What are the top policy issues in China right now? In this series of explainers on China, we have gathered the knowledge of experts at the World Economic Forum, to write about topics ranging from inclusive growth to urban migration. See the full list of explainers on China’s top policy issues at the bottom of this article, and learn more about our meeting in China, taking place in Dalian, September 09-11, here.

Policy Issue: Innovation Drive
What: Growing ambitions to become a world leader in technology
Related live streamed sessions: 
The Innovation Playbook II China’s Reform Agenda II China’s Digital Disruptors II Leading Global Innovation

With the declared goal to become a global leader in science and technology, China launched a landmark programme in 2015 for ‘’mass entrepreneurship and innovation’’, to cultivate grassroots entrepreneurship throughout the country. This vision is aligned with the country’s economic goal to shift from labour-intensive manufacturing to innovation-driven growth, and China is dedicating resources and policy support to upgrade value chains, improve technological advancement and boost innovation in manufacturing and service industries.

In addition to top-down goals to upgrade its innovation capacity in order to stay competitive, China’s innovation drive is also being led by bottom-up factors such as the rise of Chinese entrepreneurs who are disrupting traditional industries, as well as technological influences ranging from e-commerce and social media to internet finance that are helping China leapfrog its innovation process.

Indicators show that China has what it takes to rise to the forefront of global innovation. This includes soaring R&D spending (China’s R&D expenditure reached 1.18 trillion yuan ($ 193 billion) in 2013, a 15% increase year-on-year, and is set to overtake the European Union and the United States to be the top R&D-invested country by the end of this decade), a large number of corporate patents, a new generation of entrepreneurial CEOs and high number of engineering and science graduates.

However, limiting factors include weak intellectual property rights enforcement, a route learning-based education system, internet censorship, forced technology transfer policies and a top-down innovation model may hamper China’s grassroots entrepreneurial and innovative forces. China also needs to overcome a perception issue about the quality and reliability of its products and that Chinese firms receive an unfair advantage in the global marketplace through subsidized government financing and other policy tools.

The country’s innovation drive has led to a significant rise in the number of private-sector firms in China (rising four- fold since last decade) that are increasingly moving from imitate to innovate, and also shifting from serving the domestic market to venturing into the global marketplace. There has also been the boom in China’s maker and design culture, where start-ups are using crowd funding, open source designs and innovation incubators to jump-start the next disruptive product or technology.

The Chinese government’s push to reform its state-owned enterprises by encouraging mixed ownership, equity investment by non-state capital and managerial reform, is also an indication that innovation has not only extended to the private sector but is also impacting China’s public sector.

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