Jeremy Chan. Perspectives: Policy and Practice in Higher Education. Volume 19, Issue 1. 2015.
Since the new leadership of China was installed under Xi Jinping in late 2012, much attention has been paid to the ‘Chinese dream’, a concept created both in homage—and in contrast to American dream. Nearly two years on, the Chinese dream has become a staple of official rhetoric and propaganda, even as the leaders who utter it have been reluctant to define what the dream is, let alone how China can achieve it. If past performance is any indication, however, the dream which China’s leaders have in mind is ambitious in both scale and substance, perhaps nothing less than the wholesale transformation of the country. Without a doubt, one major component of this transformation includes China making good on its promise to become an ‘innovation-led nation’.
That China needs to boost its innovativeness in order to support continued economic growth is plain to see, as is the country’s struggle to do so until now. China’s desire to become more innovative is emblazoned across banners on street corners and in turgid government white papers. It is on the lips of China’s top leaders, as well as the fingertips of the country’s increasingly vocal online commentariat, who lionise famous innovators such as Steve Jobs while bemoaning the lack of comparable homegrown figures.
The leaders in Beijing have set their sights on closing the innovation gap with developed countries, becoming an ‘innovation-led nation’ by 2020, and a world leader in science and technology by 2050. This will entail massive changes to the world’s second largest economy and its largest higher education system. At the same time, it may not be enough for China to reform its economy and education institutions without changing its top-down approach to innovation. Indeed, despite enormous growth in R&D spending and scholarly articles in recent years, China has arguably become less innovative over time, at least with respect to its economic clout. To understand this innovation output gap, it is important to recognise the paradoxical role that the government plays as both the greatest champion of innovation and the greatest obstacle to progress.
Examples of the innovation paradox abound in China. The same nation that gifted the world with inventions such as paper, fireworks, the compass, and block printing—just to name a few—has in modern times become synonymous with cheap manufactures and knock-off goods. China spends more on R&D than any other nation besides the USA, but it continues to punch far below its economic weight in terms of its innovation output. Indeed, 35 years of robust economic growth has only created a yawning gap between the country’s economic weight and its capacity for innovation. A case in point: China’s economy is now larger than those of Japan and Germany combined, but it is home to fewer of the world’s most innovative firms than either country, according to business survey data. China’s innovation output even trails South Korea, whose economy is roughly one-eighth the size of China and whose population represents only 4% of the mainland’s.
A quick glance at a list of China’s largest firms reveals a dearth of innovation at the top. While 11 Chinese companies currently rank among the 100 largest in the world, all of them are state-owned enterprises (SOEs) and operate in industries such as oil, banking, and railways, where the state effectively holds a monopoly (Table 1).
| Table 1. Largest firms in China, 2013 | ||||
| Global rank | Company name | Revenue ($bn) | Industry | SOE? |
| 4 | Sinopec Group | 428.2 | Oil | Yes |
| 5 | China National Petroleum | 408.6 | Oil | Yes |
| 7 | State Grid | 298.4 | Utilities | Yes |
| 29 | Industrial and Commercial Bank of China | 133.6 | Banking | Yes |
| 50 | China Construction Bank | 113.4 | Banking | Yes |
| 64 | Agricultural Bank of China | 103.5 | Banking | Yes |
| 70 | Bank of China | 98.4 | Banking | Yes |
| 71 | China Mobile Communications | 96.9 | Telecommunications | Yes |
| 80 | China State Construction Engineering | 90.6 | Construction | Yes |
| 93 | China National Offshore Oil | 83.5 | Oil | Yes |
| 100 | China Railway Construction | 77.2 | Railway | Yes |
Source: Fortune Global 500, 2013.
Part of China’s failure to generate more innovation to date can be explained by its current state of economic development, which despite enormous progress, remains far behind developed country levels. However, the larger cause of China’s innovation paradox is the government. Essentially, China is the world’s most top-heavy country in the world, where power flows in only one direction—downward.
