Sample Speeches

China's Emerging Technological Trajectory
by Dr. Shirley Ann Jackson
President , Rensselaer Polytechnic Institute

Lally School of Management and Technology Conference
Rensselaer Polytechnic Institute, Troy , New York

Saturday, September 6, 2003

Since the restructuring, the Chinese science and technology system has made remarkable progress. Initially dependent on imported technology - which fueled its rapid economic growth, China has increasingly turned to development of home-grown technology and is channeling enormous financial and human resources into this effort. In the mid-1990s, according to an evaluation done by the U.S. Embassy in Beijing, Chinese research and development funding as a percent of Gross Domestic Product ranged between six and seven tenths (0.6 and 0.7) of one percent. By 2000, it exceeded one percent of a rapidly-expanding GDP.

By comparison, the U.S. in 2000 spent 2.76 percent of GDP on research and development. Only Japan spends more, at nearly 3 percent, and other developed nations range between two and two-and-one-half percent. China , however, has the largest research and development expenditures of any Non-OECD7 nation, and stands out among developing nations.

The backdrop of China 's scientific transformation is a simultaneous transition of the country from an agricultural to an industrial and service economy, and from a command economy to a socialist market economy. Given the complexity of such transitions, the speed with which they are being undertaken, and the size of the country, these are enormously difficult tasks.

Moreover, China is joining a changing world scientific community. The communications revolution and the trend toward globalization are combining to accelerate the pace of scientific discovery worldwide, as more scientists share more information quickly across more borders.

In effect, China is climbing on board a rocket that is lifting and moving more and more rapidly, and it is trying to do so not with a small careful step, but with, one might say, a great leap.

This time, however, instead of isolating itself, China is seeking interaction with other countries. Success will depend first on the completeness of China 's assimilation into the community of nations, second on the skill with which it develops and operates its scientific and technological infrastructure, and third, on the degree to which it allows its scientists the latitude to innovate.

China 's important achievements in economic growth over the past quarter century, as I have mentioned already, have largely been built on technology imported and/or sometimes unfortunately appropriated from other countries.

For a time, China was felt to be a risky target for international entrepreneurs, who stood either to gain enormously from penetrating the world's largest single market, or to lose everything to an inefficient and sometimes unreliable manufacturing system.

China has realized that its ambitions for economic growth hinge on its reputation in the world economy, and has expended great effort in developing legal standards, particularly in the area of patent law reform which offers intellectual property protections, which eventually led to its accession to the World Trade Organization (WTO) in 2001.

WTO membership provides an important normative influence on its members, since they must conform to the rules of the organization or else face sanctions for trade infractions such as "dumping" or protectionism.

Adherence to the rules of world trade promises to be very lucrative for China , as shown by the $20 billion dollar trade surplus this year and by its 6.7 percent economic growth. As China 's state-owned enterprises are supplanted by private enterprise, the manufacturing base is thriving, and the country requires less and less technological expertise offered by foreign companies. China has shown itself capable of producing a range of consumer goods which compete in quality and price.

Perhaps the foremost example of this is Haier, the largest consumer appliance maker in China , regarded as "the GE of China." From a small factory on the verge of bankruptcy in 1984 because of poor product quality, Haier has become a multi-billion-dollar conglomerate with more than 30,000 employees worldwide. Haier appliances are sold in many major U.S. appliance chains, and the company could well become the model for future Chinese global competitors.

However, China 's emerging private sector is lagging somewhat in the crucial area of research and development. Between 1993 and 1999, private enterprise expenditures increased by about 150 percent, about the same level of increase as the government R&D institutions, which spend about the same amount. But the ratio of Chinese enterprise R&D expenditures to sales revenues - known as "R&D intensity" - was only about one-half of one percent through the 1990s, compared with an R&D intensity of two percent for U.S. firms.

Universities are the third of the three major sectors in China performing science and technology work. They have traditionally accounted for less - about 10 percent of total Chinese R&D expenditures.

The Ministry of Science and Technology reports that about 75 percent of the work conducted by China 's S&T community in recent years has focused on product or process development, and another 20 percent on applied research. This is understandable in light of China 's economic ambitions. However, that means only five percent of Chinese effort is directed toward basic, or "pure" research.

That raises several questions. First, should the Chinese government be so heavily involved in product development and applied research. The U.S. government has been less than successful in transferring the fruits of its applied research to the marketplace, although it continues to try through mechanisms such as the Bayh-Doyle Act, which allows the results of federally sponsored research in universities to be commercially exploited.

There are other lessons - learned, or, at least issues, which come to mind from the U.S. experience.

The question of self-interest within a government's research establishment may affect the type of research conducted. One other side of the picture - not unlike some U.S. research universities, many of the Chinese Academy of Sciences institutes began developing spin-off enterprises in the early 1980s to make up for government budget cuts. Some have been incredibly successful, others have not. This raises the potential for conflict between fundamental research priorities and entrepreneurial endeavors. And, it is possible that divided attention could diminish the contribution both to fundamental science and to applied science.

This also raises the issue of technology management. China is trying to develop means of program evaluation to gauge the success of its many special programs. This is an area where the research expertise and experience of other countries might be of use.

Greater success in product development and applied research might come if the roles of the research institutes were clarified, and if the private sector stepped up and increased its investment. However, the growing interest by multinational corporations in establishing research centers, or in otherwise procuring research and technical services, presents important policy considerations - again, such as intellectual property ownership, exploitation, and global competition, as well as the overall role of foreign direct investment.