China’s Program for Science and Technology Modernization

China’s Program for Science and Technology Modernization:
Implications for American Competitiveness
Prepared for THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW
COMMISSION
Micah Springut, Stephen Schlaikjer, and David Chen CENTRA Technology, Inc.
4121 Wilson Boulevard, Suite 800 Arlington, VA 22203

China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
Disclaimer: This research report was prepared at the request of the Commission to support its deliberations. Posting of the Report to the Commission's website is intended to promote greater public understanding of the issues addressed by the Commission in its ongoing assessment of U.S.-China economic relations and their implications for U.S. 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 information in this report is current as of January 2011.
About CENTRA Technology, Inc. CENTRA Technology, Inc. is a private corporation providing security, analytic, technical, engineering, and management support to the government and private sectors since 1985. CENTRA’s China research group employs experienced Chinese language-qualified analysts to provide finished open-source analysis on a variety of topics, including: China’s politics, economy, international trade and financial relations, energy sector, environment, military, defense industry, and society. CENTRA maintains a network of expert consultants to provide clients additional insights into these and other issues.
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
Scope Note The US-China Economic and Security Review Commission (USCC) contracted
CENTRA Technology, Inc. (CENTRA) to provide a report on the scientific modernization program of the People’s Republic of China (PRC) and its implications the competitiveness of the United States.
The Commission asked CENTRA to 1) examine and assess national-level programs from the 1980s to the present; 2) assess linkages between China’s science policy and its industrial policy; 3) assess the methods commonly employed by the PRC to support its scientific modernization through interactions with the United States and other Western entities; and 4) analyze identifiable policy linkages between the Chinese government’s broader science and technology efforts and the capacities of China’s defense-industrial complex.
The report addresses the implications for US competitiveness by speculating on the potential for PRC science policies and programs to promote the development of an internationally-competitive national innovation system.
Case studies on the semiconductor, nuclear energy, and nanotechnology sectors in China address these questions in areas relevant to the Commission’s interests, while avoiding overlaps with previous and ongoing USCC research.
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
Table of Contents
Executive Summary ...........................................................................................................6 Introduction: the Trajectory of China’s Scientific and Technological Development .............................................................................................9 China’s National Institutions and National Programs for Science ........................ 15
China’s S&T Institutions .............................................................................................. 18 Major National Programs ............................................................................................. 24 Problems in Government-Sponsored Science ............................................................... 33 Other National Programs.............................................................................................. 35 The National Medium to Long-term Plan for the Development of Science and Technology (2005-2020).......................................................................................... 38 Case Study I - Nanotechnology: Cutting-Edge Science and the Future of Innovation in China ................................................................................................. 46 Science, Technology, and Industrial Policy ................................................................54 Precedents in Techno-Industrial Policy ........................................................................ 60 Case Study II - Techno-Industrial Policy in the Semiconductor Sector .............. 62 Implementing China’s Industrial Ambitions................................................................ 68 Doubts about Industrial Policies for Innovation .......................................................... 72 The International Dimension of Chinese Scientific and Technological Development ......................................................................................................................76 Indigenous Innovation .................................................................................................. 76 Commercial Linkages: Foreign Multinationals and Technology Transfer .................. 78 Case Study III - Nuclear Power: Innovation in State Enterprises and the Conundrum of Foreign Technology ............................................................................ 81 Beyond Technology Transfer: The Rise of Foreign R&D Centers ................................ 88 US Universities, Returnees and Technology Transfer ................................................. 95 US-China Scientific Cooperation ................................................................................ 101 Illicit Technology Acquisition...................................................................................... 104 Science, Technology and China’s Military-Industrial Complex............................109 Reforming the Military Technology Innovation Paradigm ........................................ 110 Funding Priority Technologies.................................................................................... 116 Finding Military Potential in the Civilian Sphere ..................................................... 118 Foreign Linkages......................................................................................................... 123 Conclusion: China as a Rising Power in Science and Technology .......................127
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
Appendix I: CAS Institutes............................................................................................132 Appendix II: China’s National Laboratories .............................................................135 Appendix III: US-China Scientific Cooperation .......................................................137
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
Selected Acronyms
CAE: Chinese Academy of Engineering CAS: Chinese Academy of Sciences CGNPG: China Guangdong Nuclear Power Group CMC: Central Military Commission CMI: civil-military integration CMIPD: Civil-Military Integration Promotion Department CNNC: China National Nuclear Corporation COSTIND: Commission on Science and Technology for National Defense FIE: Foreign-Invested Enterprise FTE: full-time equivalent GAD: General Armaments Department GRI: government research institute ICT: information and communications technology ITAR: US International Traffic in Arms Regulations KIP: Knowledge Innovation Program MLP: National Medium to Long-term Plan for the Development of Science and Technology (2005-2020) MNC: multinational corporation MOC: Ministry of Commence MOE: Ministry of Education MOF: Ministry of Finance MOP: Ministry of Personnel MOST: Ministry of Science and Technology NDRC: National Development and Reform Commission NIS: national innovation system NSFC: National Natural Science Foundation of China OECD: Organisation for Economic Cooperation and Development PRC: People’s Republic of China R&D: research and development RMB: Renminbi, the currency of the PRC S&T: science and technology SASTIND: State Administration for Science, Technology, and Industry for National Defense SOE: State-Owned Enterprise SSTC: State Science and Technology Commission
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
Executive Summary
Viewing science and technology as the key to economic development and international competitiveness, the government of the People’s Republic of China (PRC) has launched a comprehensive effort to become an innovative nation by 2020 and a global scientific power by 2050. China’s effort will draw significantly on the resources and planning role of the state, whose national science programs have long made targeted investments in research and development (R&D) efforts in areas deemed critical to China’s economic and military needs.
