Documento(s) 5 de 17

The problem of duplication and lack of coordination 

With China having literally thousands of S&T institutions, it is not surprising that there is duplication of effort throughout the system. The issue that now needs to be addressed is the duplication within a socialist market economy. 

A competitive system among enterprises in the future will ensure that a variety of common problems are attacked from a variety of competing perspectives. This may lead to a superficial appearance of duplication, but the market, if allowed to operate, will weed out the unsuccessful. 

However, a system of extensive duplication of effort in governmental institutions that have no tradition of cooperation with each other is an expensive luxury that no country can afford. The Mission has seen examples of extensive duplication of efforts among uncoordinated, separate institutions -- all funded by one level of government or another -- that coexist in close proximity.¹  

Issues related to industrial technology 

Introduction of a "technology market" and of 
competitive sources for funding 

• Substantially reducing the institutions' core-budget appropriations from government (in some cases, especially in the provinces, this reduction was to zero); 
• Making government-contract funds, allocated by competition, an important vehicle for promoting technological development; and 
• Providing incentives for enterprises to invest in R&D at an increased rate. 

Not surprisingly, many enterprises were slow to respond, and this has created great difficulties for most R&D institutions. Many enterprises are unwilling to pay for technology that in the past they would have received without charge, or they seriously undervalue the technology that has been on offer from R&D institutes. (Similar experiences have been observed in industrialized countries.) This "market failure" has influenced a number of R&D institutions to transform themselves into enterprises to commercialize their own technologies. 

The Mission found that entrepreneurial scientists and institutes were very much in favour of these reforms because they had given them the opportunity to increase the resources available for their work, although some of those who had been less successful in the competitive arena were less enthusiastic. In some provinces, there appeared to be a growing belief, even among successful provincial institutes, that only national institutes could win support from some of the programs offered by the State Science and Technology Commission (SSTC) (such as the 863 Program or the National Program for Tackling Key Technology Problems). In other regions of the country, we did not encounter this view. It would be worthwhile for SSTC to periodically review competitions for national funds to be assured that decisions are made on the technical merits of proposals and not simply on the organizational status of the group applying. 

Chinese experimentation with the concept of a technology market may well lead to some distinctive features in what we refer to as China's national system of innovation (NSI) (see Chapter 3). One critical question in any market is that of minimizing the transaction costs of interactions between organizations (for example, enterprises and research institutes) that have to deal with each other. Can an appropriately designed policy environment facilitate low-cost interactions between enterprises and suppliers of new technologies? Some continuing attention to this issue could help create a positive climate for innovative activity. 

Emergence of spin-off enterprises 

Responsibility for continuing to subsidize unsuccessful spin-off enterprises appears to reside with the parent institute. The Mission believes that if China is to develop a successful socialist market economy in which new technology enterprises (NTEs) play an increasingly important role, it will be necessary to speedily resolve the question of a new social-welfare system and to permit the process of bankruptcy to occur. 

Imported technology 

the funds for digestion, assimilation and innovation are seriously inadequate. In Japan and South Korea, the expenses for digestion and assimilation are much higher than that of introduction of technology, but in China, on the contrary, when 1.00 yuan is spent on introduction of technology, only 0.09 yuan is used for digestion and assimilation, and in Shanghai it is only 0.07 yuan.²  

Organizing for technological innovation within enterprises 

In industrialized countries, many large corporations have recognized that there are two types of technical change. One is radical technical change, which usually requires formal R&D laboratories, but the other is incremental technical change, which may sometimes involve a formal R&D organization but frequently is introduced by teams of specialized engineers who work close to the production units. Sometimes the production units themselves introduce these incremental changes. The specific way these incremental-technical-change units function varies from enterprise to enterprise and from industry to industry. 

Some industries and enterprises in China are aware of these issues. For example, the Chinese National Offshore Oil Corporation worked with a UK research group a few years ago to understand the process of innovation in UK offshore drilling companies. However, we formed an impression that, over the past 5 years or so, the majority of Chinese enterprises that have imported technology have done so without investing in the activities necessary to absorb and assimilate that technology. Chinese enterprises and policymakers may find it worthwhile to investigate the experiences of corporations in industrialized countries that have successfully assimilated imported technology and organized for both radical and incremental technical changes. 

