Although mainland China currently has the most complete industrial chain and supply chain in the world, and mainland Chinese manufacturers have extensively penetrated all parts of the global industrial chain for decades, almost every new industry and disruptive invention in the modern economy comes from the United States and other Western countries, and has no connection with mainland China at all. While the Chinese are still imagining Chang’e running to the moon, others have already landed on the moon. When the Chinese were looking forward to having a telephone at Home, others already had cell phones.
Robert Atkinson, president of the Information Technology and Innovation Foundation (ITIF), said the Chinese Communist Party has realized that it has reached a stage in its development where it must break through the key to technological innovation. He said that while the CCP has been saying for years that it wants to improve its ability to innovate in science and technology, it has only recently felt a real sense of urgency.
He told Voice of America, “It was only after the Trump administration began restricting exports to mainland China that the Xi Jinping administration really decided that the mainland urgently needed to remove its weaknesses in science and technology, and the U.S. restrictions gave Xi a lot of incentive to accelerate the development of science and technology innovation.”
The system stifles innovation
Despite the fact that China has placed innovation at the center of its overall national development and claims to have the institutional advantage of concentrating its efforts, creating an innovation platform and pooling innovation resources, critics have been pointing out for years that China’s restrictions on individual freedom and freedom of expression and institutional rigidity have largely stifled China’s ability to innovate.
Charles Kenney, a senior fellow at the Center for Global Development (CGD), an organization dedicated to research on the innovation economy, said there is no question that a society without fairness and openness is hardly an innovative society. He told VOA that while it’s not a zero-sum concept or that China won’t innovate under the current system, the fact that “China is not as open as some other countries in the world is likely to be a barrier to China’s ability to innovate more.”
Chinese media reported last year that Alibaba founder Jack Ma had also criticized China’s regulatory system, saying that the Communist Party’s regulatory system stifled innovation.
Frey, a professor at Oxford University, said that under Xi Jinping’s leadership, China’s greater emphasis on group values and suppression of the flow of ideas has made it less likely to become a leader in innovative technology. In an interview with the Voice of America, Frey noted that while China’s patent filings have soared in recent years, the country still relies heavily on intellectual property from foreign companies, particularly U.S. companies.
He cited the example that in China, while all levels of government value innovation and strongly reward patents for inventions, many are duplicate applications. If you look at the number of applications, it seems to be soaring through the roof,” he told Voice of America. Local governments also encourage applications and set targets.” He gave the example of a patent that could be divided into ten applications. The numbers look pretty, even though they actually cover all one technology.
Dong Yunting, director of the expert committee of the China Electronics and Information Industry Federation, said in a speech that “maybe 90 percent of the patents published by the Chinese statistics bureau are garbage, serving only as a vase and circling money for projects.
Policy spillover to the world
A recent study by Atkinson’s Information Technology and Innovation Foundation found that China’s system has not only limited domestic innovation, but that many of its policies have severely discouraged foreign companies, causing the overall innovation capacity of developed countries to begin to decline. The report notes that the debate over the impact of China’s economic rise has often focused on employment, yet the negative impact on innovation capacity is likely to far outweigh employment.
Atkinson told VOA that the Chinese Communist Party has repeatedly used massive government subsidies to prop up companies that have little innovation capacity and are unwilling to invest in research and development to capture markets, creating excess capacity with a large number of cheap products, causing profits to decline and forcing European and American companies to cut back on research and development spending.
He told the Voice of America, “As a result, these companies are doing less and less R&D, innovating more and more slowly, and the whole innovation system is getting slower and slower because companies in mainland China that are lagging behind in innovation are instead competing with more innovative foreign companies to gain the upper hand.”
A series of statistics in recent years show that while Chinese authorities have been investing more in R&D and innovation each year, companies themselves have invested very little. The European Commission recently released The 2020 EU Industrial R&D Investment Scoreboard after compiling the R&D investments of 2,500 companies over the past year. The EU statistics show that only three mainland Chinese companies are among the top 50 companies in global R&D investment, despite their dominant market position in many sectors.
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