Outline of the National Strategy of Innovation-Driven Development

Background Briefing

Minister of Science and Technology

May, 23, 2016

The 18th CPC National Congress proposed the strategy of innovation-driven development and stressed that scientific and technological innovation is a strategic pillar for boosting social productivity and comprehensive national strength and therefore must be placed at the heart of the country’s development. The Fifth Plenum of the 18th CPC Central Committee put innovation at the top of the five development principles and identified innovation as the number one factor driving development. It pointed out that development must be anchored on innovation, and efforts must be made to pursue development that relies more on innovation and makes better use of first-mover advantage. General Secretary Xi Jinping provided systemic explanations of the strategy of innovation-driven development on several occasions. He stressed that innovation-driven development must be viewed as a key strategy for the future and that it is important to improve top-level design and earnestly implement specific tasks, grasp the global trend of science and technology as well as the status quo and path of China’s scientific and technological development, and set out viable direction, goals and priorities for promoting development. Premier Li Keqiang also stressed on a number of occasions that innovation should be the driving force for maintaining medium-to-high speed of growth and medium-to-high level of development.

The Ministry of Science and Technology, together with other related departments, drafted the Outline of the National Strategy of Innovation-Driven Development (hereinafter referred to as the Outline) in accordance to arrangements of the CPC Central Committee and the State Council and coordination of the National Leading Group on Scientific and Technological Reform. The draft was based on studies conducted at home and abroad, the Outline of Medium-to-long-term Scientific and Technological Plans, mid-term evaluation of major S&T projects, and technology forecasting. Opinions were also solicited from local authorities, enterprises, universities, academic institutions and experts. The Outline was recently released by the CPC Central Committee and the State Council after obtaining approval from the CPC Leading Group on Further Reform and the Standing Committee of the Political Bureau of the CPC Central Committee.

The Outline is a concrete action on instructions given by General Secretary Xi Jinping in his important speeches and the philosophy of innovative development proposed at the Fifth Plenum of the 18th CPC Central Committee. It is a top-level design and systemic plan for the implementation of the innovation-driven strategy. Having established the goals, direction and priorities for innovation-driven development in the next 30 years, it is a guideline for building innovation and innovative country in the new era. It is of great relevance and profound historic significance.

I. Background

The national strategy of innovation-driven development is based on the overall interest and global developments with a focus on key sectors to drive the overall growth of China. It is not temporary or limited to certain sectors, but rather a crucial decision made by the CPC Central Committee as China has entered a critical stage of development. It is consistent with historical and present logics.

1. Innovative development is the way to go in the context of international competition. At present, a new round of S&T revolution and industrial evolution is picking up speed on the global stage. Major disruptive innovations keep emerging, creating new products, new demands and new business formats. They generate unprecedented momentum for socio-economic development and trigger profound economic and industrial restructuring. They are the key factors for China’s growth and increased international competitiveness. China now faces a rare historic opportunity for a quantum leap and also a risk of having existing gaps further widened. Only with a stronger sense of crisis and readiness to break new ground can China keep up with the world’s development and take the initiative of development in her own hands.

2. Innovative development is the way to realize the rejuvenation of the Chinese nation. The strength of a nation is ultimately determined by its ability to innovate. In the modern history, the center of the world economy has shifted several times, yet there has been a clear logic behind it. That is, the scientific center has always been a major driving force behind the geographic shift of economic center. Places where cutting-edge technologies and high-end professionals flock are always the ones that seize command heights and boast economic competitiveness. More than ever before, China needs the power of scientific innovation to realize her dream of national rejuvenation. China cannot afford any delay in the implementation of the strategy of innovation-driven development.

