How innovative is China?

Yinuo Li

This is an edited version of one of my “Get Smart on China” emails sent to colleagues on July 29th 2015. Phil Nelson contributed to this Article.

Carly Fiorina. Source: altoday.com

“The Chinese can take a test, but what they can’t do is innovate.” A few weeks ago these words sent ripples across the Chinese internet, but perhaps not in the way you might expect. When Republican presidential hopeful Carly Fiorina opined that the Chinese “are not terribly imaginative, they’re not entrepreneurial, they don’t innovate”, the response of Chinese netizens raised almost as many eyebrows as Fiorina’s sweeping statements about 1.4 billion people. Of course there were those who were understandably offended by the comments, but a surprisingly large number of Chinese people actually agreed with Fiorina and lamented their country’s lack of ability to innovate.

This is a strange phenomenon in a country with such a rich history of innovation and which has contributed some of the world’s most important inventions to human civilization. In addition to the Four Great Inventions, i.e. the magnetic compass, papermaking, printing and gunpowder (first developed not as a weapon but in an attempt to create the elixir of life, the secret of immortality), during their 5,000-year history the “not terribly imaginative” Chinese are also credited with inventing matches, wheelbarrows, silk, bells, fireworks, paper money, canal lock gates, kites, chain suspension bridges, cast iron and a meritocratic civil service, to name but a few. The Tang dynasty (618–907CE) was arguably the most technologically advanced civilization on earth and during the following centuries China continued to lead the world in technology and innovation. But from the 17th and 18th centuries onwards, China’s technological prowess began to fail. The Enlightenment was blossoming in Europe, triggering a flurry of innovation that eventually sparked off the Industrial Revolution, but China was falling behind the west, languishing in a technological impasse.

So what happened? Why did modern science and technology develop in Europe and not in China? Some argue that it was down to the aggressive European colonialists encroaching on Chinese sovereignty; this may have caused a pushback in China against imported, European science (the Emperor Qianlong in the 1700s told a British delegation hoping to dazzle the Chinese with their technology: “we don’t need your toys”). Some claim that the intense competition between so many different countries in Europe drove innovation forward, while in China, a unified, unrivaled empire long accustomed to dominating its neighbors, the urgency to innovate gradually diminished over time. One theory is that the Chinese were just too clever for their own good. They developed ceramics over two thousand years ago and refined them into an art form that the rest of the world went crazy for. Porcelain was both beautiful and practical — so practical in fact that it may have prevented the Chinese from developing a material fundamental to modern science: glass. Without the technology to create porcelain, Europeans were forced to refine glass over the centuries, which subsequently allowed European scientists to develop microscopes, telescopes, lens grinding, chemical containers and a whole range of products that facilitated scientific innovation. The invention of spectacles also played a part, as they gave European scientists with failing eyesight an extra 15 to 20 years of productivity that their Chinese counterparts didn’t have.

It wasn’t until the fall of the last emperor and the establishment of the Republic of China in 1912 that modern scientific methods found their way to China, brought back by Chinese students who had studied in the west. After the founding of the People’s Republic in 1949, R&D was arranged according to the Soviet model, often slowed down by bureaucracy and political constraints. During the Cultural Revolution, Chinese science and innovation reached their lowest point, when universities were shut down, academics were sent to the countryside to do manual labor and research ground to a halt for a decade. It wasn’t until after the end of the Cultural Revolution that science and technology were rehabilitated as one of the Four Modernizations, and promoted by Deng Xiaoping.

Thirty years later, the R&D space in China is almost unrecognizable, with the government investing more and more money in science and technology. While still dwarfed by fairly static levels of western expenditure, Chinese R&D spending is growing fast, reaching $257 billion in 2012. What’s more, if OECD predictions are right, by 2019 China’s R&D spending will have overtaken the US.

