Don't know
44%
67%
67%
67%
89%
33%
22%
33%
33%
11%
0% 20% 40% 60% 80% 100%
Collaboration with foreign universities/research
centres
Joint ventures with foreign companies
In-house development
Acquisition of Chinese technology
Technology import from abroad
What is the main mode for technology acquisition of Chinese companies?
Yes No Don't know
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52

The main modes for technology acquisition of Chinese companies are indicated below:
• Technology import from abroad;
• In-house development;
• Joint venture with foreign companies;
• Acquisition of Chinese technology.

Respondents explained that Chinese industries mainly acquire the technology from other countries,
which lose their original creativity. Government policies, especially for IPR protection, have not been
well organized, which has resulted in piracy and counterfeiting among the industries. They believed
Chinese enterprises should be supported and encouraged to foster innovation not only by funding and
policy but also by a better IPR protection environment - only then enterprises can put more efforts on
innovation.
Industry stakeholder respondents were asked what the main barriers are for Chinese SMEs in
developing STI. The respondents felt that there are many significant barriers. The responses –
illustrated in Figure 40 and Figure 41 below, indicated that the high cost of innovation is the main
barrier, accounting for 85% of Chinese respondents. In contrast, European respondents stated that it
is not only the high cost of innovation but that a lack of qualified personnel is also one of the main
barriers. Insufficient funds, uncertain demand for innovative goods or services, and lack of qualified
personnel are considered to be less important barriers.

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53

Figure 40 The main barriers for Chinese SMEs in developing STI (Chinese)

Figure 41 The main barriers for Chinese SMEs in developing STI (European)

19%
27%
44%
48%
49%
55%
58%
66%
85%
63%
64%
41%
39%
37%
37%
39%
31%
12%
0% 20% 40% 60% 80% 100%
Market dominated by established enterprises
Lack of information on markets
Lack of information on technology
Lack of finance from sources outside your enterprise
Difficulty in finding cooperation partners for
innovation
Lack of qualified personnel
Uncertain demand for innovative goods or services
Lack of funds within your enterprise or group
Innovation costs too high
What are the main barriers for Chinese SMEs in developing STI?
Yes No Don't know
22%
22%
22%
33%
44%
56%
56%
67%
67%
56%
44%
67%
56%
33%
33%
22%
11%
22%
0% 20% 40% 60% 80% 100%
Lack of finance from sources outside your enterprise
Lack of information on technology
Market dominated by established enterprises
Lack of information on markets
Difficulty in finding cooperation partners for innovation
Lack of funds within your enterprise or group
Uncertain demand for innovative goods or services]
Innovation costs too high
Lack of qualified personnel
What are the main barriers for Chinese SMEs in developing STI?
Yes No Don't know
STI Performance of China
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54
Regarding the main barriers for Chinese SMEs in developing STI, the respondents mentioned the
following:
• High cost of innovation;
• Insufficient funds;
• Uncertain demand for innovative goods or services;
• Lack of qualified personnel.

For European, the respondents mentioned that finding cooperation partners for innovation is the
main barrier for Chinese SMEs in developing STI.
Industry stakeholder respondents were asked how large companies use newly acquired dimension for
STI development. As illustrated in Figure 42, 88% of Chinese respondents mentioned increasing in-
house spending on STI and 91% of respondents mentioned cooperating with higher education and
public research organizations. This ties in with the research stakeholders claim that companies
commonly cooperate with or outsource to universities to deal with STI. Similarly, the European
respondents (Figure 43) also pointed out increasing in-house spending on STI and cooperating with
higher education and public research organizations are the main dimension for STI development.

Figure 42 The use of newly acquired dimension for STI development (Chinese)
63%
72%
75%
88%
91%
22%
18%
15%
8%
5%
0% 20% 40% 60% 80% 100%
Expanding through mergers and acquisitions
abroad
Increasing spending on external contract research
Setting up research centres abroad
Increasing in-house spending on STI
Cooperating with higher education and public
research organisations
In terms of the specific behaviour of state owned enterprises and of the growing population of
large Chinese companies, in particular of Chinese Multinational Companies, how do they use their
newly acquired dimension for STI development?
Yes No Don't know
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55

Figure 43 The use of newly acquired dimension for STI development (European)
Regarding the use of newly acquired dimension for STI development, the respondents mentioned the
following:
• Increasing in-house spending on STI;
• Cooperating with higher education and public research organizations;
• Setting up research centres abroad;
• Increasing spending on external contract research;
• Expanding through mergers and acquisitions abroad.

The European respondents mentioned the following:
• Increasing in-house spending on STI;
• Increasing spending on external contract research;
• Cooperating with higher education and public research organisations.

Indigenous innovation and its impact on foreign firms
Industry stakeholder respondents were also asked about the negative consequences of the indigenous
innovation strategy for foreign firms. This was the strategy that respondents appeared to suggest was
the least successful among the existing STI plans and programme, according to results from this survey
44%
67%
67%
89%
89%
56%
22%
22%
11%
11%
0% 20% 40% 60% 80% 100%
Setting up research centres abroad
Increasing spending on external contract research
Expanding through mergers and acquisitions abroad
Increasing in-house spending on STI
Cooperating with higher education and public
research organisations
In terms of the specific behaviour of state owned enterprises and of the growing population of
large Chinese companies, in particular of Chinese Multinational Companies, how do they use their
newly acquired dimension for STI development?
Yes No Don't know
STI Performance of China
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56
presented previously. As seen in Figure 44, a large proportion of stakeholders replied “don’t know” in
regard to the options provided for this question, suggesting that they didn’t have knowledge about
the experience of foreign companies. From those that responded, there was a high level of agreement
among respondents about the consequences of the indigenous innovation strategy. It appears that
access to public procurement is more difficult for them (this was highlighted by the greatest number
of industrial stakeholder respondents – 75%). In the same way, half of the respondents think that the
consequences include creating barriers to market entry with the development of Chinese certification
and standards, being a preferential treatment of domestic entities and of national indigenous
innovation products, as well as creating higher risk of IPR infringement for foreign firms with Chinese
certification requiring disclosure of foreign proprietary technologies.

Figure 44 The consequences of the indigenous innovation strategy for foreign firms (European)
The consequences of the indigenous innovation strategy for foreign firms are indicated below:
• More difficult to access public procurement opportunities in China;
• Barriers to market entry with the development of Chinese certification and standards;
• Preferential treatment of domestic entities and of national indigenous innovation products;
• Higher risk of IPR infringement for foreign firms with Chinese certification requiring disclosure
of foreign proprietary technologies
50%
50%
50%
75%
0% 20% 40% 60% 80% 100%
Higher risk of IPR (Intellectual Property Right)
infringement for foreign firms with Chinese
certification requiring disclosure of foreign proprietary
technologies
Preferential treatment of domestic entities and of
national indigenous innovation products
Barriers to market entry with the development of
Chinese certification and standards
More difficult access to public procurement
opportunities in China
What are the consequences of the indigenous innovation strategy for foreign firms?
Yes No Don't know