05 Sep 2007   |   News

Should do better: OECD verdict on China

China needs a better return on its fast-rising investments in R&D and higher education if it is to become an “innovation-oriented” economy by 2020, OECD.

China needs a better return on its fast-rising investments in R&D and higher education if it is to meet its goal of becoming an “innovation-oriented” economy by 2020, says the Organisation for Economic Co-operation and Development (OECD) in a new report.

In its first review of China’s innovation system, the OECD says China still has a long way to go to build a modern, high-performance national innovation system.

R&D spending has increased at an annual rate of 19 per cent since 1995 to reach US$30 billion in 2005, the sixth highest expenditure in the world – but it still has a long way to go to build a fully fledged and mature national innovation system.

Investment is focused on the updating high-tech equipment and facilities and on experimental research for new products, rather than on basic research – “the foundation of long-term innovation”. And more investment is needed in services, energy, environmental technology and basic research.

China could also face a shortage of skilled workers in science and technology, despite currently having more researchers than any other country except the United States. In recent years, the number of undergraduate degrees in science have even fallen in absolute terms.

Weak on innovation

And despite a series of reforms since the mid-1980s, the innovative capabilities of the Chinese business sector remain weak. The report calls for further reform of China’s financial system, fostering “more open and efficient capital markets” to encourage entrepreneurs to take greater risks and put money into sectors, such as biotechnology, that need long-term investments.

To encourage domestic firms to innovate and benefit more from closer ties with R&D centres of foreign companies, the government should enforce intellectual property rights more effectively and strengthen competition, says the report.

Universities play a key role in China’s innovation system. They run more than one in ten Chinese science and technology firms, account for one in five patents granted each year and provide venture capital to promising start-ups. But, says the OECD, further reform is needed to meet surging demand for talented managers and highly qualified researchers.

China’s science and innovation policy also needs better governance, says the report.

China’s emergence as a global player in science and innovation should benefit both China and the rest of the world, says the OECD – provided that both China and OECD countries can maintain a spirit of dialogue and cooperation, notably over issues such as intellectual property rights, technology transfer and technology standards.

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