3. Innovative development is imperative for China at the current stage. After decades of sustained rapid growth, China has become the second largest economy in the world, with a per capita GPD of almost US$8,000 at a middle-upper income level. On the other hand, problems such as low-end industries, inefficient economic structure, imbalanced development and growing resource and environmental constraints have become more and more alarming. China is at a critical juncture. The next steps to take would determine whether the country could overcome the “middle-income trap”. As the economy enters a new normal, to drive development through new instead of traditional factors, solve problems impeding the economy, and raise the quality and efficiency of growth are crucial for China to adapt to and lead in the new normal. The next five years is decisive for the building of a moderately prosperous society in all aspects. Whether China could successfully change the growth pattern, upgrade industries and avoid the middle-income trap depends on whether she could develop new engines through innovation and thus create a new growth cycle of longer duration.

China is well-positioned to speed up innovative development. Since the founding of the People’s Republic of China, through the hard work of several generations, China’s innovation capability has witnessed notable progress and a complete R&D system is gradually taking shape. With the transition from quantitative growth to qualitative growth, China has become a major science and technology country with great international influence.

In 2015, China’s total R&D expenditure exceeded 1.4 trillion RMB yuan, accounting for 2.10% of GDP. The number of R&D personnel reached 3.95 million person-year, ranking the first in the world. The contribution rate of scientific and technological progress rose from 50.9% to 55.1%. China also ranked the 19th place in the 2014 global ranking of national innovation index.

China’s original innovation capability has markedly improved, and produced a number of influential research outcomes in basic, frontier and strategic high technologies. Professor Tu Youyou became the first Chinese scientist that won the Nobel Prize. Major breakthroughs have been made in high-temperature superconductor, quantum theory, stem cell research and other subjects of basic research. Proud achievements have been scored in key technologies like manned space and lunar exploration, Beidou, Kuaizhou and manned submersible. China granted the second largest number of invention patents in the world. China continued to rank the second in international scientific papers, and rose to the fourth position in the number of citations. Chinese scientists have made greater contribution to the innovation of human knowledge.

The innovation capability of the business sector has rapidly enhanced, and the technological contents of industries have further increased. Today, more than 77% of China’s gross R&D expenditure comes from the business sector. The number of invention patent applications and authorizations for companies continue to rise. Breakthroughs have been made in a series of major technologies, such as high-speed railway, nuclear power, 4G mobile communication, ultra-high-voltage power transmission and distribution, hydropower equipment, wind/photovoltaic energy storage and transmission and new energy vehicles. Chinese products and equipment are actively exploring international markets. The transaction volume of technology contracts on the national scale reached 983.5 billion RMB yuan. The proportion of advanced technologies transferred and absorbed by companies reached 80%. Technology dissemination and transfer has lifted the innovation ability of a vast number of SMEs in a wide range of sectors. China’s huge market space, complete industrial system and diversified consumer demands, combined with more efficient innovation facilitated by mobile and intelligent technologies, has provided broad space for the innovation of technologies, products and industries.

That being said, we should also understand that to meet the goals of creating emerging industries and leading development, we still lack a reliable reserve of science and technologies as well as sufficient high-end professionals. The problem that key and core technologies are still controlled by other countries remains to be resolved. Many of our industries are still at the lower-to-medium end of the global value chain, and the deep-seated structural, institutional and ideological barriers of innovation still exist.

II. Overall goals and arrangements

As part of the top-level design, the Outline must be a strategic, visionary and systemic document.

1. According to the Outline, innovation-driven development means innovation should become the primary driver of development, that innovation in science and technology must be combined with innovation in system, management, business model, and culture, and that efforts must be made to pursue development on the basis of continued knowledge accumulation, technological progress and the improvement in labor competence, and promote economic growth with more advanced form, more sophisticated division of labor and more efficient structure.

2. According to the Outline, in implementing the strategy of innovation-driven development, it is important to promote all-round innovation with scientific and technological innovation at its heart, place scientific and technological innovation at the center of national development, facilitate and drive innovation in management, organization, business model and all other respects through scientific and technological innovation, foster new engines for promoting innovation-driven development, and notably enhance the ability of science and technology in supporting and leading economic and social development in order to turn innovation into the primary driver of development.

3. The Outline has identified the three stages for implementing the strategy of innovation-driven development, which are consistent and mutually reinforcing with the strategic goal of achieving China’s modernization in “three steps”.

