By Lu Wei, Department of Techno-Economics Research of DRC

Research Report No. 036, 2007

I. Knowledge Innovation Is an Important Component Part of the National Innovation System

Knowledge innovation refers to the process of acquiring new knowledge of natural science and technology through scientific research (including basic research and applied research). The objective of knowledge innovation is to pursue new discoveries, to probe into new rules, to establish new theories, and to accumulate new knowledge. The system of knowledge innovation is a network comprised of institutions and originations related to producing, diffusing and transferring knowledge as well as infrastructure which supports the network system. Its executive subjects are public scientific research institutions and research-oriented universities, and other higher education institutions, scientific research institutions run by enterprises and government agencies, etc. Knowledge innovation is a vital link in the innovation chain; and the knowledge innovation system is an important component part of the national innovation system.

1. Scientific research, especially basic research, has a long cycle, and great uncertainties and risks; on the other hand, it is public-friendly, and can generate huge external benefits to a wide range of people. In this field, market failure is a usual phenomenon. Therefore, the governments of those countries with major innovations in the world all make huge inputs in the basic research field.

Basic research can be divided into two categories: one is interest-oriented free exploring research, which need not have market or commercial impacts immediately, yet may bring about a breakthrough in discovery and form a whole new field; the other is projects-oriented research. With clear applied objectives, the combination of basic research and major projects can give birth to productivity rather quickly.

2. Along with the rapid improvement and the great development of technology, the innovation model has changed, the difference between basic research and applied research has become smaller, and the contribution of scientific research to technological innovation has become more direct. The combination of scientific research and technological innovation system has generated greater social benefits. Today many significant commercial successes and important innovations in the hi-tech field have come about thanks to the public funding for basic research from relevant governments in the world. For example, important information and communication technologies, such as globe-wide broadband internet, internet browser, compatible time sharing system of computer, intranet, and computer workstation, were all brought along by some unexpected discoveries through R&D related to national defense by the American government.

3. Basic research can not only improve the ability of original innovation, but also is good for improving the ability of integrated innovation, and the ability of further innovation based on the introduction and absorption of new technologies. Basic research provides basic technology for the integrated innovation of enterprises. For example, the development of the MP3 technology shows that basic research plays a promoting role in the development of new technology. Many technologies applied in MP3 such as magnetic recording, lithium batteries, and LCD all came from achievements and technological breakthroughs in basic research projects funded by the Defense Department, the Energy Department, the National Science Foundation, National Institutions of Health and the National Institute of Standards and Technology of the United States from the 1960s to the 1980s.

4. Launching basic research is good for attracting and training excellent research personnel. From the experiences of different countries, it can be seen that another important effect of basic research is to establish a platform to assemble research personnel of higher levels, and to maintain a large group of talented personnel willing to devote themselves to the cause of research. For example, the basic research conducted by American universities attracted and assembled the best research personnel from all over the world, fostering a large number of people holding bachelor's degrees, master's degrees and doctor's degrees, and post-doctoral research staff, providing innovation talent persons for U.S. enterprises continuously and steadily.

II. The Present Situation and Main Problems Related to Scientific Research Input in China

The Chinese government has always attached importance to basic research, and adopted appropriate measures to ensure the input to basic research.

First is developing research-oriented universities. In 1985, the Central Committee of the CPC issued Decision on Education System Reform, which entrusted higher learning institutions with "the task of training high-level professionals and developing scientific and technological culture", putting forward that "higher learning institutions and the Chinese Academy of Sciences shoulder important responsibilities concerning basic research and applied research", and that "basic research and applied research should be combined with personnel training". At present, 38 universities out of over 1,000 have been approved by the state as research-oriented universities; and in fact, some universities that have not got the approval of the state are making efforts to become research-oriented ones.

Second is implementing the Knowledge Innovation Program. In June 1998, the Leading Group for State Science and Education Development chose the Chinese Academy of Sciences (CAS) to launch a pilot project for building the national innovation system, and take the lead to start up the Knowledge Innovation Program. The overall objectives of the Program are to build the CAS into a national knowledge innovation center of natural science and high technology, which, with powerful and sustainable innovation ability, targeting national strategic goals and international science and technology frontier; to build the CAS into a scientific research base of international high level, a base of training high-level talented personnel and promoting the development of China's hi-tech industries; and to build it into a national base with the knowledge of science and technology, a national base with advanced scientific outlook and a national base equipped with talents of science and technology, which would all enjoy worldwide influence.

Third is increasing the number of basic research funding projects and expanding input in infrastructures to enhance the basic research abilities. For example, in addition to the existing Natural Science Foundation, other programs, such as the Development Plan of the State Key Fundamental Research (973 Program) and the Special Project in Early Stage on Key Programs of Fundamental Research, were launched as well. Efforts are also made in the aspects such as strengthening the building of state key laboratories, the construction of key disciplinary areas in universities, and the construction of the basic conditions platform for world top-level research-oriented universities.

1. The basic characteristics of scientific research input in China

(1) The overall scientific research expenditure has been considerably increasing, with its proportion to the R&D input decreasing, in which the basic research input is relatively low. During the Tenth Five-Year Plan, the overall expenditure on scientific research in China nearly tripled, growing from RMB 19.86 billion yuan in 2000 to RMB 57.265 billion yuan in 2005. But along with the continuing increase of input into experimental development in society, the proportion of scientific research expenditure to R&D expenditure dropped distinctly, from 33% at the beginning of the Ninth Five-Year Plan to 26% by the end of the Tenth Five-Year Plan.

Since the beginning of the Ninth Five-Year Plan, the proportion of the applied research expenditure to the total R&D expenditure in China first dropped and then rose, yet never surpassing the percentage at the beginning of the Ninth Five-Year Plan. The expenditure of basic research has been going up along with that of R&D. During the Tenth Five-Year Plan, the growing rate of the basic research expenditure has been 24.5% per year on average, a little bit higher than that of the R&D expenditure, which consists of 22.3% of the total. The basic research expenditure to R&D expenditure has rested between 5.3% to 5.9%. (Table 1)

Table 1 Change of China's R&D Expenditure Structure

Source: Data used are sorted out from China Statistical Yearbook on Science and Technology over the years.

Compared with other countries, the proportion of the applied research expenditure to the R&D expenditure in China is close to the average level of that in innovation-oriented countries. The proportion of the basic research expenditure, however, is not only far below that in developed countries, but also lower than that in countries trying to catching up with China (Table 2). For example, in the Republic of Korea, the proportion of R&D expenditure to GDP in 1983 was 1.1%, and the proportion of the basic research expenditure to R&D expenditure was 18.2% in the same year; in 1985, the former was 1.58%, while the latter 16.9%, and the proportion of the applied research expenditure to R&D expenditure was 29.2%.¹

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¹www.innovation.gov.en，"A Brief Account of Technological Innovation in the Republic of Korea"。