One point worth emphasis relates to enterprises' strategies to promote technical change. It is important for enterprise managers, operating in a global-market context, to understand the limitations to what governments can do for them and the crucial roles that they, themselves, will play in determining the technological success or failure of the enterprise for which they are ultimately responsible. 

Protection of intellectual property 

An issue for China to consider is the adequacy of the present system of implementation of its intellectual property legislation. A recent World Bank (1995, p. 10) document argues that among the remaining challenges (of S&T reform) facing the government of China is intellectual property rights (IPR) enforcement. The document suggests that 

the key concern is how effectively intellectual property legislation is and will be enforced. The key tasks ahead involve raising awareness of intellectual property rights, among users and providers of technology, fostering the further professionalization of enforcement personnel, and ensuring that these rights are adequately pursued. A nationwide professional court system is needed, exemplified by the recently created Intellectual Property Courts dedicated to enforcing the IPR regime. Education and dissemination seem to be key to improved enforcement in the short term. 

High-technology development zones and NTEs 

Some of these zones, in provincial cities, are still small, but others, such as the one in Pudong Development Area in Shanghai, are very large. Additionally, China has several other categories of zones within which enterprises are eligible to receive preferential treatment (for example, the Pudong Development Area consists of a finance and trade zone, an export-processing zone, a free-trade zone, and a high-technology zone, all of which seem to be competing to attract the same enterprises and have similar sets of incentives available). 

According to a draft report from the Institute of Science Policy and Management (ISPM) of the CAS (Fang Xin n.d.), there are six important sets of issues relating to these new zones and the companies that operate in them: 

• The ownership of the assets of the NTEs, most of which have been created by R&D institutes and other public bodies (in the absence of a fully developed share-holding system, the ownership of the assets of many NTEs can be in doubt); 
• The modernization of the management of many NTEs; 
• The precise delimitation of the roles of the management authorities of the new high-technology development zones (Do they constitute a new level of government? Are they regulatory agencies, determining the eligibility of individual enterprises claiming the incentives offered by the zones? Or are they support systems, designed to help NTEs through the early stages of enterprise growth and development?); 
• The treatment, from an incentive viewpoint, of enterprises within a zone that expand their production in facilities outside the zone; 
• The eligibility of NTEs to compete for further national support through a variety of funding channels; and 
• The development of adequate systems of taxation administration, financial management, accounting and auditing, both for NTEs and for the zone-management authorities. 

Two points can be drawn from international experience that may be relevant to the future development of high-technology development zones. First, in industrialized countries, there is a growing appreciation of the effects of geographic clustering of complementary industrial competencies. In a world in which globalization is increasingly perceived as the driving force behind enterprise strategies and in which national boundaries seem to be less and less significant, it is also becoming clear that the competitive success of many enterprises is due to localized concentrations of skilled people and technologies. To the extent that China's high-technology development zones can produce focused concentrations of skills and technologies and can promote cooperation among the enterprises located within those zones, they may in fact be important contributors to the global competitiveness of those enterprises that have the managerial capacities to succeed. 

Second (on a less positive note), as China moves to join the World Trade Organization (WTO), it should look at the WTO treatment of subsidies for R&D. The kinds of incentives China offers within specified geographic locations (and hence not open to enterprises located elsewhere) may be deemed as unacceptable to the WTO and, as such, could render products produced in the zones vulnerable to countervailing tariffs. It is by no means clear that this would in fact be the case, but Chinese authorities should be attentive to this possibility. 

Transfer of military technology for civilian use 

The Mission visited one military R&D institute (the Northwest Research Institute of Electronic Equipment) that is producing satellite antennae for the civilian market. This establishment had moved to Xi'an to take advantage of the preferential tax incentives offered by the high-technology development zone. The Institute markets its products both nationally and internationally. Profits from the civilian production are plowed back into the civilian work, and, in practice, part of its revenues help finance some of the huge social costs that the Institute bears. 

