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EXECUTIVE SUMMARY: AN EVALUATION OF CHINA’S SCIENCE &TECHNOLOGY SYSTEM AND ITS IMPACT ON THE RESEARCH COMMUNITY

An October 2002 Report from U.S. Embassy Beijing

Full report(MS-WORD, 765KB) is available at http://www.usembassy-china.org.cn/sandt/ST-Report.doc

Recent rapid economic growth combined with reform efforts in China’s science and technology (S&T) sector have resulted in a major realignment of scientific research priorities, as well as significant changes in how the country’s research institutes manage and conduct scientific research. China has adopted a series of measures to bind S&T activities more closely to economic development, and the R&D sector, including China’s institutes of higher education, has been pushed to commercialize research results. This study provides a “snapshot” of recent changes in China’s S&T management and funding policy. It also identifies some of the issues and challenges that lie ahead for China as the country works to catch up with S&T capabilities in developed countries.

STRUCTURE OF CHINA’S SCIENCE AND TECHNOLOGY (S&T) SYSTEM

A New Chinese Model: In the early 1950s, China’s newly-established Communist government modeled its emerging S&T research and development system on that of the Soviet Union. By the late 1970s, however, following the confusion of the Cultural Revolution, then-Vice Premier Deng Xiaoping proclaimed S&T to be one of the “four modernizations,” and the Chinese government started to transform the S&T system according to new strategies. Over the next two decades, the S&T system evolved into a Chinese version of Western models, although with some distinctive characteristics. The key organizations listed below now administer most civilian science and engineering research in China, although the Ministries of Defense, Health, Agriculture and the State Forestry Administration and other economic agencies also have significant research operations under their direct management. The Ministry of Education oversees and funds all universities in the country.

The Ministry of Science and Technology (MOST) inherited responsibility for coordinating and organizing all China’s official S&T activities from the now-defunct State S&T Commission. The Ministry provides policy guidance on the S&T systemic reform agenda, and formulates policies on how to strengthen basic and applied research and technology development, especially in the high tech area. Recently, MOST has focused on S&T development strategies that complement the nation’s agenda of economic reform and development. The Ministry provides funds for S&T programs in both basic and applied research, for instance the high technology R&D program commonly referred to as the “973” program.

The Chinese Academy of Sciences (CAS) exists on two levels. Elected academy members have a significant consulting and advisory role. More substantively, however, CAS loosely manages over 100 independent research institutes, which conduct scientific research in all branches of the natural sciences. Each Institute’s funding is an amalgam of resources coming from CAS Headquarters, MOST and the National Natural Science Foundation of China (NSFC). In addition, institutes earn varying amounts of money owning and operating spin-off enterprises. CAS Headquarters also owns spin-offs. The Chinese Academy of Engineering (CAE) was formed more recently, and is a much smaller organization than CAS, playing only a consulting and advisory role, with no research institutes, graduate school or research centers.

The National Natural Science Foundation of China (NSFC) was consciously modeled after the National Science Foundation of the United States when it was founded in the mid-1980s. NSFC funds peer-reviewed basic and applied research in natural science fields such as physics, mathematics, and chemical and life sciences. Principal grant awardees are Chinese universities and CAS research institutes.

RECENT TRENDS IN FUNDING AND PERSONNEL

Between 1994 and 1998, nationwide R&D funding as a percentage of GDP hovered between 0.6% and 0.7%. In the most recent years for which data exists, however, this indicator has increased sharply, to 0.83% in 1999 and 1.01% in 2000. Although most developed countries’ R&D ratios range between 2% and 2.5%, China stands out as a heavy spender among developing countries. Mexico’s R&D spending, for example, ranged from 0.31% in 1994 to 0.4% in 1999, while India’s score varied from 0.81% to 0.86% in the same time frame. China’s government (exclusive of the private sector, but inclusive of government-owned corporations) reported investing more than 57.6 billion RMB ($6.9 billion) in S&T in 2000, an increase of 4.8% over the previous year. The bulk of this R&D spending, however, was for development and applied research.

