Qu Qiang: Nation Must Invest More in the Future

2018-03-19 IMI

This article first appeared in China Daily Europe on February 16, 2018. Qu Qiang, Assistant Director and Research Fellow of IMI The European Union recently issued its 2017 research and development scoreboard. According to this, China had the fastest-growing investment in R&D, compared with traditional international front-runners like the United States, the European Union and Japan. This is not surprising, given China's growth in the past four decades. Technology, the most important driving force of a modern economy, and the related investment, is playing a vital role in this process, as the country's demographic bonus and low-cost advantage gradually fade away. There is a significant nationwide consensus that being more tech-savvy makes China a more important and sustainable economic heavyweight, leaving aside the fact that technology provides probably the only solution to all of our potential long-term concerns. Therefore it is understandable that among the most enthusiastic tech investors there are not only high-tech internet companies like Tencent, Alibaba and Baidu, but also State-owned giants such as PetroChina, China Railway and Shanghai Automobile - with on average 1.5 billion euros ($1.8 billion; ￡1.3 billion) spent on R&D by the top 10 Chinese players last year. China has become home to the world's largest internet market and high-speed railway network, renewable energy application and competitive space technology, served by the country's leading corporations. It did not achieve this overnight, but zigzagged a long way before eventually catching up. Before the 2000s, the country's economic surge greatly relied on its large reserve of natural resources, its enormous young and low-cost workforce and institutional liberalization. However, as its economy reaches a new stage, younger, better-endowed competitors are rising, and China's old ways do not pay off like before. China, more than ever, has realized that only by grasping core technology and groundbreaking innovation can it leap to new heights. Hence, about 20 years ago, some Chinese companies, mostly internet and manufacturing players, started their unique pilgrimage toward innovation, copying then improving - finding a foreign best-seller and reinventing some of its features and functions to make it a better fit in China. The success of these products and the companies' later IPOs brought them their first bucket of gold, paving the way for the true, independent, yet money-burning R&D of the future. This doesn't just apply to businesses. The government of China is the most important funder of R&D, especially fundamental research. In the past five years, the government's average expenditure on R&D has reached more than 1.3 trillion yuan ($206 billion; 168 billion euros; ￡149 billion) annually. The funding gap is getting smaller between China and other leading countries. Moreover, in specific areas, such as computer chips and artifical intelligence, China's public and private funding together are already taking the lead in the international arena. The Chinese government and businesses are learning to play smart, leveraging international capital to help with R&D through joint ventures and inter-government projects. Besides funding, talent is also a key factor. Education has been at the top of the national agenda since the late 1970s, with special attention being paid to science. With more than four decades of development, China has accumulated one of the largest teams of professional talent. Since 2004, China has graduated the largest number of engineering students in the world - more than the United States, the EU, Japan and India. China not only has the largest talent reserve but it also competes at the highest level. In the hottest areas such as deep learning, Chinese effective research papers rank No 1 in the world, and their Chinese authors are world-renowned experts. It has also become a trend for China to show more interest in international talent. An increasing number of the world top-class researchers are coming to China. More R&D cooperation is also on the way between China, the US and Europe, led by their governments and universities. Beyond funding and talent, China also has the upper hand in other areas, such as research infrastructure, data and technology transfer. In many Chinese universities and research institutions, the equipment used in experiments is second to none. With a large market and user base, Chinese businesses are able to acquire more data to feed their deep-learning models, to improve their calculation methods, which in return gives them an advantage against international competition. However, we also need to be clear that China, although growing fast, still lags a long way behind some global champions. According to the EU's report, the world's top five companies, including Volkswagen and Microsoft, have annual R&D budgets that average more than 12 billion euros. Only one Chinese company, Huawei, is able to rub shoulders with the big boys in the 10-billion-euro club. Next comes Alibaba, which only invests 2.3 billion euros a year. Most Chinese R&D is concentrated in the area of information and communications technology, manufacturing and industrial engineering, but industries that require larger and longer investment and carry with them more uncertainties and risks - such as pharmaceuticals and medical research - remain under funded. We remain not fully involved in the international R&D community. In the past 20 years, we followed and got closer. Now it is time to think about going beyond.

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Qu Qiang: Nation Must Invest More in the Future

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