The Chinese government recognizes that national science programs alone are not capable of sustaining the leapfrogging scientific capabilities the PRC now seeks. Although they have aided China’s technological advance substantially, these programs have not yet fostered the widespread commercialization of internationally-competitive technologies originating from Chinese R&D efforts.
China’s science and technology (S&T) policy now embraces the idea, conveyed in China’s national plans and official speeches, of “speeding up the construction of an innovation system that takes enterprises as the center, the market as guide, with commercialization and research interwoven.” The government does not aim to move out of the way of markets. Rather, the PRC government has become a leader in a technology commercialization drive.
x China’s S&T bureaucracy has expanded financial support for R&D in corporate enterprises, promoted links between research institutes and commercial firms, and established technology development zones and commercialization bases.
x The National Megaprojects introduced in the 2006 Medium to Long-term Plan for the Development of Science and Technology (2005-2020) (MLP) involve substantial government investments and incentives for key technology and engineering projects with commercial applications.
China’s industrial bureaucracies have also supported high technology industries through subsidies for industry, procurement policies; financial support for enterprises’ international expansion, and large-scale investments. In these efforts, the PRC has a mixed record. The government helped China’s leading telecommunications equipment manufacturers grow, but has so far failed to foster notable innovation in the semiconductor industry.
x The October 2010 Decision of the State Council to Accelerate the Development of ‘Strategic Emerging Industries’ may herald a new phase in China’s industrial policy—one that intensifies the government’s focus on promoting high-technology enterprises more than ever before. The policy calls for the government to fund and promote investments in new industries in seven key areas of technology.
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
x Industrial policy measures could potentially stifle innovation, since they involve “picking winners” and diverting investment to firms and projects that may not have the technological wherewithal to compete effectively.
China’s national innovation system struggles to balance its need to utilize foreign sources of technology with a desire to nurture homegrown innovation. Nevertheless the PRC has positioned itself to reap the benefits of global commercial and scientific networks.
x Technology transfers from foreign firms continue to be important for Chinese enterprises, most recently in the rail transport, alternative energy, and civilian nuclear sectors. The Chinese government and its commercial enterprises are making greater efforts than in the past to assimilate and improve this technology.
x The growing amount of R&D conducted in China by foreign multinational corporations provides a potentially more promising avenue for the PRC to obtain technological know-how.
x The United States has made substantial contributions to Chinese science, particularly through training Chinese scientists and engineers in its universities, research institutes, and corporations. This corps of talent plays an outsized role in China’s technological development. A shared American and Chinese interest in challenges related to climate change, energy, and health has also propelled government-facilitated cooperative science projects and growing academic collaborations.
Yet Chinese fears about dependency on foreign technology have provided the impetus for China’s pursuit of “indigenous innovation,” an attempt to secure sovereign control over core technological capabilities. “Indigenous innovation” does not call for technological autarky, but for China’s foreign interactions to have a laser focus on extracting technology for China’s benefit.
x Multinational Corporations (MNCs) have quickly learned that China shapes incentives to acquire technology that will then be then be harnessed for the benefit of its national firms. China has also attempted to fill important capability gaps through espionage and theft of foreign technologies that are often crucial pieces in the United States’ high-tech industrial and military dominance.
x These “techno-nationalist” policies (those that enhance China’s exclusive interests) also include certain restrictive procurement, standards, and patent policies. Such policies are often at odds with best practices for innovation.
