Technological Innovation in China: Experts Look at Obstacles

Tech Innovation In China: Experts Look At Obstacles

An April 2000 report from U.S. Embassy Beijing

Summary: Chinese and U.S. scholars compared the strengths and weaknesses of the Chinese and U.S. technological innovation "systems" at an April 24 - 27 Beijing conference. Chinese scholars in open session pointed to an emphasis on hardware over training, excessive hierarchy and structural problems as key problems for Chinese science. NPC Standing Committee Vice Chairman Cheng Siwei and other Chinese scholars are very interested in Silicon Valley and hope to replicate it in Beijing. While open exchanges like these are very helpful, what Chinese scientists and science policy scholars cannot discuss open forum some sensitive topics. For example, on some occasions PRC scholars have said that they believe that other key problems such as the lack of intellectual freedom and economic inefficiency are rooted in the Communist Party's monopoly on power and in the socialist system.

Chinese and U.S. experts on management and innovation came together in Beijing on April 24 - 27 for the "China-U.S. Joint Conference on Technological Innovation" sponsored by the National Science Foundation and the National Natural Science Foundation of China. The papers for the conference are collected in a conference volume so this report is concerned with comments made by scholars in open session and in conversations outside the meeting rooms.

Chinese See Legal, Institutional Obstacles to Innovation

Implicit in the American presentations was the central role of private initiative and the indirect role of government. In contrast, Chinese scholars often envisioned an active government role. Chinese scholars did, however, also point to shortcomings in the Chinese legal system and institutions as important obstacles to technological innovation.

In an open forum some of these critiques cannot be pushed too far. On various occasions Embassy Beijing has heard even more penetrating analyses from Chinese scholars in private. ESTOFF has heard on some occasions Chinese scientists and science policy researchers in private express the view that the overly rigid hierarchies, waste, and corruption problems are a direct consequence of the leading role of the Communist Party and the official ideology [for background see Upholding the Four Principles Reconsidered ] that provide a justification for Communist Party rule. The inability of Chinese experts to fully express their views in open session, of course, limited the quality of the exchanges between the U.S. and Chinese scholars. [For background see The Two Distinct Psychological Spheres and Opinion Surveys in China ]

Open Session Comments: Structural Problems -- Laws Not Followed, Poor Management

One Chinese scholar was surprised that a U.S. law, (the Bayh-Doyle Act) that facilitated patenting of discoveries by universities, could have such far reaching implications. The scholar said China has many laws and policies but they are not authoritative (that is, many people don't pay attention to laws and policies) and so are not effective.

A Chinese scholar said that problem is not money to support innovation. The problem is waste and poor management. China needs to create a system of incentives that will help ensure that capital is used efficiently and not wasted.

Another Chinese scholar said that in China the tangible such as hardware is often preferred over education and training.

Professor Liu Xielin in his reports noted that innovation in state-owned enterprises is a big problem since the managers in those companies act like government bureaucrats. Chinese policy is still primarily top-down. It needs to encourage more initiative from below. The legal framework for cooperative ventures is inadequate. There is now less cooperation than before between Chinese companies in the commercialization of products. This is because the Chinese legal system is not able to adequately enforce contract rights that a company acquired under a contract made with another company for the joint development of a product.

Chinese Focus: How to Create A Chinese Silicon Valley

The Chinese scholars were very interested in what made Silicon Valley a success. The idea of the government picking winners, be it winning companies or the location of China's Silicon Valley, was implicit in the comments made by many of the Chinese scholars. Several of the Chinese scholars and NPC Vice Chairman Cheng Siwei clearly favored Beijing as the site of China's future Silicon Valley. The group of American scholars, which included many Californians, stressed that government has only an indirect role in Silicon Valley. One American scholar suggested that in China Shanghai or Shenzhen might even in their distance from Beijing have an advantage as a Chinese Silicon Valley candidate.

University of California Professor AnnaLee Saxenian (author of the 1994 book Regional Advantage: Culture and Competition in Silicon Valley and Route 128) portrayed Silicon Valley as primarily in people's minds, in the openness of Stanford and area institutions, and in a network of relationships rather than in physical infrastructure. One Chinese scholar pointed to the Chinese tendency to build walls between organizations and the consequent poor communication beteween organizations and between levels in Chinese organizations as an important obstacle to innovation.

One American scholar went so far as to dismiss science parks, a popular high tech innovation strategy in China, as real estate opportunities rather than engines of technological innovation.

Naughton: Chinese Gov't Interventions Now Less Direct

Professor Barry Naughton of the University of California at San Diego traced the changing role of the Chinese government in managing innovation over the past two decades. Naughton noted signs of a less direct approach to managing innovation in recent years. The Chinese government supports the entry of Chinese manufacturers Konka and TCL in the cellular telephone market but this time waited for promising Chinese competitors to emerge before giving support. Naughton noted the focus of support seemed to be shifting from mostly state-owned enterprises to Chinese companies in general -- in his words from socialistic to nationalistic. Naughton also mentioned plans to create secondary listing boards in Shanghai and Shenzhen to make it easy for venture capitalists to raise money. Naughton said that the change in the Chinese economy from a shortage economy to a surplus economy will force many companies to pay more attention to the needs of their customers in order to survive. This discipline will be an important force for innovation.

