In Search of Self-Reliance: Xi Overhauls China’s Innovation System

Introduction

In 2016, President Xi Jinping visited Nanchang University in Jiangxi Province to learn more about the work of the National Silicon-based LED Engineering Technology Research Center (Jiangxi News, September 25, 2019). The center caught the attention of China’s leadership after it received first place in the 2015 National Technology Invention Prize for its work on “high-efficiency GaN-based blue-light emitting diodes on silicon-substrates” (State Council, January 8, 2016). This technology is used in LED lighting systems and celebrated in Chinese media for breaking Japanese and American monopolies in these technologies. A 2022 article summarized the strategic significance of GaN-based blue-LEDs the following way:

By moving from basic research to technology invention, to product creation, and then to business marketing, a complete and feasible innovation and entrepreneurship plan is formed. The project not only resolves the “stranglehold” problem, but also ensures the complete industrial chain is “independent and controllable.”

That is how the story is told anyways. This particular work was billed as a “third way” for LED technology and backed up by “independent intellectual property” (MOST, October, 2016). Last year, the center’s director, Dr. Jiang Fengyi was quoted as saying, “if you want China’s LEDs to have their own right to speak, you must find a new way” (China Education News, June 20, 2022). Starting at the earliest stages of innovation and shepherding an idea all the way to production, is seen as a pathway by which China might address dependencies in certain technologies. This narrative is a significant departure from the type of work National Engineering Technology Research Centers (NETRCs) were originally designed to perform.

Reforming National Engineering Technology Research Centers

The National Silicon-based LED Engineering Technology Research Center is one of at least 374 NETRCs in China (Forward-The Economist, December 3, 2020). These research institutions are currently undergoing reform. After the issuance of a series of policies in 2016 and 2017, NETRCs are being reshaped to meet contemporary policy priorities, in particular through integration into newly created institutions that facilitate the development of so-called “chokepoint” or “stranglehold” technologies. Such technologies are those in which China is susceptible to the application of foreign export controls, because it is not able to make them without foreign technology and knowledge, especially from the U.S., Europe or Japan. Three publicly available studies produced by the Ministry of Science and Technology (MOST),  from 2014-2016, shed light on these centers and their special history in developing technologies for Chinese domestic industry (MOST, 2014; 2015; 2016). Moreover, these studies also provide indicators of what their activities might entail moving forward.

The centers emerged in the early 1990s with a mandate to “actively carry out the digestion, assimilation, and innovation of imported technology from abroad, and become the technical support for enterprises to absorb foreign advanced technology and improve product quality” (State Scientific and Technological Commission, February 4, 1993). As such these institutions are part of China’s legacy innovation platform, the IDAR (introduce, digest, assimilate, re-innovate) system. [1]

In his 2022 book, Innovate to Dominate: The Rise of the Chinese Techno-Security State, Tai Ming Cheung describes the IDAR system as a process of “creative adaptation or advanced imitation” that emerged in the late 1980s. The process was applied in earnest starting in the 1990s as a way to introduce technologies from the countries emerging from the former Soviet Union. It was at that time that NETRCs were created alongside a host of similar organizations such as the National Development and Reform Commission (NDRC)-managed National Engineering Research Centers. Collectively, these institutions played an important role in the buildup of China’s defense industry by focusing especially on the third step, the assimilation process which frequently occurs through reverse engineering of foreign technologies. [2]

A series of three Ministry of Science and Technology (MOST) reports seeks to capture the proportion of inventions derived from different “types” of innovation. According to MOST’s in-depth study of NETRCs in 2014, 70.40 percent of these centers’ scientific accomplishments resulted from “self-developed R&D” (自行研发) (MOST, July 2015). [3] Meanwhile, 23.56 percent were the result of “absorption from the supporting unit” (吸收依托单位). The supporting unit refers to the host organization of the engineering technology research center. For instance, in the case of the National Silicon-based LED Engineering Technology Research Center, the “supporting unit” is Nanchang University, which is the educational institution where the center is based. This suggests that nearly a quarter of the innovative work being done at these centers involves products that were “industrialized” or transferred from work done at the center’s support units. This industrialization often happens in collaboration with corporate partners. In the case of the center at Nanchang University, Lattice Power (晶能光电) plays an important role as a commercializing partner (Nanchang University). The remaining accomplishments were “absorbed from outside units” (吸收外单位), through “introduction from abroad” (引进国外) or “other” means. The following year, in 2015, the proportion of “self-developed R&D” rose slightly to 71.22 percent (MOST, October, 2016) as did “absorption from supporting units” (to 24.27 percent) while the category of “other” shrunk to nearly zero percent.

The statistical breakdown, however, changed in 2016, when 88.72 percent of technological achievements were reported as arising from “indigenous innovation” (自主创新). The remainder of achievements were ascribed to  “introduction, digestion, assimilation, and re-innovation” (引进、消化、吸收再创新) (MOST, April 2018). These categories directly comport with the types of innovation NETRCs were originally designed to perform and the type of innovation they are expected to perform moving forward.

To what extent these statistics mean anything is unclear. The different types of innovation are not addressed anywhere else in the report and a series of case studies at the end of the reports do not offer descriptions about how certain achievements came about. One thing that these numbers do indicate is that the vast majority of innovation emerging from NETRCs is labeled as originating in China in some way or another. Consequently, these statistics serve to “narrate” a transition from the IDAR system to a system aimed at homegrown innovation. As such, this narrative is in line with top-level policy designs currently under way in China such as the 2016 Innovation-Driven Development Strategy (IDDS) which describes goals for moving the country toward “original innovation.”

