How Can China Afford Its Science And Technology Goals?

China has embarked on a series of techno-industrial upgrades, shifting its growth model into high-end value-added manufacture.

AsianScientist (Oct. 17, 2017) – By Tristan Kenderdine – China is at a historic economic juncture. Its urban-centric growth model has orphaned the rural population while the urban population struggles with incomes below OECD levels and housing, education and health costs above those in Europe.

Science and technology policy is also at a critical point, with China on the edge of a series of techno-industrial upgrades into super advanced industries, shifting its growth model into high-end value-added manufactures.

To achieve this, China is reconfiguring its science research funding bureaucracy. Projects that proliferated under the 12th Five Year Plan (FYP) are being streamlined into a new, simplified funding arrangement. This includes the previous umbrella programs of 973 (basic science research) and 863 (high technology research).

To spearhead the research and development (R&D) funding overhaul, the Ministry of Science and Technology (MoST), which acts as a gatekeeper for funding and project coordination, upgraded and consolidated the National Key Technologies R&D Program. This is the first of the five major umbrella programs in national R&D reform. The consolidated institution supersedes the 863 and 973 programs, which had previously been scattered across a variety of government agencies and state-owned enterprises (SOEs).

Funding for the 13th FYP is now beginning to be rolled out in projects overseen by MoST and coordinated through hierarchical project databases and funding grants. Larger, horizontal, inter-ministerial science and technology details are likely to be rolled out throughout 2017 and 2018.

The reform process established in 2014 is nearly complete. In 2014 key pilot projects were established and a database of centrally financed research projects was setup. Throughout 2015 and 2016 five categories of the science and technology plans were demarcated with a unified and transparent management platform established. Now in 2017, the clean-up and abolition of the old funding channels is being enacted to allow the full operability of the five new categories of projects and funds.

By simplifying the new R&D funding into five sections, the policy coordination aims to integrate project application and resource allocation and to upgrade industry chains and financing channels for technology innovation. This is while allowing markets to play their role and limiting governmental agencies from micromanaging projects.

The wide-ranging R&D bureaucratic architecture, which includes MoST along with a wealth of other ministries in the science and technology industrial complex, is to be consolidated from the current, fragmented funding channels into a unified inter-agency platform. This shift in R&D management is hoped to enable stronger oversight, promote efficiency and reduce micro-management from the centre and wasteful investment by the localities.

Since 2014, the Ministry of Finance has also been channelling funding for industrial upgrading away from local government fiscal spending that can’t be audited and into more transparent and centrally coordinated industrial development investment funds. By early 2017 there were nearly 1000 individual funds collectively worth US$500 billion.

These funding mechanisms will intersect with other centrally coordinated industrial policy developments as science-technology reform for national innovation is integrated into China’s wider industrial infrastructure. China’s State Council has said advancements in science and technology will lead to socio-economic development. And it’s spending big, with R&D investment to account for 2.5 percent of GDP by 2020. SOEs—the backbone of China’s science-technology industry—will be mandated to spend 1.5 percent of business revenue on R&D.

The proliferation of five-year plans into horizontal sectors and vertical tiers of government is quite natural. But the speed at which the industrial technology plans have been formed and published is indicative of advanced planning. Trade policy in comparison is still struggling to publish its 13th FYP on international capacity cooperation ten months on from its announcement.

For policy transmission and implementation, China’s network of high‐tech industrial parks stand ready to act as a conduit between central government, local government and SOEs. Mostly governed at the prefectural-levels, such parks generate around 10 percent of China’s industrial output and 16 percent of its export value.

Cooperation between central government funds, prefectural government industrial parks and private capital enterprises have opened a huge array of R&D funds to guide the science and technology industrial complex. Key technologies generated by these parks include graphene cables, environmentally friendly materials, new energy vehicles and photovoltaic energy.

Of course, the system will be open to misuse and misdirection of funds. There is already an overcapacity problem in low-end robotics as subsidies have encouraged the picking of low-hanging fruit rather than developing the industrial clusters necessary for future innovation.

Similarly in higher education, reform of the 211 and 985 programs into 42 strategic schools is unlikely to result in substantial changes in Chinese university and vocational sector outputs, other than a few soundbites from global rankings.

The start of any FYP cycle always sees policy exuberance and a flood of funding for strategic industries and centrally coordinated, industrial technology capacity. But watching the government’s science-technology funding scheme is especially prescient as China pushes through the post-industrial technology barrier and begins to take the lead in areas like artificial intelligence, robotics, batteries and new energy, advanced materials, nano-technology and biotechnology.

Tristan Kenderdine is Research Director at Future Risk.


Source: East Asia Forum; Photo: Shutterstock.
Disclaimer: This article does not necessarily reflect the views of AsianScientist or its staff.

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