Planning ahead

China's industrial and innovation development blueprints are a meaningful reference for other developing countries

After the launch of reform and opening-up in the late 1970s, China started to gradually catch up with the industrialized countries. In order to achieve this goal, China has included industrial innovation strategies as one of its development pillars. These policies, in the past four decades, have helped transform China from a basically agricultural country into a global manufacturing powerhouse, such that it is often called the world factory.

One example worth mentioning is the footwear sector. In the mid-1980s, China decided to develop its leather and shoe industry. With this in mind, it drew up a strategic development plan for the sector, one of the basic points of which was to attract qualified human resources with knowledge of the production system, technologies and commercial contacts of this sector.

The Chinese government identified a production hub called Vale do Sinos, in the south of Brazil, which has its center in the city of Novo Hamburgo, in Rio Grande do Sul. A delegation of Chinese government officials and entrepreneurs visited the region to promote cooperation and learn about the required technology, and hired professionals who then emigrated to Guangdong province, where the industry was concentrated, mainly in the cities of Dongguan, Shenzhen and Foshan in Guangdong. Years later, this region became the largest footwear production center in the world, with big-name companies such as Nike, Adidas, and many others locating their factories there.

This strategy was characterized by the intense commercial opening of China through economic reforms that enabled the entry of foreign capital and the development of market economy mechanisms, allowing the country to encourage the birth of the private sector. Foreign investments received by China shot up from less than $2 billion in 1978 to about $173.5 billion in 2021.Simultaneously, the Chinese government has made massive investments in its infrastructure, energy, water, sewage, internet and logistics sectors, creating the largest rail and port connection network in the world.

China has modernized its production structure, its infrastructure and its logistics through the insertion of market mechanisms such as commercial banks, policies to stimulate exports and imports, attracting investments, and the qualification of labor, among others. The Chinese government has introduced measures that encourage entrepreneurship and foreign trade, facilitating the business environment by expanding credit in the economy, improving infrastructure, and training personnel.

In 2006, China launched the Medium and Long-Term Plan for the Development of Science and Technology (2006-20), whose goal was to build the foundation for indigenous innovation capacity, and prepare the sector for international competition. In 2021, China's total investment in research and development reached 2.79 trillion yuan ($438 billion), up 14.2 percent year-on-year, and the proportion of R&D investment in its GDP reached 2.44 percent. According to the World Intellectual Property Organization's Global Innovation Index 2021, China's overall innovation capacity rose to the 12th in the world ranking. Since 2013, China has moved steadily up in the GII ranking, as it seeks to make itself a global innovation leader to have approached the top 10. It boasts 19 of the top science and technology clusters worldwide, with the Shenzhen-Hong Kong-Guangzhou region and Beijing ranking in the second and third places, respectively.

China's evolving development objectives are set out in its five-year plans. Last year, the Chinese government launched the 14th Five-Year Plan (2021-25) that promotes domestic circulation, whose goal is to strengthen the domestic economy and consolidate economic and social development. In addition, the plan also envisages less dependence on foreign technology and imported resources and duplicating existing plans for industrial modernization and technological innovation, making China a global leader in strategic emerging industries, frontier technology and science, and fostering Industry 4.0.

China is making rapid advancements in becoming an "innovation-oriented society". The US government, however, holds the belief that China's potential capacity for scientific and technological innovation and the rapid growth momentum of high-tech industries threaten the US' economic and military security. Therefore, it is determined to contain the development and rise of China's high-tech industries and it launched a trade war against China under the philosophy of unilateralism and trade protectionism in 2017. As an important component of national comprehensive strength, strategic industrial innovation has become one of the key elements in the current Sino-US competition.

China still faces significant challenges ahead. It needs more breakthroughs in basic science to increase disruptive innovations, as well as fostering knowledge-based entrepreneurship to add value to its production and services. Besides, China has to improve its venture capital system among many other things.

To sum up, although China's industrial and innovation path cannot be replicated, it can be of a meaningful reference for the developing countries that believe in industrial and innovation policies as pillars of national development.

The author is former minister of tourism of Brazil and a professor of public policy at the School of Public Policy and Management at Tsinghua University.

Contact the editor at editor@chinawatch.cn