Improve the efficiency of the national systems that relate to innovation

China has realized a high growth rate over the 30-plus years since the start of Reform and Opening Up, despite its relatively insufficient resource endowment. However, we also must recognize in a very clear-headed way that the methods by which this growth was achieved must be changed. These methods included high levels of inputs, high expenditure of resources, and high rates of emissions. By now, the situation is unsustainable. The issue of ultimate importance to China in its modernization is how to achieve sustainable growth. This means taking a sustainable path that uses resources in highly efficient ways and ways that enable overall resource conservation.

In order to promote technological advances and innovations in the sphere of resource utilization, and to set up institutions and systems that encourage such innovation, we must adopt the following key measures.

Improve the market

Realize a more competitive market environment that stimulates companies to innovate in order to succeed. Fair competition is a key driving force behind coiporate innovation. The aim is to make use of the fundamental and incentivizing role of market competition; to create a fair, open, and transparent market environment; to strengthen the ways in which industrial policy can guide innovation; to stimulate a situation in which excellence succeeds while inferior companies are washed out of the market; to strengthen the incentive to innovate among market entities; and to turn around the equation of ‘asking companies to innovate’ by instead ‘having companies want to innovate.’ In order to do all that, we must adopt the following key measures. First, set up rules that provide for fair market entry. Create conditions that allow companies of different ownership structures to compete fairly with one another, which means creating the market environment and mechanisms that allow access to innovation resources on an equal basis. Second, speed up tax reform and reform of the piicing of key resources. Set up tax policies and pricing systems that reflect the scarcity of resources as well as their impact on the environment. Use market mechanisms to propel companies toward innovation as well as to guide them toward innovation. Third, strengthen the protection of intellectual property lights. Increase the cost of infringing upon such rights and lower the cost of protecting such rights. At the same time, elevate the value of intellectual property rights in order to incentivize the enthusiasm to innovate and to protect the rights and interests of innovators. Fourth, improve all kinds of standards (regulations) that relate to the environment, to quality controls, and to safety. Strengthen the forcefulness with which standards are enforced, and unify all standards. Create mechanisms that allow excellent companies to win out over inferior companies.

Fifth, foster the development of strategic new industries. Support R&D of core technologies in key areas. Place equal emphasis on different technology road maps. Set up banders to entry by creating regulatory standards that relate to energy consumption, safety, and environmental protection, and let the market choose which technological direction to take.

Improve the methods by which the government supports technological innovation

In order to push government functions in the direction of servicing innovation and away from directly managing R&D, we should improve the methods by which the government allocates resources for R&D. The intent is to raise the efficiency with which public funds are used. Specific ways to do this include the following. First, fonnulate a goal-oriented R&D plan for industrial technology and strengthen the alignment of the government plan with each link in the process of innovation. Increase the level of support for projects that serve as models for commercialization and the links that create actual results. Second, focus on the social benefits of publicly funded R&D, and emphasize basic research and public- benefit areas that are not effectively addressed by market mechanisms. Build up ‘innovation platforms,’ and provide particular support to the innovative work of small and medium-sized companies. Third, set up ways to achieve technology transfer of feasible results and mechanisms to disseminate results. Push forward the actual use and promotion of such technologies. Fourth, create institutional structures that separate the various functions of planning and formulating R&D projects, implementing them, and evaluating them. That includes forming effective ways to cany out regulatory' oversight and enforce constraints. Fifth, improve the systems that evaluate projects. Manage projects by categories. With respect to newly commercialized technologies and projects that are being broadly implemented, look at the total life-span energy efficiency and incorporate environmental impact assessments.

Put more investment into basic research

China should constantly seek to improve mechanisms for investing in basic research and increase the percentage of basic-research investment in the total amount that goes into R&D. This means taking full advantage of the primary role of the state in funding basic research. It requires increasing financial support from central public finance for pure science, for basic-research centers, and for large- scale infrastructure needs for basic science, as well as making sme the support is stable and secure. With respect to the design of systems, we should improve the policy environment and institutional structures and mechanisms that relate to basic research, as well as systems for evaluating and deploying basic research. We should vigorously guide and encourage local governments, businesses, and the public to increase investment in basic research and foster a culture that values basic research.

Encourage universities to cultivate high-quality scientific personnel and do cutting-edge research

The situation at present is that universities tend to focus on applied-science research. China’s universities, research institutes, and corporations generally lack the ability or motivation to promote innovation, which means that investment in basic research is insufficient. China should strengthen its investment into key areas of basic research by broadening the autonomy of universities and research institutes and allowing individuals the right to decide themselves on topics of research. It should support the formation of research teams that interact with one another across disciplines and across institutions, including universities and research institutes so as to encourage them to participate fully in basic research and cutting-edge research. Universities should develop models by which research and education are integrated so as to cultivate innovative people who are enthusiastic about basic- science education and creative in their ways of thinking. They should significantly raise the caliber of China’s scientific human resources.

 
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