The policy issue of interest to the Mission was whether the Chinese approach of transferring military technology for civilian use by means of defence-establishment manufacturing of civilian products is the best approach. In international experience, a different approach has been taken -- military technology is transferred to civilian enterprises; thus, military R&D establishments continue as R&D establishments and rarely get involved in production. Civilian companies manufacture armaments or civilian products, or both. In industrialized countries, it is believed that civil enterprises, with management systems in tune with the marketplace, are better placed to manufacture products for that marketplace than defence industries that have usually operated on a cost-plus basis. 

The Mission recognized that without changes to the social-welfare system, the Chinese approach is probably the most sensible one. If social reforms make it possible to humanely shed staff, then it would be worthwhile for China to study the foreign experience of technology transfer and the foreign experience of developing dual-use technologies, that is, technologies that can be exploited for both military and civilian uses. 

Product design and quality 

Issues related to basic research 

Some questions of definition and their policy implications 

• So-called curiosity-oriented research, often, but not always, carried out by individual scientists searching for general scientific understanding rather than seeking to contribute to the solution of some identified social or economic problem -- Such research encompasses whole fields of science, such as cosmology and astronomy, and is also practiced at the boundaries of knowledge in other fields in which the mainstream is already linked to application. Such research in general shows little likelihood of contributing to economic development at any foreseeable time. This type of scientific activity is giving rise to informal international networks of individuals and groups whose collaboration is facilitated by inexpensive electronic communications. The activity also provides a useful opening into the global scientific community. In industrialized countries, curiosity-oriented research is widely seen as a good vehicle for training new generations of researchers because it provides ample opportunities for young scientists to learn research skills. Many academic programs still demand that candidates undertake an individual piece of original research; large numbers of graduate students are the hallmark of successful programs of this type. 
• Strategic research, in which teams of researchers, frequently from a variety of disciplines, explore the frontiers of knowledge in broad areas of science that are believed likely to be of future economic or social importance -- In this domain, the probability of some application is thought to be foreseeable in the medium term, although the specific route to application might be far from evident at this time. This form of research is becoming more important (but should never replace curiosity-driven research in its entirety) and is posing new problems for institutions of higher education, which have to devise new ways of evaluating the research of graduate students who work in teams rather than alone and who work in new transdisciplinary areas rather than within the confines of a traditional academic discipline. 
• "Big science" of two kinds: science, such as high-energy physics, that requires ultraexpensive facilities; and the geographically extensive research needed to understand changing global environmental phenomena -- Both types of big science are often affordable only by consortia of countries prepared to share the considerable costs involved. 

Preservation and encouragement of basic research 

Although much attention in this report, as well as in China, is devoted to seeking improved means of linking China's investment in basic research to the long-term economic and social needs of the country, we agree with many of our Chinese colleagues who wish to retain three other important roles for basic research in a contemporary society: 

• As a vehicle for advanced human-resource development (HRD); 
• As a means of building a national knowledge base (a kind of social intelligence function to equip society so it can react to the uncertainties of a rapidly changing world); and 
• As an expression of national culture in which knowledge is valued and the search for new knowledge is appreciated. 

Continuing reform of the Chinese Academy of Sciences 

• 20% from budget allocation from the national government; 
• 30% from contracts with national ministries; 
• 30% from contracts with enterprises; and 
• 20% from contracts with provincial and municipal governments. 

• Provide a national base of basic-research competence, across the natural sciences, in increasingly "open" laboratories that host visiting scientists from across China and around the world (this includes the Academy's special responsibility for China's activities in big science); 
• Provide advanced training to talented young scientists; 
• Participate in developing the most advanced high-technology sectors of Chinese industry; and 
• Undertake research that is broadly defined as being in the public interest (such as environmental science). 

As with all such large and previously dominant institutions, CAS has many critics. We met groups who cited the May 1995 Decision as meaning that basic research should be done in the universities and that applied research should be done in enterprises -- leaving little space for CAS institutes (as we set out in Part II, the Mission does not subscribe to this oversimplified interpretation of how to implement the May 1995 Decision). Additionally, we heard again the often-asked question, Why is the CAS engaged in agricultural research, given the existence of academies of Agricultural and Forestry Sciences and given CAS's apparent remoteness from any extension services? 

