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China Inclusive Innovation for Sustainable Inclusive Document of The World Bank CHINA INCLUSIVE INNOVATION FOR SUSTAINABLE INCLUSIVE GROWTH (TA-P128575-TAS-BB) October, 2013 Financial and Private Sector Development East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective as of April 10, 2013) Currency Unit = Yuan US$1.00 = 6.25 Yuan FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank MOA Ministry of Agriculture AEDC Alternative Energy Development MOH Ministry of Health Corporation (South Africa) AfDB African Development Bank MOF Ministry of Finance ARPU Average Revenue Per User MOST Ministry of Science and Technology BiOS Biological Innovation for Open Society MLM More from Less for More (or Many) BoP Base of the Pyramid MTB Mycobacterium Tuberculosis BRICS Brazil, Russia, India, China and South NEA National Energy Administration Africa CAS Chinese Academy of Sciences NGOS Non-Governmental Organizations CBRC China Banking Regulatory Commission NInC National Innovation Council (India) CCTV Closed-Circuit Television NIF National Innovation Foundation (India) CHNS China Health and Nutrition Survey NSFC National Natural Science Foundation Committee CSIR Council of Scientific and Industrial OECD Organization for Economic Cooperation and Research (India) Development FYP Five-Year Plan OSDD Open Source Drug Discovery GDP Gross Domestic Product PBC People’s Bank of China GRA Global Research Alliance PCM Phase Change Material GRL Global Responsibility License PHS Personal Handset System PIPRA Public Intellectual Property Rights for Agriculture MDGS Millennium Development Goals P2P Peer-to-Peer or Person-to-Person ICT Information and Communications R&D Research and Development Technology IFIS International Financial Institutions RMB Renminbi (China) ICAR Indian Council of Agricultural Research RTIs Research and Technology Institutes ICMR Indian Council of Medical Research SSFC National Social Science Committee IDEAS Innovation, Development, Enterprise, SIAT Shenzhen Institute of Advanced Technology Action and Service IDB Inter-American Development Bank S&T Science and Technology IFAD International Fund for Agricultural SMART Simple, Maintenance-Friendly, Affordable, Reliable Development and Timely to Market INPRA Information Network Platform for Rural SMEs Small and Medium Enterprises Area IP Intellectual Property SRISTI Society for Research and Initiatives for Sustainable Technologies and Institutions (India) IPR Intellectual Property Rights STI Science, Technology and Innovation IRS Internal Revenue Service (USA) TISTR Thailand Institute of Scientific and Technological Research MDGS Millennium Development Goals TUFE Tianjin University of Finance and Economics MOE Ministry of Education UN United Nations Economic & Social Commission for ESCAP Asia and the Pacific MEP Ministry of Environmental Protection VC Venture Capital MIIT Ministry of Industry and Information VCFEI Venture Capital Funds for Emerging Industries Technology Vice President: Axel van Trotsenburg Country Director: Klaus Rohland Director: T. Tunc Uyanik Sector Manager: Hormoz Aghdaey Task Team Leader: Wang Jun/Hamid Alavi CHINA INCLUSIVE INNOVATION FOR SUSTAINABLE INCLUSIVE GROWTH TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................................................... i Chapter 1. Inclusive Innovation: A Conceptual Framework ........................................................... 1 I. The Context: Inequality of Access to Basic Services ................................................................. 1 II. Inclusive Innovation: An Introduction and Basic Principles ...................................................... 9 III. The Rationale: Addressing Multiple Dimensions of Inequality Through a Multi-Pronged Innovation Agenda ........................................................................................................................... 15 IV. The Role of the Government: Building Alliances to Overcome Market Failures .................... 18 V. Other Agents and Their Roles .................................................................................................. 26 Chapter 2. The Landscape for Inclusive Innovation in China ....................................................... 29 I. The Enabling Environment to Promote Inclusive Innovation in China ................................... 29 Government Commitment to Addressing Disparities ................................................................... 29 Strong Physical and ICT Infrastructure ........................................................................................ 30 Well-Developed National Innovation System .............................................................................. 31 Rapidly Growing Private Sector with Strong Manufacturing Capability ..................................... 34 A Large BoP Market with Rising Aspirations and Purchasing Power .......................................... 35 II. The Status of Inclusive Innovation Programs and Initiatives in China .................................... 35 Government Programs and Initiatives .......................................................................................... 35 University and Research Institute Initiatives ................................................................................ 39 Private Sector Initiatives ............................................................................................................... 41 Grassroots Innovation Initiatives .................................................................................................. 42 III. Key Issues and Challenges in Promoting Inclusive Innovation in China ................................. 44 The Institutional and Policy Framework ...................................................................................... 44 The Effectiveness of Government-Driven Policies and Programs ............................................... 45 The Coverage and Sustainability of Private Sector Initiatives ..................................................... 46 The Orientation and Incentives for Universities and Public Research Institutes.......................... 47 Regulatory and Institutional Barriers ............................................................................................ 48 Government Support for Grassroots Innovation ........................................................................... 48 International Collaboration in Inclusive Innovation ..................................................................... 48 Early Stage Capital for Inclusive Innovation ................................................................................ 49 Chapter 3. Inclusive Innovation: The International Experience ................................................... 50 National Government Initiatives ................................................................................................... 50 Research and Technology Institutes (RTIs) .................................................................................. 54 Private Sector Firms ..................................................................................................................... 58 Technological Innovation ............................................................................................................. 59 Bypassing Constraints .................................................................................................................. 63 Foundations and International Development Institutions ............................................................. 64 Partnerships and Collaborative IP ................................................................................................ 65 Lessons and Challenges from Global Inclusive Innovation Efforts ............................................. 68 Chapter 4: Policy Options for Promoting Inclusive Innovation in China .................................... 72 I. Key Goals of Public Policy Intervention .................................................................................. 72 II. Elements of Public Policy to Promote Inclusive Innovation .................................................... 74 Dedicated fund to support inclusive innovation ........................................................................... 76 Orienting public universities and research institutes towards inclusive innovation ..................... 77 Support for Grassroots Innovation ................................................................................................ 78 Grand Challenges, Competitions and Prizes................................................................................. 80 III. Improving Design, Monitoring and Evaluation ........................................................................ 81 TABLES Table 1: Poverty and Inequality Indicators: A Global Comparison ............................................... 1 Table 2: Access to Basic Goods and Services ................................................................................ 3 Table 3: Rural and Urban Disparities in BRICS Countries ............................................................ 4 Table 4: Education attainment in urban and rural areas, 1979-2006 .............................................. 5 Table 5: Rural-urban disparities
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