Chinese military capabilities are enhanced by spillovers from China’s advancing civilian technology base.
x Reforms in the management of defense industries and the research system—as well as initiatives to link civilian and military research—have facilitated absorption of dual-use technology by the People’s Liberation Army (PLA).
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
x Despite arms embargoes and export restrictions, technology collaborations between Western and Chinese firms have significant spillover benefits for Chinese military technology.
Caught between a tradition of state planning and the need for markets—and between an interest in foreign technology assimilation and the lure of domestically-developed technology—China’s innovation system faces an ambiguous future. Coherent-sounding national visions obscure the fact that China’s bureaucracies have different interests and pursue different goals. This is the case in China’s civilian nuclear program—where a two-pronged approach of buying high-quality foreign technology while investing in indigenous development of next-generation nuclear power was driven more by bureaucratic contention than by a coherent national vision. China has demonstrated a formidable capacity for technological modernization, but its current system of innovation ultimately imposes limits on China’s potential.
x China’s national science programs, elite commitments, sustained R&D investments, large cohort of scientists, “China price” manufacturing, huge domestic market, and access to technology and know-how from the international system have proven remarkably effective in enabling China’s technological “catch up” and leadership in select areas of technology and manufacturing.
x Yet the Chinese model of science in its present form is unlikely to deliver the types of creative research on which future high-technology leadership will depend. Bureaucratically-driven institutions and programs for science are wasteful. China has yet to show that it can meaningfully use the tools of the state to drive the commercialization of discoveries in research labs in a competitive manner. And the nation’s drift in a techno-nationalist direction could compromise China’s enabling international scientific links.
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China’s Program for Science and Technology Modernization Prepared for the US-China Economic and Security Review Commission
Introduction: the Trajectory of China’s Scientific and Technological Development1
China is no longer just the world’s workshop. Manned space ventures, electric cars, and the world’s fastest supercomputer all make clear: the People’s Republic of China (PRC) is ascendant in science and technology. According to Secretary of Energy Steven Chu, speaking in late 2010, China’s recent technological successes constitute a new “Sputnik moment” for the United States.2
With China poised to be a leader in clean energy and transportation technologies, Secretary Chu was suggesting a technological challenge on a level that ought to shock the American psyche.3 China’s low-emission coal energy plants, third and fourth generation nuclear reactors, high-voltage transmission lines, alternative-energy vehicles, solar and wind energy devices, and high-speed trains, are all either more advanced than those in the United States, or provide serious competition to American technologies.4
The transformation in Chinese technological capabilities is not only apparent in the clean energy and transportation fields. China’s high-tech industries have made steady progress in telecommunications and information technology (IT). Significant budgetary commitments for research in nanotechnology, new materials, and other cuttingedge scientific fields have allowed China to play a leading role in the next generation of important discoveries. And advanced military weapons systems (including recentlydeployed anti-ship ballistic missiles and a new fighter jet prototype with stealth characteristics), have benefited from advances in the PRC’s defense industries and in China’s civilian technology base.
The Chinese government has been a major impetus in the PRC’s rapid scientific rise. China’s leading officials are deeply committed to technological modernization and have provided sustained attention and funding to realize their goals. They view technological development as the key to meeting the economic demands of its 1.3 billion citizens as the world faces a crisis of sustainability.5 In addition, they see science and technology modernization as a critical factor in reaching a leading position on the world
1 The authors acknowledge the contribution and counsel of noted expert on China S&T issues, Dr. Richard P. Suttmeier, relating to portions of this report. 2 US Department of Energy, “Secretary Chu: China's Clean Energy Successes Represent a New ‘Sputnik Moment’ for America,” November 29, 2010. http://www.energy.gov/news/9829.htm. 3 See also, Evan Osnos, “Green Giant,” The New Yorker, December 21, 2009. 4 US Department of Energy, “Secretary Chu: China's Clean Energy Successes Represent a New ‘Sputnik Moment’ for America,” November 29, 2010. http://www.energy.gov/news/9829.htm; Adam Aston at Greener World Media, “7 Technologies Where China Has the U.S. Beat,” Reuters, December 7, 2010. http://www.reuters.com/article/idUS376800032720101207 5 Chinese Academy of Sciences, The Science &Technology Revolution and China's Modernization: Thinking on China's Science & Technology Development Strategy toward 2050. The English version is available through a joint publication agreement between Science Press Beijing and Springer-Verlag: Science and Technology in China: A Roadmap to 2050: Strategic General Report of the Chinese Academy of Sciences (November 2009).
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