The Mission believes that there is great scope for CAS to take the lead in defining new and productive relationships with the universities in its activities in fundamental science and with enterprises in the more applied aspects of its work. 

The debates surrounding the CAS and its future should be seen, the Mission believes, as only part of a necessary and much wider debate on the restructuring and rationalization of the overall system of R&D institutes in China. Once there is in place a national social-security system capable of coping with redundant workers, the reform of many Chinese institutions will need to be undertaken as a matter of urgency. 

Continuing reform of the research role of 
institutions of higher education 

More broadly, we were told that some 200 universities have the right to grant doctoral degrees and that 400 could grant master's degrees, but we suspect that in the majority of these institutions, the right to grant such degrees is probably limited to a few specific departments. 

International experience suggests that doctoral-level training requires that the departments that offer doctoral degrees must themselves be heavily involved in research. The same is not necessarily the case for undergraduate- or master's-degree programs. This suggests that priority should be given in China to ensuring that all university departments authorized to award doctoral degrees become thriving research departments. 

S&T information 

• Accessing Western S&T literature remains a major problem for most research institutions. Only a few research institutes are able to purchase Western scientific journals. 
• Whether to publish scientific papers in Western journals or in Chinese ones seems to be a hotly debated issue. Those in favour of publishing in Western journals argued that this enabled the Chinese research to be internationally peer reviewed and helped ensure that Chinese scientists maintained international standards. Those in favour of publishing in Chinese journals argued that their own journals were read and understood by many more Chinese scientists than had access to Western journals. Also, if the best papers were published overseas the quality of the Chinese journals would decline. Issues of national prestige and the ability of individual scientists to be listed in the Science Citation Index also featured in the debate. The Mission recognized the strength of the arguments on both sides of the debate. English is the international language of science, and as long as China seeks to be a part of the international scientific community then its scientists will be disadvantaged if they are unable to communicate in English. On the other hand, at this stage in its development, China needs to disseminate its scientific knowledge widely within China, and this means using the medium of the Chinese language. 
• Beyond formal publications, much S&T knowledge is disseminated in Western countries through what is called gray literature, that is, literature and reports originally distributed among networks of colleagues without being formally published. This practice has been largely replaced in recent years by the dissemination of information through the Internet. In China we gained the impression that such informal reports are rarely distributed and shared. Information seems to be held secret by a department or agency, and there is a reluctance to share this with others. This impedes the dissemination of knowledge. 
• The Internet is not yet widely used in China, but its benefits are well known and understood. Several of the scientists we met in eastern China have e-mail addresses. We anticipate Internet use will spread quickly, which could have a major impact on the diffusion of information and perhaps facilitate greater research collaboration. On the other hand, one of the implications of access to the World Wide Web is that it will further expose China to Western values and culture, not all of which are likely to be beneficial to China. 

Underutilization of scientific societies 

Popularization of S&T 

Now, more than 30 years later, the state of public understanding of science is still an important policy issue, and for exactly the same reasons as in the earlier period. However, whereas most of the efforts of industrialized countries focus on popularizing science, the Chinese approach also recognizes the importance of spreading knowledge and understanding of how S&T effects people's lives. 

The Mission believes that this is an important policy area for China and regrets that we did not learn more about the current programs. 

Issues related to resource use 

Environmental protection: an example of 
the problems of implementation 

The problem of protecting the environment while maintaining economic and social development is clearly a major policy issue at all decision-making levels in China, and the Mission was impressed with the concerns expressed and the initiatives under way. The National Environmental Protection Agency is collecting statistics on the equally staggering costs to the economy of environmental degradation, which add up to some 100 billion CNY annually. 

The main approaches being taken to protect the environment are the following: 

• Enacting tough new environmental legislation (including even the death penalty); 
• Imposing fines for pollution, based on the polluter-pays principle; 
• Requiring environmental assessments and imposing more stringent standards for new industries; 
• Establishing industrial development zones, where environmental-protection infrastructure, like waste and sewage disposal, can be shared and emissions can be more stringently controlled and monitored; 
• Investing in cleaner technology, land rehabilitation, and afforestation projects; 
• Creating major infrastructure schemes for energy development, especially hydroelectricity and water transfers; and 
• Improving public environmental awareness and education. 