Innovation from the Top Down
From the top down, where the government can marshal its considerable resources, it is not an exaggeration to say that support for innovation is greater than in any other country in the world. This top-down approach to development is how China came to possess gleaming infrastructure ranging from the world’s longest high-speed railway to the world’s fastest super computer. While most of the developed world has cut funding for science programmes in recent years, China’s government has announced ambitious plans to return humans to the moon and to reach the deepest depths of the sea.
In a landmark 2006 policy document, China’s government made clear not only that it plans to engineer a more innovative society, but how it plans to do so. Namely, Beijing has promised to promote targeted investments in science and technology, preferential tax policy for priority industries, procurement and absorption of foreign technology, greater intellectual property rights (IPR) protection, and reforms to the country’s education system.
China already invests more in R&D than any country but the USA, and it is just getting started. China’s spending on R&D has grown from $232bn in 2012 to an estimated $284bn in 2014, representing more than the amount spent by the industrial powerhouses Japan and Germany combined. However, China’s expenditure on R&D still trails most developed countries as a percentage of total economic output. This suggests that China will continue to see rapid growth in its R&D spending for years to come, which will inevitably open up new opportunities for collaboration with foreign institutions, even as China continues to close the technology gap with developed countries.
China is already a research powerhouse in its own right, more than doubling its number of scholarly publications from 2006 to 2012. Today, China trails only the USA in the number of articles it publishes every year. In 2012, China also became the world’s largest patent applicant. What is more, China’s top-down approach to innovation has begun to trickle down to its firms, with many Chinese companies now spending greater sums of money on R&D than all but a few multinational corporations. Whatever technology Chinese firms cannot design themselves, they often purchase from rival firms overseas, closing major innovation gaps in the process. China is not the first country to pursue technological parity through incremental innovation, but it is the first country to do so through large-scale acquisition of foreign technology.
Given the particularly top-heavy nature of China’s approach to innovation, however, it is perhaps not surprising that far more money is spent on boosting research output than on improving research quality. According to the Global Competitiveness Index, published annually by the World Economic Forum, China’s capacity for innovation ranks highest on metrics such as ‘government procurement of advanced technological products’ and ‘company spending on R&D’—areas where the biggest wallet often wins out—while the country performs far more poorly in areas such as ‘number of scientists and engineers’ and ‘quality of scientific research institutions’. Since 2008, China’s GDP has more than doubled in nominal terms, but its global ranking on more than half of the metrics associated with innovation has actually decreased. In other words, the enormous levels of spending on R&D and technology, which have been made possible by rapid economic growth, have not resulted in equivalent improvements in the quality of China’s research output.
To understand why, it is important to acknowledge the weaknesses of a solely top-down approach to innovation, especially one which overvalues quantifiable targets such as R&D spending and patent applications, while paying little attention to the effectiveness of this spending or the quality of these patents. Indeed, while China became the world’s largest applicant for patents in 2012, it was granted less than half as many patents as Japan that year, an indication that quantity continues to trump quality.
Given the considerable emphasis on innovation in official rhetoric and government work plans, however, China appears set to focus on narrowing this innovation output gap. How and whether foreign institutions such as UK universities can benefit from this trend largely remains to be seen, but the top-down nature of innovation in China suggests that the most effective approach will be to form partnerships which directly support China’s innovation agenda.
Innovation from the Bottom Up
While China’s R&D spending and innovation investments look formidable from above, the view from the bottom up is far less optimistic. For one thing, IPR protection is improving in China, but it lags far behind developed country levels. This is an obvious disincentive for potential innovators and entrepreneurs. For another thing, financing for small- and medium-sized enterprises (SMEs) in China is often hard to come by, meaning that entrepreneurism and the start-up culture that have thrived in places such as Silicon Valley have yet to take root in China. Beijing neglects the country’s private sector at its own peril. And perhaps most crucially, China’s education system is known to stifle creativity and free thinking—the very lifeblood of innovation—while the government is not known to look favourably upon the free expression that has accompanied innovation in more open societies.