Between 1995 and 2000, the total income of CAS Institutes increased sharply, from 3.2 billion RMB ($390 million) to over 7 billion RMB ($850 million). The largest increase in government funding occurred in 1998, coinciding with the commencement of the Knowledge Innovation Program. At the same time, CAS personnel numbers have decreased steadily, with sharp declines since 1999.

One of the biggest winners in the area of basic and “applied basic” research has been the NSFC. Between 1996 and 2000, NSFC’s budget doubled to 1.2 billion RMB ($145 million), and the Foundation plans to double in size again by the year 2003. To keep standards high, average award size has risen consistently, with the sharpest increases being between 1999 and 2000, when average award size rose from 135,000 RMB ($16,000) to 170,000 RMB ($20,000).

In 1995, there were roughly 1.8 million students in China enrolled as undergraduates in science, engineering, agriculture and medicine programs. By 2000, this number had more than doubled to 3.3 million. Annual increases in enrollment, meanwhile, accelerated from 3% in 1996 to 18% in 1999 and 31% in the year 2000. Graduate student enrollment in science showed similar increases between 1997 and 1999.

ACCOMPLISHMENTS OF CHINA’S NEW S&T POLICIES

Many of the major S&T reforms begun in the mid-1980s have accelerated sharply in recent years. Two recent initiatives, MOST’s “863” high technology R&D program and CAS’ “Knowledge Innovation Program,” have proven particularly decisive in promoting intensified competition and higher levels of achievement in research.

Mandatory retirement and drastic staffing cutbacks have opened the door for younger, better-educated scientists to move into senior research and management positions. At most CAS organizations, for example, the majority of their staff is less than 45 years of age. A natural result has been increased output. China ranked 12^th worldwide in major international scientific publications in 1992, but reached 8^th by 1999. It ranked 17^th in the Scientific Citations Index (SCI) in 1992, but by 2000 had reached 8^thplace for the number of papers cited. China’s record in the Engineering Index (EI) is even better. As far back as 1992, China ranked 6^th. By 1999, China ranked 3^rd among all nations, with its share of the total increasing from 4.3% in 1998 to 7.4% in 1999.

Reform policies have included placing all research faculty members on contracts. “Iron rice bowls” -- job security regardless of performance -- have now been shattered at most CAS institutes and universities. Formal project evaluations are now required every three years at the research institutes. Financial management, meanwhile, has been streamlined, with awarded funds deposited directly from the Ministry of Finance to the awardees’ institution, skipping time delays at MOST or NSFC. MOST has conducted relatively thorough assessments of projects funded by the “863” program, and third party reviewers have been asked to analyze budget requests for major projects funded by the “973” program.

Starting in the late 1980s, CAS encouraged its research institutes to launch commercial spin-offs based on successful applied research in their laboratories. An early success story was Legend Computer, a CAS spin-off that is now China’s largest personal computer manufacturer. More enterprises followed during the 1990s, when the Academy’s research institutes were forced to find alternative sources of income as CAS cut their regular budgets. CAS participated in the establishment of the Zhonguancun Science Park in Beijing, a large-scale attempt to recreate Silicon Valley in China. Top university professors, meanwhile, are also finding commercial applications for their research projects. Tsinghua University, for instance, has a long list of flourishing affiliated high-tech enterprises, and a new science park is under construction. The net income of university-owned businesses rose from 6.5 billion ($780 million) in 2000 to over 10 billion ($1.2 billion) in 2001. (The university gets to keep 10%.)

OLD AND NEW CHALLENGES

Despite some success in attracting talent back to China, the scientific “brain drain” problem still persists. With more graduate students receiving masters’ and doctoral degrees, even more of them are competitive enough to win overseas study or post-doctoral opportunities, the U.S. being the consistent top choice. Their professors do not actively discourage them, of course, even though as a result they often have to accept “second or third echelon” Ph.D. students, even at top Chinese research institutes.