The issues are reported to relate to 

• The regulatory system for pollution control; 
• Low prices for resource inputs (particularly for energy and water); and 
• Negative environmental impacts resulting from other S&T policies and programs and broader economic and social policies. 

• Pollution charges are too low: it is cheaper for polluters to continue to pay the fines than to clean up; 
• Retrofitting polluting equipment is expensive, and there is probably a need for economic incentives, such as subsidies for installing clean technology or tax rebates; 
• Polluters pay only for the worst-offending pollutant, so there are few incentives to reduce emissions of other pollutants; 
• Fines collected may be allocated to environmental protection or general revenues but are not usually reinvested in improved and cost-shared treatment facilities; 
• The monitoring capacity of the environmental-protection agencies (EPAs) requires considerable strengthening in technology, trained staff, and coverage of the monitoring network; and 
• TVEs are less effectively regulated than SOEs but account for a significant, and increasing, proportion of environmental pollution. 

Resource pricing 

It is generally recognized that official coal and water prices are far too low in China. This has negative repercussions in the case of coal mining because low coal prices discourage coal mines from investing in environmental-protection or safety measures. The recent expansion of township enterprises into coal mining has exacerbated the environmental damage caused by the mines themselves. More generally, the low price of energy provides a perverse incentive for industry to pollute. 

The total (economic, social, and environmental) costs of coal include not only the mining costs but also transportation costs from northern and western China to the populous east and south. Currently, 40% of China's railway capacity is reserved for coal transportation, but transportation is a main bottleneck to supply and also incurs additional pollution costs. Washing the coal with water would reduce the amount of coal that is transported, as well as the ash produced during burning, but in 1985 only 16% of all raw coal was washed, compared with 80% in OECD countries. In addition, converting coal into electricity incurs costs. 

The policy debate is complex, going far beyond the acceptance that the price of energy be increased into a broader examination of alternative policy instruments, from pollution fines to consumption taxes and tradable permits. The cost of coal, for example, could be increased at the mine head by requiring mining enterprises to pay a levy for the costs of environmental damage caused by extraction. Reforming the transportation component in the cost of coal would inevitably involve a wider consideration of freight rates and regional inequalities in distance to energy users. Incorporating the total costs of energy consumption in the price to consumers would involve a policy equation that includes comparisons of the locational advantage of sites for power production and local environmental-quality standards. 

Similarly, the low government-regulated prices that farmers receive for much of their grain production means that they cannot pay higher prices for water, which is provided to them at costs below the cost of supply. There is little incentive for farmers to invest in water-saving equipment or processes. The negative environmental outcome is increased abstraction of groundwater and surface water, which lowers water tables and reduces the minimum surface flows necessary to provide environmental services, such as pollution flushing, and the maintenance of floodplain vegetation and aquatic resources. The result is that the farmers waste water, but the policy reform needs to encompass not only water pricing but also grain prices. 

An analysis conducted for the China Council of the 1993 water prices in Beijing showed that for recovering the total costs for supplying water in Beijing, prices should be 10 times higher for industrial users, 15 times higher for municipal users, and 77 times higher for agricultural users. If prices were raised sufficiently to reduce current waste (more than 50% of water in Beijing is still used for agriculture) such that the huge costs of the Eastern Route Water Transfer Project could be delayed even by a few years, the savings would be enormous. 

The Mission believes that the resource-pricing policy debate is a very important one for the S&T community in China to address. It is also evident that any policy reforms will need to go far beyond S&T and encompass broader economic and social reforms. 

Rural development 

• Ensuring national food security, especially self-sufficiency in grains; 
• Providing low food prices and greater food availability for the poor; 
• Increasing agricultural productivity as land per capita decreases; 
• Increasing rural incomes and rural employment; 
• Transforming agriculture from a subsistence to a commercial basis; and 
• Maintaining rural society by reducing the rural­urban prosperity gap. 