Despite the problems associated with statistics on innovation origins, these three official reports help paint a more general profile of NETRCs. For instance, of the 360 centers the reports describe, the three most represented areas of research are in materials (67), biotechnology and population health (40) and advanced manufacturing (46). In addition to being based in so-called supporting units, NETRCs are also overseen by managing units. A wide variety of ministries serve as managing units including the Ministry of Education and the Ministry of Science and Technology. However, other government organs such as the Ministry of Public Security and the Logistics Support Department of the Central Military Commission also oversee NERTCs indicating a likely dual-use dimension of their work. Collectively, NETRCs employ over 50,000 R&D staff, including 12,000 PhDs. In 2016, NETRCs received approval for 8,240 patents, the vast majority of which were domestic patents. The same year, NETRCs reportedly filed 1196 standards of which only 101 were international standards. In 2016, 360 NETRCs collectively managed some 258.106 billion RMB ($37.74 billion) worth of assets, which is more than double the value held three years earlier (MOST, April 2018). These developments indicate the rapidly growing role of NETRCs in China’s innovation system. While these numbers are somewhat outdated, they represent some of the best assessments of a largely understudied set of institutions in China.

Springboards to Self-Reliance

NETRCs are poised to play a role in China’s current approach to innovation, which is increasingly fixated on achieving “self-reliance.” The “13th Five Year Plan for Science and Technology Innovation” notes NETRCs alongside a variety of research entities that needed to be optimized “based on national strategy and the needs of the innovation chain layout” (State Council, July 28, 20216). In 2017, China’s central government issued policies announcing that new approvals of NETRCs would stop while existing National Engineering Technology Research Centers would be “merged or integrated” (Gov.cn, August 24, 2018). Meanwhile, NETRCs are mentioned in a recently-released “Action Plan for Improving the Technological Capabilities of Enterprises (2022-2023)” where they are noted as having a role in boosting the innovative capacities of Chinese companies in particular by guiding work in key and core technologies (MOST, MOF, August 5, 2022).

In addition to being included in policies designed to upgrade domestic companies, some NERTCs will be converted into a new type of institution, the national technology innovation center (国家技术创新中心) (MOST, MOF, February 2, 2021). For national technology innovation centers, a recently updated strategic priority embedded in their administrative measures is alleviating technology “chokepoints.” This process of conversion is currently ongoing. For instance, the Henan Agricultural University based National Wheat Engineering Technology Research Center (国家小麦工程技术研究中心) is applying for status as the National Wheat Technology Innovation Center (国家小麦技术创新中心) (Henan Business Daily, January 12; Henan Agricultural University, October 21, 2022; Henan Agricultural University, July 17, 2020)

These new innovation centers ‘should adhere to the principle of “fewer but better,”’ a nod to the 2016 Innovation Development Strategy (IDDS) which emphasizes a general move from quantity to quality in innovation (State Council and Central Committee, May 19, 2016). A 2017 work plan for national technology innovation centers lists the priority areas for innovation centers. They are expected to perform work that is at the “frontiers of science and technology,” on “the main economic battlefield,” and serves the “major needs of the country.” The latter is defined as “national security and major interests” which includes addressing “chokepoints” (MOST, November 23, 2017).

Conversion to new institutions represents a second pathway by which China’s innovation ecosystem is being transformed through top-down governance. A similar set of institutions, so-called National Engineering Research Centers (NERCs), which have a similar mandate to NETRCs but are managed by China’s powerful National Development and Reform Commission (NDRC) were reorganized by way of consolidation and updating. The approximately 191 NERCs currently in operation stem from combining two previously distinct types of institutions (formerly National Engineering Laboratories and National Engineering Research Centers) and updating their administrative measures (ASPI The Strategist, September 26, 2022). Meanwhile, some NETRCs will be carried forward and at least some will be converted into a new type of organization. In so doing-the Chinese central government embeds new strategic priorities in its research funding programs.

Conclusion

Xi Jinping is spearheading a major overhaul of the Chinese innovation system with two broad goals in mind. The first goal is to steer the system toward indigenous innovation or a kind of original innovation in China with less and less input from abroad. Increasing indigenous innovation is intended to help achieve the second goal, which is self-reliance. By tracing the work, shifting mandates, and institutional relationships and lineages of NETRCs, we can begin to see in more concrete terms the implementation of these high-level ambitions. National Engineering Technology Research Centers promise to be important players in performing the actual heavy lifting of innovating individual technologies that help facilitate China’s tech independence.

Michael Laha is a member of the 2021-22 Alexander von Humboldt Foundation German Chancellor Fellow cohort based at the Mercator Institute for China Studies (MERICS). He conducts research on China’s innovation policy and China’s role in the transatlantic relationship. He was previously a Senior Program Officer at the Asia Society Center on U.S.-China Relations.

Notes

[1] The typical rendering of R in the IDAR system as “re-innovate” or “再创新.” However, in these 1993 administrative measures for NERTCs the “再“ is  omitted, though it is likely implied.

[2] For more on the IDAR system read Tai Ming Cheung, Innovate to Dominate: The Rise of the Chinese Techno-Security State (Ithaca, NY: Cornell University Press, 2022).

[3] The report renders the Chinese name 国家工程技术研究中心 of National Engineering Technology Research Centers into National Engineering Research Centers which in Chinese would be 国家工程研究中心. That is an error on part of the report’s authors. National Engineering Research Centers are distinct and managed by China’s National Reform and Development Commission. National Engineering Technology Research Centers are managed by the Ministry of Science and Technology and this article focuses on these centers.