The government has started a series of aggressive programs, such as the “Hundred Talent Program,” to attract talented returnees to China from institutions overseas. Top scholars are offered higher salaries, generous housing packages and a research team at their disposal. The “Hundred Talent Program” also offers exclusive research funds of 1 to 2 million RMB ($120,000 to $240,000). Anecdotal data, however, indicates that most talented scientists that have returned have gone to work in multinational companies or local start-up enterprises, rather than government or university research programs. Some are attracted by the improved quality of life in the major cities compared to the time they left China. There has also been increased international cooperation, with many overseas Chinese participating in scholarly exchanges in China.

Being an agrarian country, China has always had too few R&D workers in its labor force. Between 1995 and 2000, R&D workers increased from 804,000 to 925,000 full-time equivalents (FTE’s.) However, the number of scientists and engineers engaged in R&D as a proportion of the labor force has remained low compared to the developed countries. China had only 11 qualified scientists per 10,000 people in 1999, compared to 81.8 in the U.S. and 92.2 in Japan.

Lack of geographic diversity in China’s S&T system is another difficult challenge. With Beijing and Shanghai having most of the top universities and research institutes, China’s large hinterland continues to be left behind. For example, Peking University and Tsinghua between them received over 60 million RMB ($7 million) from NSFC in 2001, head and shoulders above other universities. The central government’s Western Development Initiative appears to have had little impact thus far on the allocation of R&D funds.

Another major problem is the generational legacy of the Cultural Revolution. During that tumultuous time, high schools and universities were closed for a decade. Now, as current R&D managers reach retirement age, there are few experienced managers from the “lost generation” ready to take their place. As a result, many of the new research directors are between 38 and 45 - the generation before them having little education - and at that age many of them have no management experience.

Perhaps the key concern emerging from recent R&D policy trends, however, is the difficulty of finding a proper balance between basic research and applied research and development. Many Chinese S&T policy leaders are concerned that the recent emphasis on commercial applications is driving out creativity in basic research. The experience of some developed countries is that an over-emphasis on commercial applications can result in lost progress on basic research, including in some important scientific areas. Extra emphasis on applied R&D may make sense for a developing country, however. One result of China’s thrust towards commercialization appears to be the concept of “applied basic” research, leading to some successful but unexpected results -- for example the successful breeding of rice and other new crop varieties at a plasma physics institute.

Despite progress on applied research, China is still heavily reliant on imported technology. Technology exports have increased, but in the high-tech area imports have increased even more rapidly. China’s high tech trade deficit grew from 7.6 billion RMB ($920 million) in 1997 to 15.5 billion RMB ($1.9 billion) in 2000.

METHODOLOGY OF THIS STUDY

A National Science Foundation (NSF) Embassy Science Fellow based at the U.S. Embassy in Beijing prepared this report after multiple visits to the Ministry of Science and Technology, the Chinese Academy of Sciences, the Chinese Academy of Engineering, the Ministry of Education, and the National Natural Science Foundation of China. The Fellow also visited a number of research institutes, universities, and private enterprises between November 2001 and March 2002, including approximately 25 organizations, bureaus and offices in Beijing and Yunnan Province. Essential statistics for this study are drawn from the China Science and Technology Indicators (China’s version of the NSF’s Science and Engineering Indicators), which is prepared by the National Research Center for Science and Technology Development under the Ministry of Science and Technology. This report focuses on the management and funding of China’s S&T community, while ignoring research agendas and, for the most part, facilities.

ORGANIZATION OF THE REPORT

The report first lays out the context of China’s current S&T trends, discussing the history of China’s S&T community, its organizational structure, and some overall trends and statistics. The report then turns to specific Chinese government S&T organizations and their activities. This is followed by an overview of the Chinese university system as it relates to S&T, focusing on Beijing University and Tsinghua University. Next, the phenomena of spin-off enterprises and science parks are examined. The report ends with a discussion of recent problems in China’s S&T community, areas for further study, and final conclusions.