Two groups of S&T reforms have had a great impact in rural areas; these are the priority given to agricultural research and the contribution of the Spark Program (discussed below) to the rapid development of rural industries. Both groups of reforms have brought both successes and new challenges. 

Agricultural productivity -- A key goal has been to apply S&T to raise agricultural productivity. This led to some early successes: for example, the net result of technological improvements and the changeover to the family farm was an increase in grain productivity of 43% between 1978 and 1984; for wheat, the increase in yields for the same period was 61%. These spectacular trends have not been maintained, although there have been further technological developments such as improved genetic varieties and the use of chemical-intensive production methods. It has been estimated that agricultural chemicals have accounted for about 30% of the increased grain production since the 1970s and have reduced the labour required per hectare. Despite this, there is a lower efficiency in the use of fertilizers than in other countries. Furthermore, there is widespread environmental contamination because of heavy chemical loads in agricultural runoff. The costs of inputs, such as chemicals, have increased more rapidly than the prices paid to farmers for their outputs, especially grains. 

The Mission was told that there is concern about the dependence of Chinese agriculture on chemical inputs, both because of their cost and because of their negative impact on the environment. There are renewed calls for an agricultural transformation that is based on biological pesticides and organic fertilizers, as well as on plant varieties that are drought resistant and adapted to marginal land. These are priorities for S&T investments. However, we were also told that the present combination of economic and technological developments has created a situation in which farmers are discouraged from growing grain and are turning to more profitable activities, such as growing alternative crops, including vegetables; working in township enterprises; or migrating to urban areas. These are issues that clearly go beyond the domain of S&T. 

Rural enterprises -- A major contribution of S&T reform to rural development has been the Spark Program. This successful combination of packages of proven technologies and an effective delivery system, including extension and demonstration projects, has been hailed as a major success. The Mission was impressed with the projects we visited, both those focused on agricultural postharvest storage and processing and those less directly based on agriculture. The Spark Program has shown that S&T can be packaged to benefit the lives of the rural poor. Other countries could benefit from a close look at the Chinese experience. It was not clear to us how far the Spark Program included specific consideration of the needs of rural women or, indeed, whether it has led to greater benefits for men than for women. It clearly has potential to improve the status of rural women by increasing their incomes and their participation in rural enterprises. 

The proliferation of rural enterprises has become a greater generator of rural prosperity than agriculture itself, and this has led to some of the problems noted above. Between 1980 and 1989, agriculture's contribution to rural productivity rose from 192 billion CNY to 653 billion CNY (an increase of 240%); rural industry's contribution rose from 54 billion CNY to 589 billion CNY (an increase of 991%). The rural enterprises have created employment for the increasing numbers of surplus rural labour, but they raise concerns about health and safety at work, as well as contamination of the rural environment. They also serve to reduce the attractiveness of agriculture, which is still the key to China's future economic prosperity. 

Future reform of agricultural R&D 

The urgent challenge facing policymakers concerned with the improvement of S&T activities in the agricultural sector will be to restructure the existing research service to make it more relevant and efficient and more capable of responding to the urgent needs of the rural sector in the next decade and beyond. 

Issues related to the financing of S&T activities 

Target for R&D spending for 2000 

The Mission believes that rapid consideration needs to be given to the adequacy of the existing array of fiscal and tax incentives currently offered to promote R&D activities within enterprises if the government is going to be able to convince enterprises to change their behaviour. Some consideration might be given to general tax incentives for R&D activities, such as those offered in some industrialized countries (for example, Australia and Canada). An additional route to increasing R&D funding worth exploring could be the imposition of levies on production, a system used to good effect in supporting agricultural research in many countries. 

An additional factor that needs to be taken into account is the influence of the rate of inflation on the decision-making behaviour of enterprise management. In industrialized countries, periods of high inflation appear to induce a stance of "risk aversion" in many enterprises, which take a conservative view of investments in R&D during such periods of economic uncertainty. Conversely, periods of rapid expansion in industrial R&D expenditures tend to appear in periods of low inflation. As a consequence, the attainment of the goal for S&T spending may be highly dependent on China's macroeconomic performance between now and the end of the decade.
 

Documento(s) 5 de 17