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PLANNING for INNOVATION Understanding China’S Plans for Technological, Energy, Industrial, and Defense Development

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PLANNING FOR INNOVATION Understanding China’s Plans for Technological, Energy, Industrial, and Defense Development A report prepared for the U.S.-China Economic and Security Review Commission Tai Ming Cheung Thomas Mahnken Deborah Seligsohn Kevin Pollpeter Eric Anderson Fan Yang July 28, 2016 UNIVERSITY OF CALIFORNIA INSTITUTE ON GLOBAL CONFLICT AND COOPERATION Disclaimer: This research report was prepared at the request of the U.S.-China Economic and Security Review Commission to support its deliberations. Posting of the report to the Commis- sion’s website is intended to promote greater public understanding of the issues addressed by the Commission in its ongoing assessment of US-China economic relations and their implications for US security, as mandated by Public Law 106-398 and Public Law 108-7. However, it does not necessarily imply an endorsement by the Commission or any individual Commissioner of the views or conclusions expressed in this commissioned research report. The University of California Institute on Global Conflict and Cooperation (IGCC) addresses global challenges to peace and prosperity through academically rigorous, policy-relevant research, train- ing, and outreach on international security, economic development, and the environment. IGCC brings scholars together across social science and lab science disciplines to work on topics such as regional security, nuclear proliferation, innovation and national security, development and political violence, emerging threats, and climate change. IGCC is housed within the School of Global Policy and Strategy at the University of California, San Diego. ii CONTENTS ACKNOWLEDGEMENTS .................................................................................................................... vi CONTRIBUTORS ................................................................................................................................. vi ACRONYMS AND ABBREVIATIONS ................................................................................................. viii LIST OF FIGURES AND TABLES ....................................................................................................... xi EXECUTIVE SUMMARY ........................................................................................................ XIII Key Findings .......................................................................................................................... xiii How Should the United States Respond? ........................................................................... xvii INTRODUCTION ............................................................................................................. 1 Part I: Understanding Chinese State-Directed Strategies and Plans ................................... 3 Military Strategy and Defense and Dual-Use Research and Development Plans ................................ 3 Civilian Science and Technology and Industrial Development Plans.................................................... 5 Energy Plans ......................................................................................................................................... 5 Urbanization Plans and Chinese Technology Acquisition Activities ..................................................... 6 Part II: Implications for US National Security and Economic Competitiveness .................. 6 Implications for US National Security .................................................................................................... 6 Implications for US Economic Competitiveness ................................................................................... 7 Analytical Framework for Assessing Impact on US Economic Competitiveness .................................. 7 The Current State of Academic and Policy Analysis of China’s S&T Policies and Progress ............... 8 PART I: UNDERSTANDING CHINESE STATE STRATEGIES AND PLANS .............. 15 A. MILITARY STRATEGY AND DEFENSE AND DUAL-USE SCIENCE AND .........................16 TECHNOLOGY DEVELOPMENT PLANS AND STRATEGIES The Relationship Between China’s National Military Strategy and Its Defense..................16 Science and Technology Strategies and Plans The PLA’s Weapons and Equipment Development Strategy and Construction Plans ......19 Recent Reforms of the PLA Armament System .................................................................................. 23 Special Plans for Defense and Dual-Use Science and Technology Development ..............24 Medium and Long-Term Defense Science and Technology Development Plan ................................. 24 The ‘995’ New High-Technology Plan ................................................................................................. 25 The ‘863’ High-Technology Research and Development Plan ............................................................ 27 B. CIVILIAN SCIENCE, TECHNOLOGY, AND INDUSTRIAL DEVELOPMENT PLANS ..........29 China’s Science and Technology Plans: Background and Progress ..................................29 National Medium- and Long-Term Plan for Science and Technology..................................30 Development (2006‒2020) The Strategic Emerging Industries Initiative .........................................................................35 The ‘973’ National Basic Research Plan ............................................................................................. 37 The Five-Year Plans and Xi Jinping’s Innovation-Driven Development Strategy ...............38 The Made in China 2025 and Internet Plus Plans..................................................................43 Made in China 2025 ............................................................................................................................ 45 The Internet Plus Plan ......................................................................................................................... 51 iii Assessing the Made in China 2025 and Internet Plus Plans ................................................55 Science and Technology in China: A Roadmap to 2050 ......................................................56 Challenges and Recent Reforms to China’s Science and Technology System ................................. 58 Corruption ............................................................................................................................................ 59 S&T System Reforms .......................................................................................................................... 61 Establishment of Five New Consolidated S&T Plans and Funds to ....................................64 Replace Existing Specialized S&T Plans ENERGY IN CHINA ..................................................................................................................68 China’s Energy Plans .............................................................................................................69 The Overriding Determinants of Chinese Energy Policy......................................................71 The 12th Energy Development Five-Year Plan: Goals and Progress ................................................ 73 The Structure and Process of Chinese Energy System ...................................................................... 76 Energy Policymaking and Planning ..................................................................................................... 79 The Make-up of China’s Energy Industry ............................................................................................ 81 Chinese Views of the Global Energy Context .......................................................................85 Market Demand ................................................................................................................................... 88 Indigenous Innovation ......................................................................................................................... 95 Market Reform ................................................................................................................................... 111 Environmental Goals ......................................................................................................................... 112 Chinese Urbanization Plans ................................................................................................. 113 Chinese Priorities for Technology Acquisitions from the United States .......................... 118 and Foreign Countries US and Foreign Technology Areas of High Priority for Chinese Acquisition .................................... 119 Technology Acquisition Requirements in the Made in China 2025 Plan .......................................... 120 Technology Acquisition Requirements in the Defense Domain ........................................................ 121 How Can the United States Better Protect Against Illegal Chinese Technology Acquisition? .......... 123 PART II: IMPLICATIONS FOR US NATIONAL SECURITY AND ECONOMIC ......... 125 COMPETITIVENESS A. IMPLICATIONS FOR US NATIONAL SECURITY .............................................................126 US Strengths ..................................................................................................................................... 126 US Weaknesses ................................................................................................................................ 129 Chinese Strengths ............................................................................................................................
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