The OECD Takes a Second Look at Chinese R&D

Posted by: Bruce Einhorn on August 30, 2007

The OECD received a lot of well-deserved criticism last December after it came out with a report claiming that China had passed Japan to become the world’s second-biggest investor in R&D, behind only the U.S. My Asiatech blog post about the report, for instance, asked “Is the OECD hyping China’s R&D spending?” The answer: Yes. Now the OECD seems to be making amends. The organization has issued a new paper on innovation in China and thankfully the conclusions seem to be a lot more sober. “China still has a long way to go to build a modern, high-performance national innovation system,” the OECD reports in its press statement announcing the new report. Yes, China has made progress by investing in R&D. But according to the OECD, “much of this [investment] focused on the high-technology sector, updating equipment and facilities, and experimental research for new products rather than on basic research, the foundation of long-term innovation. More investment is needed in sectors such as services, energy, environmental technology and basic research.”

Some other problems, according to the OECD, include a potential shortage of skilled workers in science and technology. In the U.S., it’s popular for people bemoaning the sorry state of American education to point to the vastly higher numbers of science and technology students in Chinese universities, but according to the OECD, China faces a numbers crunch of its own. “In recent years, undergraduate degrees in science have even fallen in absolute terms,” the OECD reports. “China should improve the quality of science education to attract more students, with more emphasis on managerial expertise and entrepreneurship.” The report also criticizes Chinese business for its lack of innovation and points out that the Chinese financial system, dominated by state-owned banks, doesn’t foster an innovative climate for start-ups. And of course there’s the fact that China is the world’s center for trademark, patent and copyright theft. “To encourage domestic firms to innovate and benefit more from closer ties with R&D centres of foreign companies,” the OECD reports, “the government should enforce intellectual property rights (IPRs) more effectively and strengthen competition.” Other than the odd editing - do people really say IPRs instead of IPR? - there’s not much to criticize there.

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Reader Comments

jcage

August 31, 2007 01:47 AM

When OECD came out with the report that China was the second major expender in R & D in term of dollar in PPP, Chinese scientists and personnels state the the report from OECD was wrong since China still buying portion of their equipment abroad so PPP has not effect outside of the native country.
Also, China is in catch-up mode trying to catch up with the West in term of existing technology so no enough basic research since basic research take a long time to become useful.
However, China patents are growing really fast according to WIPO.

Katie Leung

August 31, 2007 09:53 AM

Thank you very much for this article Bruce, thanks for pointing out the flaws of Chinese academic systems and also a big thank you to OECD for making these amends. And i hope these flaws will be tackled as soon as possible to boost developments.Yes Definitely China still has a very very long way to go, and recently Chinese lawmakers just annouced a few adjustments in science laws that scientific failures expenses will be covered and paid for if the scientists can prove that they tried their best, another step in encouraging domestic innovation because before scientific failures were not usually tolerated and that's why there were some cases of scientific frauds in China, but now with this new law, I hope things will get better and I also hope they will come up with more new laws to boost innovation further and enforce laws on protection or IPRs.

Thanks Bruce and as we can see Bruce is not really a pro-China as people said.

Katie Leung

August 31, 2007 09:56 AM

And as we can see from an UN agency report recently that the number of Chinese patents had increased considerably, taking the third place after US and Japan. Hope the number will get bigger and bigger after the new laws.

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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