Nevertheless, while China is focussed on closing the ‘innovation gap’, it still has some way to go. The Foreign Policy Centre’s calculations show that China is a technologically hungry nation; good at development and adaptation of technology but not necessarily yet successful at independent innovation. The Chinese leadership is determined to change this. It places growing emphasis on the concept of ‘made by China’ rather than ‘made in China’. As President Hu Jintao is reported to have said ‘borrowing and importing can never replace innovation’. The recent 2006 session of China’s National Peoples Congress has confirmed the high priority which China plans to give R&D. The Foreign Policy Centre goes further and demonstrates that most R&D spending in China has been the result of state-directed and funded initiatives undertaken for strategic, security or nationalistic reasons – a vivid illustration of the importance placed by China on the link between science and its growing global power.

Other important factors rightly highlighted by this Report include the priority which China now places on extending its capacity in scientific education and training, and the growing emphasis which China is now placing on encouraging private sector investments in R&D. The Report’s findings show that domestic Chinese firms are increasingly more efficient, innovative and profitable than foreign high-tech R&D firms investing in mainland China. This is driven by their greater hunger for commercial success. But such success needs the foundation of universities and other educational establishments which encourage creative, innovative and commercially minded scientists. This is an environment which has yet to mature in China.

A substantial underlying issue vital to the role which R&D is to play in China’s economic development is the question of Intellectual Property Protection. China has well documented regulations for the protection of IP. The problem is lack of enforcement. As China itself develops more domestic innovations, the hope must be that enforcing the protection of IP will be in the interest not just of foreigners but of an increasing number of local companies. If China aspires to be a leading global power in the field of science and technological innovation, it needs international collaboration with more and more global companies undertaking research activities in China. This can only be achieved if it cleans up its act on protection of IP.

The Report’s author, Christopher Forster, and the Foreign Policy Centre are also to be congratulated on their timing in producing this Report just as the United Kingdom is seeking to increase efforts to attract more Chinese investment to the United Kingdom and, particularly to encourage Chinese companies to base their overseas R&D centres in the UK. Britain needs to show imagination and inventiveness, for instance in fostering partnerships between UK and Chinese academic institutions and businesses. This is the reason why the China-Britain Business Council has set up an Innovation and Technology Forum to increase UK commercial R&D partnerships with Chinese counterparts. The Foreign Policy Centre’s excellent Report supports our belief that Britain must repeat with China its earlier success in attracting to the UK the bulk of Asian investment by other Asian countries in the EU. That is the best way for both countries to maximise the opportunities for a strong science and technology partnership.

Lord Powell of Bayswater KCMG
President of the China Britain Business Council