G20 summit to underpin China’s innovation drive

For China, a great deal is riding on the Group of 20 or G20 Economic Summit taking place in Hangzhou in China’s eastern Zhejiang province next week and intended to showcase China’s ability to take a world economic leadership role – something it has been criticised for avoiding in the past as it concentrated on national inward-looking policies.

Alongside the usual G20 summit themes of finance and trade, China is keen to push global innovation-driven growth as a topic at the summit, on 4-5 September.

The ‘top item’ on the expected summit outcome list is the drafting of a blueprint for innovation-driven growth, said China’s Foreign Minister Wang Yi at a press conference in Beijing in May.

China, which assumed the rotating presidency of the G20 from Turkey in December 2015, has set out the main theme of the G20, “towards an innovated, invigorated, interconnected and inclusive world”, but at the heart of it is innovation which Chinese officials have said refers specifically to science and technology.

“The world is now on the eve of a new round of scientific and industrial revolution, and innovation is of crucial importance for facilitating leapfrogging progress in productivity and strong economic growth,” said Chinese State Councillor Yang Jiechi, who is in charge of preparations for the summit.

“What we advocate is innovation in the broad sense. We call for innovation in science and technology and, beyond that, in development concepts, institutions and mechanisms, business models and a whole range of areas,” Yang said.

In addition, rather than the usual concentration on rich economies at the summit, China wants to emphasise technology transfer from richer countries and innovation for developing countries to deliver the Sustainable Development Goals to end poverty and hunger, improve health and education, protect the environment, combat climate change and develop sustainable cities.

Among the proposals discussed at G20 technical expert level is the idea of a G20-backed global research and development or R&D platform and a fund “to coordinate technology and innovation solutions” for global challenges such as health epidemics that have cross-border implications. But it is not clear whether preparations have progressed far enough to announce talks on such a platform.

Extension of national policy

But China’s emphasis on technology and innovation is genuine, according to summit experts and is an extension of its own national economic policies.

China is basing its own future prosperity on being a knowledge-based economy, underpinned by research and innovation. Innovation-led growth is already an important national priority, constantly emphasised by China’s leader Xi Jinping in numerous speeches.

China also hopes research and innovation will help transform its economy from low-end manufacturing to a more innovation-based economy to put the country on track for high economic growth rates after a slow-down in the last two years.

Earlier this month, China’s State Council – roughly equivalent to Cabinet – published its targets for its ‘Science and Technology Progress by 2020’ plan. The government wants knowledge intensive services to contribute 20% of gross domestic product or GDP by 2020, up from 15.6% in 2015, according to the five-year plan.

Under the plan the government will encourage enterprises to invest more in R&D and offer preferential policies for knowledge intensive start-ups while pushing universities and research institutes to improve efficiency, according to official documents.

The government’s innovation drives, with announcements coming thick and fast in the past year, are breathtakingly ambitious. One government plan is to establish a network of 15 manufacturing innovation centres nationwide by 2020 for collaboration between the manufacturing sector and the government, and another 15 by 2025 bringing the total to 30 by that date.

Other ambitious targets include sourcing as much as 15% of its energy from renewable resources by 2020. China also aspires to be a space superpower.

The government also set a goal of the total elimination of poverty by 2020, which will require substantial research.

International acquisitions

In recent years China’s innovation policy has become more outward-looking.

China’s leadership realised “indigenous innovation is a far more arduous and a longer path to pursue to achieve global technological superpower status”, according to Naubahar Sharif, associate professor at Hong Kong University of Science and Technology and an expert on China’s innovation policies.

So Chinese firms have been abroad – the United States, Australia, Germany, the United Kingdom and other European countries – to acquire the most highly sophisticated technology companies.

“Chinese enterprises are everywhere, including cloud computing, gene mapping, smart manufacturing, smart cities, big data analysis, and 5G, making the nation a key partner in global partnerships in innovation,” China’s Economic Daily said recently.

“It is a strategy to help them reach the frontier of technology much more quickly than they would otherwise have been able to,” Sharif told University World News. “It is a reflection of the desire of the leadership in China to as quickly as possible achieve the status of global technological leader.”

China has acquired intellectual property rights, research laboratories and personnel, and management systems outright from foreign companies, some of which “have acquired their expertise over decades of experimentation. Innovation is a very long-term process," Sharif said.

Yet it is also evident that the “massive government push to raise R&D spending, train more scientists, and file more patents has yet to give China a lead in science-based innovation”, said a report by McKinsey Global Institute published in October 2015.

McKinsey said China could become a global leader in efficiency-driven and customer-focused innovations, but needed to “catch up” in science- and engineering-based ones.

Chinese Premier Li Keqiang was quoted by official media as saying in April during a visit to Tsinghua and Peking universities, “Innovation requires one’s own efforts as well as the ability to look to, and learn from, advance experiences and concepts from overseas.” At the same time, he admitted that China still had shortcomings in basic research.

Global innovation challenge

But the challenge will be how to share innovation and knowledge, which requires medium to long term policies, to drive global growth in the short to medium term.

“Many governments have struggled even to identify policies that are useful in promoting innovation, let alone work out how these efforts could be scaled up to the lofty heights of the G20,” said Adam Triggs, a research scholar at the Crawford School of Public Policy at Australian National University and a former member of the Australian G20 Task Force, in a recent commentary.

China is already expanding cooperation in science and technology development with other countries, especially among the ‘belt and road’ countries involved in China’s new Silk Road project – a massive Chinese investment to create an economic area that includes countries in Asia, Europe, the Middle East and East Africa.

China’s ‘innovation diplomacy’ has been underway for some years. “An ever-intensifying web of international connections has spread across every aspect of China’s innovation system – from joint academic research to technology transfer and licensing, foreign direct investment, mergers and acquisitions,” said a 2013 report by NESTA, the UK’s non-profit National Endowment for Science, Technology and the Arts.

“As a result the Chinese system is densely connected to sources of expertise elsewhere,” the report said.

A G20 platform for sharing data, research and analysis on global challenges, and including financial organisations, government funders, research institutions and universities, as well as large and medium enterprises, would be a step further, if China can steer it thorough a crowded economic and political agenda to ensure it is part of the G20 outcome document.