Step 1, China should become an innovative country by 2020 to give strong support for building a moderately prosperous society in all respects;

Step 2, China should move to the forefront of innovative countries by 2030 to lay a solid foundation for building China into a major economic power and a society of common prosperity;

Step 3, China should become an innovation power by 2050 to support the building of a prosperous, strong, democratic, culturally advanced, harmonious, modern socialist country and the realization of the Chinese dream of national renewal.

4. The Outline has laid out the implementing steps for the strategy of innovation-driven development, and stressed the importance of “driving by twin wheels, building one system and promoting six transformations”.

Driving by twin wheels means the two wheels of STI and institutional innovation should coordinate with each other and play their role sustainably. Innovation is, first and foremost, about innovation in science and technology. It is imperative to strengthen the weak links in STI before anything else. We must be clear about the direction and priority of development, strengthen scientific exploration and make technological breakthroughs, and foster a systemic capability for sustained innovation. Institutional innovation should aim at adjusting all production relations inconsistent with the goal of innovation-driven development. We should advance institutional innovation concerning science and technology, economy and government administration, unleashing fully the power of innovation.

One system means the building of the national innovation system. We should build an ecosystem featuring close coordination and interaction among various innovation entities as well as unimpeded flow and efficient allocation of innovation factors, and bring about the carriers, institutional arrangements and safeguards for achieving innovation-driven development; define the functions and roles of enterprises, research institutes, universities and colleges, social groups and other innovation entities, and set up an open and efficient innovation network; improve innovation governance, further clarify the respective responsibilities of government and market, and build a system for ensuring balanced allocation of innovation resources; formulate pro-innovation policies, improve the legal system to protect innovation, and cultivate an innovation-friendly social environment for boosted creativity of the whole society.

Six transformations means the transformation in the model of development from an inefficient model focusing on the scale expansion to a more sustainable one focusing on quality and efficiency; the transformation in the driving force of development from traditional factors to innovation factors; the transformation in the industrial sector from the lower-to-medium end of the value chain to the medium-to-higher end; the transformation in the status of innovation capability from being “behind, on a par with or ahead of” other countries at the same time but mostly “behind” to being “on a par with” or “ahead of” other countries; the transformation in the allocation of resources from focusing on R&D to a balanced distribution along the industrial chain, innovation chain and capital chain; and the transformation in innovation entity from an “elite group” of science and technology professionals to the interaction between the “elite group” and the general public involving innovation and entrepreneurship.

III. Strategic tasks and safeguards

The Outline has made systemic plans for scientific, industrial, regional and organizational innovation, innovation in military-civilian coordination and mass innovation, which demonstrates the layout of innovation on all fronts. As for the assignment of duties, the Outline has not only laid out the specific tasks of development but also made arrangement for institutional innovation in the long run.

In terms of strategic tasks, the Outline has, in keeping with General Secretary Xi Jinping’s requirements of “endeavoring for the international frontier S&T breakthroughs, meeting major needs of the country, and serving economic development”, laid out steps for the key areas and crucial links of innovation-driven development and put forward eight tasks concerning innovation capability, human resource, overall planning, coordinated innovation and innovation of the whole society.

In terms of safeguard measures, the Outline has pledged safeguards for the implementation of the strategy with a focus on building an efficient national innovation system, deepening institutional and structural reform and cultivating a sound ecosystem for innovation, and proposed concrete safeguard measures in six areas, namely reforming the innovation governance system, stepping up input in innovation through multiple channels, promoting open innovation, improving the evaluation system, implementing IPR standards and branding strategies, and fostering an innovation-friendly social environment.

The Outline has also put forward detailed requirements for its implementation and organization from the perspectives of strengthening leadership, improving coordination and division of labor, running pilot programs, conducting monitoring and evaluation and strengthening publicity, and called on the Party and the whole society to rally closely around the CPC Central Committee with Comrade Xi Jinping as the General Secretary, aligned the efforts of all sides on the implementation of the innovation-driven development strategy, and striven to complete the building of an innovative country in all respects and realize the Chinese dream of great national rejuvenation.