Several American scholars commenting on statistical data in a Chinese paper on research and development of several relatively successful state enterprises, noted that returns on research and development investment were extremely low. One American scholar pointed to serious inconsistencies in statistical data and commented that several of the American scholars suspect that the actual economic growth rate of China is less than half the growth rate announced by the Chinese government.

Discussions Outside the Hall: It's the System

Outside the formal meetings, a scholar told ESTOFF that the basic problem of science in China is that Chinese government agencies act like private interest groups and are often not effectively constrained by law. [Note: This analysis is developed in "Grave Concerns" (summarized in a six part series on the U.S. Embassy Beijing webpage) by Chinese Academy of Social Sciences scholars of the political and economic reasons why China's good environmental policies are not implemented can be applied to science and many other areas in Chinese society. End note]

The Basic Problems are Socialism and the Communist Party

ESTOFF has on occasion heard Chinese scientists and science policy experts see the problems of Chinese science as being inextricably bound up China's economic and political system. Recently a Chinese scholar remarked to ESTOFF that the lack of intellectual freedom and the extraordinary waste of resources severely handicap Chinese science. Both problems are rooted in the Communist Party's monopoly on power and in the socialist system. The Communist Party alternates between tightening and loosening constraints on society depending upon how secure the Party feels. The scholar said that the latest example of the Party's limitations on intellectual freedom is the firing of four Chinese Academy of Social Sciences researchers. Nobody believes in Marxism, said the scholar, it is just a slogan. Resources are wasted or used very inefficiently much more often in China than in the United States, said the scholar, because under socialism nobody plays the role of the owner who would see that resources are used efficiently. Local protectionism and the struggle between the center and localities are another source of great waste, the scholar said. For example, said the scholar, China has 186 different automobile companies -- many more than in other countries.

Bringing the Students Home: Intellectual Freedom Key

After hearing Professor AnnaLee Saxenian's presentation on Silicon Valley and the close links Taiwan high tech companies forged with Silicon Valley, some Chinese scholars asked ESTOFF in a hallway what he thought would bring home some of the many highly trained PRC scientists living overseas. ESTOFF answered higher salaries for academics and scientists and intellectual freedom. ESTOFF remarked that the rapid democratization of Taiwan during the 1980s make the island a much more attractive place to Taiwanese living abroad. Taiwanese used to the democratic society of the United States could no longer stand living under the dictatorship of the KMT. ESTOFF suggested that greater intellectual freedom in China would make China much more attractive to Chinese scholars living overseas. The Chinese scholars agreed that intellectual freedom was part of the problem. [For more on Chinese students in the United States, see the summary review of Studying in America and Bringing the PRC Students Home ]

Meeting with NPC Vice Chairman Cheng Siwei

On April 25, the U.S. scholars met Prof. Cheng Siwei, Vice Chairman of the Standing Committee of the National People's Congress and Director General, Dept. of Management Sciences of the National Natural Science Foundation of China. Cheng had proposed the joint U.S. discussion on technological innovation to the Natural Science Foundation two years before. Cheng obtained an MBA at the University of California in the early 1980s. Cheng began the meeting by announcing that at that day's session of the Standing Committee, an official from the Ministry of Foreign Affairs had reported on how WTO commitments will compel China to greatly increase transparency in official procedures.

American Scholar Asks For Access to Social Science Data

An American scholar who had been unable to obtain data from Chinese colleagues on their social science research project (although the Chinese partners were allowed under the rules to let their American partner look at the materials in their office). The American scholar asked Cheng what could be done about obtaining this information. The scholar noted that all countries keep some information classified, but this data has no relation to Chinese national security. Cheng replied that after China enters WTO strictures on the release of information will be eased.

Future Cooperation

Several scholars at the meeting pointed to the need to examine how and which innovations succeed rather than focus on the process leading to innovation. The Chinese scholars seemed to realize the advantages of indirect rather than direct government involvement but do not not seem certain as to how to achieve this in China given the legal, institutional and political characteristics of the present economic and political system. Owing to restrictions on the Chinese participants felt in expressing themselves in open session, some of the American participants may not have realized that the views of their Chinese colleagues were closer to their own then appeared on the surface.

Chinese Tech Problems are Management,Politics,Economics

Words like science and technology, knowledge economy and "Science is the most important productive force" often slip from Chinese lips like nearly magical incantations. Yet as more Chinese scholars are now pointing out, the problems of science and technology in China are not so much scientific as they are problems of management, economics and politics.