Partly in response to these questions, the Communist Party of China (CPC) announced a rash of new reforms at the end of 2013, none more rhetorically significant than a promise that market forces would play a larger role in the economy—in name if not in practice. Indeed, the CPC pledged that the market would play a ‘decisive’ role in the economy, which represented an upgrade over the ‘foundational’ role it had previously served. Essentially, the CPC announced its intention to get out of the business of allocating resources, such as land and capital, even as it made no mention of plans for greater privatisation of the industries and other resources which currently belong to the state. This despite the fact that the most innovative firms in China are all found in the private sector (Table 2).
| Table 2. Most innovative firms in China, 2013 | ||
| Rank | Company | Industry |
| 1 | Alibaba Group | E-commerce |
| 2 | Huawei Investment & Holding | ICT |
| 3 | Tencent Holdings Ltd | Internet services and e-commerce |
| 4 | Lenovo Group | Computer |
| 5 | Sany Heavy Industry Co. | Heavy machinery |
| 6 | China Merchants Bank | Finance |
| 7 | Baidu, Inc. | Internet services |
| 8 | Haier Electronics Group Co. | Consumer electronics |
| 9 | Jingdong Mall (formerly 360Buy Group) | E-commerce |
| 10 | Wanxiang Group | Automotive components |
Source: Booz & Company, China Innovation Forum 2013
In practice, the government’s actions have yet to live up to its rhetoric, and the gap between word and deed may even be widening over time. Censorship of both Western and domestic media is on the rise in China, and many of the world’s largest and most innovative Internet companies are blocked entirely—Facebook, YouTube and Twitter, just to name a few. Google, which is perhaps the most innovative firm in the entire world, has run afoul of the Chinese government for years and has seen its market share of China’s Internet population—the world’s largest—dwindle considerably since 2009. Meanwhile, Baidu, the local rival to Google, ‘has grown massively in its home market with an offering that breaks no technological ground and does not challenge political orthodoxy’ (Abrami, Kirby, and McFarlan, 2014). This is China’s innovation paradox laid bare: even as leaders in Beijing aspire to create an innovation-led nation by 2020, China continues to find itself among the world’s most prolific Internet censors, alongside countries such as North Korea, Iran, Syria, and Saudi Arabia.
China’s leaders can often appear in thrall to innovation per se, but it is worth remembering that innovation is not the end goal of the CPC; rather, it is the means by which the Party will ensure its survival. As such, innovation is much like anything else in modern China: it is allowed to exist in harmony with the continued rule of the CPC, but never in conflict. A case in point is China’s greatest modern innovation, colloquially known as ‘the Great Firewall of China’, which is the largest and most sophisticated Internet censorship regime the world has ever seen. As China’s economy has developed and its capabilities have grown, its leaders have become more adept at using information technology to maintain their monopoly on power. If China is to become an innovation-led nation by 2020, it will be the first to do so while maintaining tight control over the flow of information both within and outside the country.
Innovation Through Education
China’s leaders have rightfully homed in on human capital as the key to developing a more innovative society, but they have done so in the turgid language of five-year plans and government directive. In particular, Beijing has targeted increasing the number of high-skilled workers in its labour force, primarily by investing in the most rapid expansion in higher education the world has ever witnessed. From fewer than 1 m higher education graduates in 2000, China saw nearly 7.3 m students graduate from higher education institutions in 2014. This rapid expansion in higher education will profoundly change China’s labour force, which had fewer than 50 m workers with post-secondary qualifications as recently as 2010. The government has already announced ambitious—and unrealistic—plans to expand the number of these high-skilled workers to 195 m by 2020 (Huiyao 2010).
