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Reinvigorating China Through Science and Education: a Chinese Strategy for a Knowledge-Based Economy

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Reinvigorating China Through Science and Education: a Chinese Strategy for a Knowledge-Based Economy 1 Reinvigorating China through Science and Education: A Chinese Strategy for A Knowledge-Based Economy Dr. Lan Xue, Prof. and Vice President Development Research Academy for the 21st Century Tsinghua University Beijing, 100084 (86-10)6278-2605 (phone and fax) [email protected] In recent years, the role of science, technology, and education (STE) is increasingly becoming more prominent in China's economic reform and development. In 1995, the idea of "Reinvigorating China through Science and Education" has been formally adopted by the government as one of the two major development strategies. The fever on "knowledge-based economy", which swept China since 1997, further confirmed the role of STE in China’s future development. In June and August 1999, the Central Government held two separate national summit conferences, one on education and one on technological innovation. The education summit approved an Action Plan to Reinvigorate Education in the 21st Century, while the innovation summit issued a policy decree on strengthening technological innovation, developing high-tech, and promoting large scale commercialisation. Underlying this enthusiasm on STE is a search for new sources of power to jump-start China’s reform and growth. After more than a decade’s rapid economic growth, China began to show signs of stagnation since mid-1990s when overall social demand began to decline while extra productive capacity was on the rise. At the same time, the repercussion on the environment and natural resources as the result of the rapid economic growth made it clear that China could no longer afford to grow in the old fashion. It is against this background that the idea of knowledge-based economy hit home with many Chinese scholars and government officials. While there is still a debate on the concept and it’s implications for China, the government wasted no time to embrace it’s basic principle and took actions in several fronts in the hope that China can steer a new course of knowledge-based development in the 21st century. These include structural reforms, government sponsored programs, and changes in incentive structure. First, the government is determined to restructure China’s national innovation system and make it more responsible to the market need. Chinese Academy of Sciences (CAS) started a restructuring program named “Knowledge Innovation Engineering” in 1998, which aimed at selecting key research areas, consolidating research institutes, and improving R&D management. In less than two years, many research institutes are consolidated and over 700 research projects at various levels are selected with a total funding of close to 1 billion Chinese Yuan. An even more daring effort is the restructuring of 242 public research institutes, which were previously affiliated with various government ministries and engaged in research activities often found of little practical use. Through the 2 restructuring process, 131 institutes were merged into enterprises, 40 changed their affiliation to local governments, 18 became intermediaries, 6 merged with universities, 9 were eliminated, and the rest maintained their old status. An equally important endeavour is the reform process currently undergoing in China’s higher education system. Under tremendous pressure from the general public, China has been increasing its higher education enrolment by double digits over the past several years. For example, China’s regular universities and colleges took 1.6 million new students in 1999, an increase of 47.4 percent over the previous year. However, increasing enrolment could not solve the problems inherent in the old system. One problem was the fact that many universities were established with narrow and outdated disciplinary focuses as the result of Russian influence in the 1950s. The other related problem was that the administration of universities was broken into three systems, Ministry of Education, other ministries in the Central government, and provincial and local governments. These systems were separated by organisational barriers. The objective of the current structural reform is to make China’s higher education system capable to meet challenges of a knowledge-based economy—more accessible to the public, flexible enough to respond to the changing market needs, and highly efficient to provide good educational services at low cost. The reform focused on co-operations between central and local governments, and mergers between universities. By early 2000, the administration of over 400 universities has changed hands from the Central government ministries to some form of co-administration between central and local governments. In addition, 125 new universities have been established through mergers and acquisitions among 304 universities. At the same time when these reforms are moving forward, the government has also made great effort to promote technological innovation and the development of high-tech industry. Of course, China will continue to support several national high- tech programs, including the 863 Program, China’s high-tech development program and the Torch Program, China’s high-tech commercialisation program. However, there are several important changes in this new round of initiatives. One important change is the emphasis on small and medium sized enterprises (SMEs) and non-state S&T enterprises. Traditionally, large state owned enterprises (SOEs) were the beneficiaries of government’s S&T support. But this time, a special fund was created to support innovative activities in SMEs, many of which are privately owned. In addition, Ministry of Science and Technology (MOST) and State Economic and Trade Commission (SETC) jointly issued a document aimed at creating a more friendly market environment and providing better services for non- state enterprises. Another important change is the shift of focus from simply creating government programs to also building infrastructures and environments. For example, based on a document issued by MOST, many of China’s national high-tech development zones have put greater emphasis on creating a conducive environment and better services for innovators. Incubators, financing services, and information networks are seen as essential elements in these zones. In particular, the Zhongguancun Science Park located in Beijing has generated great interests recently 3 after it’s strategic plan to make it China’s “silicon valley” was approved by the Central government. Shanghai and Shenzhen are also strong contenders. Both cities have announced bold plans to attract money and talents to catch the wave of knowledge economy. In addition, venture capital market is increasingly seen as a necessary part of the institutional infrastructure for high-tech development. China has already committed to establish a NASDAQ type of stock market to help the proper development of venture capital market. The third area of government effort is to change the incentive structure to facilitate the transfer of knowledge from R&D labs to production. In March 1999, seven government ministries jointly issued a set of important policy changes to provide greater incentives for commercialising R&D results from universities and research institutes. They effectively eliminated the ceiling that had limited the percentage of company shares one could get from transferring a technology. At the same time, the policy requires that no less than 50 percent of the financial reward from commercialisation of a technology be paid to the individuals who have made important contributions to the process. University faculty members and research staff in public research institutions are encouraged to engage in consulting activities and to take unpaid leave to start high-tech ventures. While these efforts are quite impressive, one should not forget that China is still a developing nation with over 800 million people in the countryside, making it a daunting task to move from a rural to an urban society. Further, China is still in the process of making the transition from a planned economy to a market economy. The complexity of making these two transitions at once presents enormous challenges. However, if one looks back to see what China has achieved over the past two decades when it was determined to follow the path of openness and reform, there is every reason to be optimistic on what’s the future would be if China can maintain the course of knowledge for development..
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