China: Controlled Innovation
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When discussing the growth in China we tend to view it using our own (capitalistic/democratic) filter. However, the economy in China is much different than our own. This piece tries to help
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China: Controlled Innovation
- 1. China: Innovation in a Centrally Planned Economy ETM 520/620 November 30, 2009 Greg Bourque Dan Meador Wilson Zehr Shawn Jiang Lam Dinh Nametsegang Boemo-Mokhawa
- 2. Foundation Innovation is: “…the creation and implementation of new processes, products, services and methods of delivery, which result in significant improvements in outcomes, efficiency, effectiveness or quality.” Mulgan, G and Albury, D (2003) Innovation in the Public Sector, Cabinet Office, London. 2Team 5 Why Innovate? • Increase standard of living • Achieve sustained economic growth • Kontratieff’s Long Wave Cycle
- 3. Tale of Two Priorities Central Planning • Need for control • Activity based rewards • Follow the party line • Top down decisions • Planned growth Market Driven • Need to innovate • Outcome based rewards • Think outside of the box • Bottom up decisions • Organic growth 3Team 5 Can an innovation system in a centrally planned economy be as successful as in a market driven economy?
- 4. Measuring Innovation Metrics • Human Capital • Research and Development Expenditures • Patents granted • Economic Performance • Per Capita income • Domestic Consumption • Productivity – Key to raising living standards – Key to poverty reduction – Key to a sound environment Methods • Ranking • Trending • Policy Analysis • System Analysis - Analysis of support structures 4Team 5
- 5. Education R&D Implementation Linkages Innovation System End Use 5Team 5
- 6. China: Economic Miracle 10% Average GDP Growth 30 Years 6Team 5 25% Average Export Growth 2000 - 2005
- 7. Source: Stages of Economic Development (transcript) Speech at the Chinese Academy of Arts and Sciences Beijing, June 19, 2004 Professor Jeffrey D. Sachs Director, The Earth Institute at Columbia University Economic Growth Path to Sustained Growth IncomeperCapita Time0 n Knowledge Industrial Commercial Pre-commercial Leverage low cost resources such as labor Add additional value through innovation 7Team 5
- 8. MongoliaProvinces (22) Autonomous Regions (5) Guangxi Inner Mongolia Ningxia Hui Xinjiang Tibet Municipalities (4) Beijing Shanghai Tianjin Chongqing Special Administrative Regions (2) Hong Kong Macau China: The Country Population: 1.3B (1st ) Land Area: 9.6M KM (4th ) 8Team 5
- 9. Source: The China Business Review, April 2009 Notes: NEA = National Energy Administration; SAFE = State Administration of Foreign Exchange; SFDA = State Food and Drug Administration. China: Government National People’s Congress (NPC) 9
- 10. Source: http://www.china.org.cn/e-china China: Government NPC Composition 10Team 5
- 11. Demographics 80% men 77% over 35 31% college degree Group Members Meet Communist Party 73 million National Party Congress 2,000 5 years Central Committee 200 Politburo 24 Standing Committee 9 frequent Source(s): BBC News The China Business Review Hu Jin President Hu Jintao Chair Hu Jintao Chairman General Secretary Hu Jintao 11th Five Year Plan China: Government Role (Rule) of Communist Party 11Team 5
- 12. Open to World Deng Xiaoping ‘80 80% SOE ‘53 – ’57 1st 5 Year Plan ‘56 100% SOE 93.5% farm cooperatives ‘06 – ’10 11th 5 Year Plan China: Economy History of Growth 12Team 5 China GDP Growth (1950 – 2005) Korean War Great Leap Forward Cultural Revolution Market-based economic returns since 1978 Farm privatization WTO entrySEZ’s 1997 Asian Financial Crisis ‘58 Break with Soviet Style Communism ‘96 43% SOE ‘76 – ’80 5th 5 Year Plan Source: GDP data published by the People's Republic of China and compiled by Hitotsubashi University (Japan) and augmented with World Bank and other data.