Source: OECD Science, Technology and Industry Outlook 2014 — © OECD 2014

The life sciences are just one example of the growing focus on R&D in China. For many years, the Chinese pharmaceutical industry produced only generic drugs, with no real R&D capacity or investment. In an attempt to promote new research, the government launched the National Key New Drug Initiative in 2008, a grant-making fund endowed with RMB 6.6 billion (over $1 billion) to support pharmaceutical innovation. This was halfway through the course of the government’s eleventh five-year plan for social and economic development. Under the twelfth (and current) five-year plan, starting in 2011, the government demonstrated how serious it is about drug development by almost doubling funding for the Initiative to RMB 12 billion (almost $2 billion). At first the fund was not particularly successful (or one can say rather embarrassing if you look at limited drug candidates that came out of it), partly because the money was spread too thinly among a broad range of recipients, and partly because many of the grants focused on capacity-building platforms rather than products themselves. Nowadays, while there are still constraints, the government is working to make the fund more productive and it has seen its successes grow as funding has increased. As China moves into its thirteenth five-year plan next year, the government is intending to give more funding to companies rather than academic institutions.

Government support for R&D does not stop there. In contrast to the days when Chinese students had to go abroad in order to carry out research, now more and more scientists (both foreigners and returning Chinese) are being attracted to China from abroad to study and work, and the government is playing an active role in enticing them. It is true that a large number of Chinese PhD students go abroad to the US or Europe, while China tends to attract students from less developed countries, but generous government schemes and recent funding reforms have succeeded in attracting ever larger numbers of postdoctoral scientists and PhD students to work and study in China. The Thousand Talents Program and similar schemes to encourage

Professor Shi Yigong. Source: nanzao.com

foreign postdocs were launched in part because of the insistence of Shi Yigong, a Tsinghua University professor who turned down an endowed chair at Princeton eight years ago and returned to academia in China. Professor Shi is now just one of many leaders in their field who have opted to return to China. Professor Shi is also the chair for Local Scientific Advisory Committee for the foundation’s Grand Challenge effort in Beijing this year.

As Chinese R&D capacity and expertise grow, more and more multinational companies are also identifying great potential for research in China. For example, almost all the biggest pharmaceutical companies in the world have R&D activities in China, usually led by a returning Chinese expert. They in turn help to boost Chinese R&D by providing training for local staff. Just like so many returnees from western countries, some of these employees will then go on to found innovative start-ups of their own and forge new research paths. But the really exciting development for Chinese R&D is that over the past few years more and more of these small start-ups have been attracting venture capital, something that would have seemed impossible a few years ago. In fact, the most creative and cutting-edge projects are much more likely to obtain private funding than public. These ground-breaking start-ups tend to spring up in clusters, creating hot-spots of innovation.

There are ways to go for China on the path of innovation, and through our work at the foundation we will not only witness, but also involve and shape some of that through our own work and investment.

P.S. Below are a set of China innovation closely related the Foundation’s work, especially in areas that can help tackle poverty and health challenges.

Vaccines development is a rapidly growing area that has already seen some great successes: a Japanese encephalitis vaccine and an influenza vaccine, developed in China, have received WHO pre-qualification and can be used internationally. A Chinese-made Ebola virus vaccine is currently also undergoing clinical trials. Vaccine delivery, one of the greatest challenges to

Arktek. Source: intellectualventureslab.com

global health, has also been tackled by Chinese innovators; through Global Good, the foundation has worked with one of China’s biggest refrigerator manufacturers to develop a mobile fridge-freezer called Arktek, which can keep vaccines at the right temperature for over a month without the need for batteries, electricity, propane or any other kind of energy source — all it needs is ice. It’s not just about vaccines, though; Shang Ring, another exciting Chinese innovation, is an easy-to-use, male circumcision device that reduces healing time and is much less invasive than conventional surgery. We have also worked with a Chinese company called Ustar to develop improved point-of-care HIV and TB diagnostic kits that are cheap enough to make their use feasible in developing countries.

edited by: Joanne Zeng