Today, roughly one-third of Chinese students can expect to enrol in tertiary education of some sort, with one-fifth enrolling in four-year universities. While China’s overall rate of higher education attainment still trails far behind developed country levels, the gap is shrinking over time. The greater concern for China and its innovation agenda is whether the students who progress to tertiary levels are being taught the skills necessary to think critically and creatively. Preparation for the national college entrance examination (Gaokao) notoriously consumes the bulk of the time students spend in senior secondary school, and most of this preparation consists of drilling and rote memorisation. Once students enrol in tertiary institutions, precious little time is spent in classroom or extracurricular activities that promote critical thinking. Students are constantly reminded that they are graduating into the most competitive employment market in history, and administrators are judged on performance metrics closely tied to graduate employability. It is not uncommon to hear stories of Chinese graduates who are required to provide proof of employment to their universities before they are issued a diploma.
However, this single-minded focus on employability may be changing at China’s most elite universities. Both Peking University and Tsinghua University have begun to require their students to enrol in liberal arts courses—including literature, philosophy and history—in an effort to promote greater scepticism and curiosity (Abrami, Kirby, and McFarlan, 2014). Whether the luxury of a liberal arts education can be extended to students at less prestigious institutions remains to be seen.
The greatest constraint on innovation in China’s higher education system may be the institutions themselves. Despite the enormous sums of money that the Chinese government and private sources are investing in improving the research capabilities of the country’s leading universities, academic freedom is severely curtailed and most decision-making power rests in the hands of CPC committees and the university’s party secretary, who normally outranks the president.
While private colleges and universities have proliferated in recent years, growing at a faster rate than public institutions, this is also no panacea for China. Private higher education institutions generally lag behind public universities in terms of reputation, teaching quality, and resources, and most private colleges and universities offer only a limited range of courses, which naturally puts constraints on their research budgets and impact. It is instructive that China has—by its own measure—42 universities which currently rank among the top 500 in the world, but none of these are private institutions.
Innovative Partnerships
Given the Chinese government’s competing needs to generate a more innovative society while maintaining an essential monopoly on power, it is hard to imagine how the country can accept—let alone embrace—the market dynamics, free expression, and general ethos of ‘creative destruction’ that have accompanied innovation in developed economies. The experience of Google in China shows that even the most innovative firms are necessarily subservient to government prerogative. This means that foreign institutions which wish to participate in China’s ambitious innovation agenda will need to do so in partnership with the government and in pursuit of stated development goals of China.
A few leading UK institutions have led the charge in forging research partnerships with local universities in China, but the bulk of UK universities have been slow to follow suit. This fact alone suggests that the most difficult partnership for UK institutions to secure in China may be the first one, with additional opportunities for research collaboration presenting themselves once foreign institutions establish a foothold in the country. What is more, the majority of existing UK-China partnerships remains concentrated in the hard sciences, disproportionately benefitting those institutions and academic departments which are able to collaborate in these subject areas. Research partnerships in natural science, engineering, medical science and technology subjects represent three-quarters of all UK-China collaboration, according to British Council records.
More recently, interest has reportedly grown in establishing UK-China partnerships in the social sciences, with subjects such as media, linguistics, economics, and business in particularly high demand. This shift towards the social sciences is driven in part by a general relaxation in government controls and oversight, but more sensitive subject areas continue to be off limits for foreign collaboration.
Chinese institutions are especially keen to partner with foreign universities in order to expand their teaching and research capacities, although graduate employability remains the top priority. This means that UK institutions which wish to deepen their engagement in China may need to think beyond traditional university-to-university partnerships and explore links with local industry.
While UK institutions may be drawn to the large amounts of research funding that is currently available in China, it is unclear how these UK-China partnerships will contribute to the country’s overall innovation agenda. Given the limited success to date of its top-down approach to innovation, perhaps China’s progress on this front should be measured less by the amount of resources which the government makes available, and more by the amount of control it can devolve to the universities and academics concerned.
To the extent that China’s essentially top-down approach to innovation remains unchanged, the recent growth in UK-China research partnerships can hardly be expected to move the needle on China’s innovation prospects. The paradox of innovation in China will not disappear by addressing the country’s considerable strengths, but by addressing its institutional weaknesses. The UK universities that forge research links in China today would do well to remember this lesson. Only China can resolve its innovation paradox, and UK institutions will have to be content with merely being present at the birth of a more innovative nation—whenever that day may come.