- 13. China: Economy Role of Special Economic Zone (SEZ) Function • Create Jobs • Acquire technical knowledge • Attract foreign direct investment Common Incentives • Access to low cost labor pool • Favorable tax treatment (tax-free window) • Greater independence for international trade • Business friendly rules & policies • Potential for subsidies 13Team 5
- 14. China: Economy Special Economic Zones 1980 - 1984 Guangdong Province - Shantou - Shenzhen - Zhuhai Fujian Province - Xiamen Hainan Island 1984 (FDI) Dalian Qinhuangdao Tianjin Yantai Qingdao Lianyungang Nantong Shanghai Ningbo Wenzhou Fuzhou Guangzhou Zhanjiang Beihai 1985 expand coastal areas open economic zones Mountainous Region 14 Source: Handbook of International Economic Statistics, Feb 1999
- 15. labor labor labor China: Economy Flow of Capitol & Labor Government Investment Government Investment urban > rural 2015 15 Mountainous Region Source: Handbook of International Economic Statistics, Feb 1999
- 16. Time0 n Knowledge Industrial Commercial Pre-commercial Urban China Rural China Source: Stages of Economic Development (transcript) Speech at the Chinese Academy of Arts and Sciences Beijing, June 19, 2004 Professor Jeffrey D. Sachs Director, The Earth Institute at Columbia University IncomeperCapita • Economic Development and Nation-Building: the Case of China Shinichi Ichimura (Co-leader) Professor Emeritus, Kyoto University, Japan 10,000* modernization 2,000* Industrialization 500* Take Off China: Economy Evolutionary Stage Ұ 13,786** $ 1,907 Ұ 4,140** $ 573 ** Source: Thomson Reuters, Jan 24, 2008 growing faster US Medium $ 48,000 n = 2007 16Team 5
- 17. HDI measures the average progress of a country in human development across three dimensions: life expectancy, education, and standard of living. United Nations Development Program Human Development Report 2009 China: Innovation Human Development 17Team 5
- 18. China: Economy Preserve “Social Harmony” Labor Force Composition Agriculture: 43% Industry: 25% Services: 32% (2006 est.) GDP Composition Agriculture: 11.3% Industry: 48.6% Services: 40.1% (2008 est.) 18Team 5 Source(s): Stratfor, (www.stratfor.com) April 2, 2007 Urban to Rural Migration Population Aging Rapidly
- 19. 5th 5 Year Plan v1.0 (1976 – 1980) • Steel Output – 60M tons • Oil Output – 250M tons • 10 oil & gas fields • 120 large projects • Steel, non-ferrous metal, coal • Ұ70B government investment 11th 5 Year Plan (2006 – 2010) • Scientific approach to development • New socialist countryside • Upgrade industrial structure – Technology-based industries – Modernize manufacturing – Strength before scale • Develop service industry • Balance among regions • Environmentally sensitive • Science and education • Institutional reforms • Harmonious socialist society • Socialist democratic politics • Socialist cultural development • Strengthen national defense Team 5 19 China: Planning Changing Focus 5th 5 Year Plan v2.0 (1978 – 1980) • Modernization (revised focus) • Principles of readjustment, reform, rectification and improvement. • Market-based reforms • Open to world • Foreign direct investment • Agricultural privatization Guideline Source: china.org.cn National Party Congress (en.ndrc.gov.cn)
- 20. China Made Top Manufacturer & Exporter • Toys 70% • Shoes 50% • Color TV 45% • Air Conditioner 30% • Textile 24% Export/GDP: 60%(2003); 64%(2005) Excessive investment into processing trade (OEM), resulting in, labor, land and resource intensive products China: Planning The Torch Program 5th 5-Year Plan FDI China Made CHINA TORCH PROGRAM Independent Innovation China Created China Created Policy Capital Market Talents Independent Innovation Technology Industrial Construction Climb Value Chain
- 21. STIP Locations: • 29 in central cities with intensive intellectual resources and sound industrial base • 13 in coastal cities with better conditions of opening-up to outside world • 12 in the cities with intensive military industries and traditional industrial base China: Planning Science & Technology Industrial Park (STIP) CHINA TORCH PROGRAM
- 22. China: Innovation Research & Development 22Team 5 China’s R&D Expenditure/Percentage of GDP
- 23. China: Innovation Research & Development 23Team 5 Source: Ministry of Science and Technology of the People’s Republic of China
- 24. Team 5 24 China: Innovation R&D Comparison
- 25. China: Innovation Patent Activity 25 Team 5 Source: Ministry of Science and Technology of the People’s Republic of China
- 26. 26 Team 5 Source: Ministry of Science and Technology of the People’s Republic of China China: Innovation Patent Activity
- 28. 28 Team 5 Source: Ministry of Science and Technology of the People’s Republic of China China: Innovation Science & Technology Publications Domestic: Classified by Institution
- 29. China: Innovation Income & Savings Growth 29Team 5 Source: Boston Consulting Group Asia-Pacific excluding Japan: 33% China Singapore Malaysia India Thailand South Korea Australia Philippines New Zealand 2003 2004 2005 2006 2007
- 30. China Rank Globally Factor 1960 2000 Income per worker 103 71 Total factor productivity 105 76 30Team 5 China: Innovation Income & Productivity Rank
- 31. Conclusions • Enormous Economic Growth Over the Past 30 Years – Foreign Direct Investment (FDI - open to outside world) – Low cost Labor (Export oriented) – Urban Development • Improvements Innovation System – Education – R&D – Implementation – Linkage – (End-use) • Factors to Sustain Growth – Central Planed S&T DevelopmentIndividual Enterprise R&D / Entrepreneurial Collaboration – Government Intervention, Primary ActorsSecondary Actors – Planned EconomyMarket Based – Focus is on short-term economic benefit Focus must be on long-term S&T Research Team 5 31
Notas del editor
- 中国制造：在多个行业中，中国都位居全球第一大生产国和第一大出口国。 玩具 占全球产量的 70% ， 鞋类 占全球产量的 50% ， 彩电 占全球产量的 45% ， 空调 占全球产量的 30% ， 纺织品服装 占全球产量的 24% 。 中国制造：在多个行业中，中国都位居全球第一大生产国和第一大出口国。 玩具 占全球产量的 70% ， 鞋类 占全球产量的 50% ， 彩电 占全球产量的 45% ， 空调 占全球产量的 30% ， 纺织品服装 占全球产量的 24% 。 中国制造：在多个行业中，中国都位居全球第一大生产国和第一大出口国。 玩具 占全球产量的 70% ， 鞋类 占全球产量的 50% ， 彩电 占全球产量的 45% ， 空调 占全球产量的 30% ， 纺织品服装 占全球产量的 24% 。 jjjj 中国制造：在多个行业中，中国都位居全球第一大生产国和第一大出口国。 玩具 占全球产量的 70% ， 鞋类 占全球产量的 50% ， 彩电 占全球产量的 45% ， 空调 占全球产量的 30% ， 纺织品服装 占全球产量的 24% 。