China’s Plans for Winning the Tech War

Four years ago Beijing announced its desire to make China an innovation-oriented society.

China wants to strengthen innovation, particularly in energy, transportation, the environment, agriculture, information, and health. It aims to boost the development of proprietary intellectual property. It seeks to apply modern technologies to public life and urbanization. And it is looking to modernize its defense capabilities, including its space program.

Accordingly, Beijing plans to increase R&D spending from 1.5% of GDP in 2006 to 2.5% by 2020, introduce unique technical standards that would reduce dependence on imported technologies by 30%, and ensure that China will become one of the world’s top five economies according to the number of patents granted and scientific papers published.

1. It offers tax incentives, including accelerated depreciation of investments in R&D facilities and tax breaks on returns from venture capital investments in technology-based start-ups.

2. It has increased spending in 17 areas in which the state’s research institutions and its enterprises collaborate, banks offer cheap loans, and special funding supports the development of domestic technologies that can replace imported ones.

3. It has tailored procurement policies to favor indigenously developed technologies. This occurs at the national, provincial, and municipal levels, especially in cities such as Beijing, Shanghai, and Guangzhou, where the state wants technology-rich industries to replace low- and mid-tech ones that are moving inland.

4. Finally, it is forcing multinational companies to transfer their newest technologies to their joint ventures with China’s state-owned companies.

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