Foreign-funded research institutions should be included in national science and technology plan

There are conflicting views about foreign-funded research institutions' influence on domestic innovation. But generally speaking, foreign-funded research institutions are playing a key role in improving the overall effectiveness of the national innovation system.

China has become an important base for foreign research institutions over the years, and industrial clusters have gradually formed, mainly concentrated on technology-intensive industries such as electronics, communications, biological medicine, transport, chemicals, and software design.

Through cooperation with foreign-funded research institutions, the openness of the national innovation system has been improved and Chinese enterprises and research institutions have absorbed and used global innovation resources, and the connections between the domestic research network and the global research network have been strengthened.

In 2012 there were 10,146 research institutions affiliated to overseas-funded enterprises in China, accounting for 22.1 percent of China's total. And at the end of 2010 there were more than 1,400 foreign-funded independent research institutions in China. In 2006, there were about 140,000 research staff working in foreign-funded enterprises in China. In 2012, the number had increased to 770,000, and they accounted for 25.3 percent of all research staff in China's large and medium-sized industrial enterprises. In 2000, the R&D expenditure in China of foreign-funded industrial enterprises above a designated size was about 10 billion yuan ($1.6 billion, 1.2 billion euros), and in 2012 the amount had grown to 176.4 billion yuan. Foreign companies' R&D cooperation with domestic enterprises has also improved.

The rapid growth of foreign-funded research institutions in China has not only expanded the sources of research funds, it has also increased the ratio of domestic enterprises' research investment and improved the domestic structure of research investment. It has also prompted domestic companies and research institutions to focus on research and innovation activities with more commercial value.

To some extent, foreign-funded research institutions have also slowed the domestic brain drain and attracted many overseas Chineseto return to work in China.

The increasing number of foreign-funded research institutions has also improved the environment for domestic innovation. Foreign-funded research institutions in China have researched, designed and industrialized high-tech products in China, and have brought new management ideas that provide a higher platform for domestic enterprises and research institutions' innovation activities. Meanwhile, the regional clustering of foreign-funded research institutions has helped propel the clustering development of China's high-tech enterprises and improved the regional innovation environment.

However, foreign-funded research institutions also present great challenges to domestic innovation. Technological dependency has been deepened, and foreign-funded research institutions attract talent, technology and capital, which may increase transnational corporations' control of domestic industrial technology development.

Foreign research institutions now dominate some domestic markets, thanks to their abundant capital, strong technology, advanced marketing strategies, as well as global production and distribution networks, a lack of which has remarkably hindered the development of domestic brands.

The competition for domestic talent has also intensified, with most domestic research talent attracted to foreign-funded research institutions due to the higher salaries, better working environments and abundant research and management experience they offer.

With the government seeking to transform the economic structure and boost domestic innovation, there have been fresh demands for foreign-funded research institutions to be integrated into the national innovation system. This requires overall planning to further open the national science and technology plan to foreign-funded research institutions by determining through investigations the development situation and policy needs of foreign-funded research institutions. The authorities should also support qualified foreign-funded research institutions and domestic enterprises and research institutions that jointly apply for national science and technology R&D or innovation projects.

Foreign-funded research institutions' high-end R&D and cooperative innovation should be encouraged. The authorities should encourage transnational corporations and research institutions to establish high-end R&D centers and innovation bases in China through incentive finance and taxation policies. The authorities should also promote foreign-funded research institutions to collaborate with domestic enterprises and colleges.

The authorities should also encourage domestic enterprises to increase their investment in R&D and innovation to improve their own innovation capabilities, and domestic enterprises should track the technological development of foreign-funded research institutions to seek opportunities for collaboration.

The author is an official with the Ministry of Science and Technology. The article first appeared in Study Times. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 06/13/2014 page14)