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China's Emerging Technological Trajectory in the 21st Century

Shirley Ann Jackson, Ph.D.
President, Rensselaer Polytechnic Institute

Lally School of Management and Technology Conference
Rensselaer Polytechnic Institute, Troy, New York

Saturday, September 6, 2003

Good afternoon.

Thank you for inviting me to this important conference on China's emerging technological trajectory. Rensselaer Polytechnic Institute and its Lally School of Management and Technology are delighted to host our guests.

In considering the subject of this conference, we can expect that China's 21st century trajectory will match the rate of technological ascendance China demonstrated in the 1st century, or in the 11th century — when its mastery of science and technology moved China to unequalled economic status. At the start of each of the last two millennia, China accounted for one quarter of the world's Gross Domestic Product (GDP).

It is somewhat ironic, then, that, at the start of this third millennium, the issue of whether the world scientific community should help China to attain scientific parity with the developed nations is the subject of international debate. In a very real sense, the world would be giving back to China some of what China has given to the world.

The issue should not be whether the developed world engages China to exchange and advance scientific knowledge, but how, and how well. Science in the 21st century has the power, as we all know, to achieve a higher standard of living for a world population that will double by mid-century. China's nearly 2 billion people represent 40 percent of that population.

Against this backdrop, the pace of scientific discovery and technological change creates its own conundrum. Many areas of inquiry leading to dual use technologies for example — including nuclear technology, lasers, computers, and other technologies — have critical implications. Yet other areas, such as nanotechnology, stem cell research, and genomics, raise profound moral and ethical questions.

As China ascends, the world scientific and technological community is grappling with issues never before faced, as it assists China in its development, and works to help the science and technology sector avoid the pitfalls attendant to rapid growth. China, in turn, must show similar leadership in acknowledging and responding to the legitimate concerns of the developed nations over its adherence to global norms.

The 5,000-year-old Chinese civilization, in fact, played a considerable role in the development of what we now deem to be those global norms. Contact with China repeatedly enriched Western cultures as those cultures advanced, retreated, and advanced again. China also contributed more significantly to the advancement of science through the ages than is generally credited.

Joseph Needham, the Cambridge don and authority on the history of Chinese science, observed that "the conception of the life-elixir, originating in China and only in China, passed first to the Arabs, then to the Byzantines and lastly to the Franks or the Latins in the time of Roger Bacon, established the whole movement of chemical medicine."

Needham further noted that many of the scientific and mathematical innovators of the Western world were outdone by their Chinese counterparts. For example, Chang Heng, astronomer, mathematician, and inventor of the seismograph, knew more than his more heralded Greek counterpart Xenocrates, Needham asserts. And, in time measurement, Su Sung outdid Vitruvius. Needham cites dozens of other examples of Chinese scientific, mathematical, and engineering accomplishment which equal or exceed, and which certainly influenced, Western progress.

Prior to the 17th century, Chinese science and technology exchanges with the rest of the world included the compass, gunpowder and pyrotechnics, moveable type, and papermaking. China's development of the technology to produce such prized commodities as porcelain and silk helped to shape world trade patterns and to enrich world culture — for centuries.

In the 17th century, Chinese rulers cut themselves off from the rest of the world, effectively bypassing the Industrial Revolution, and the rapid transition of the West into what we call modernity. In the process, China remained an agrarian economy which, despite its size and population, accounted for just five percent of the world Gross Domestic Product by 1950.

The emergence of the People's Republic of China led to the development of new scientific capability, centrally planned like the scientific and technological infrastructure of the Soviet Union. China's scientific energies were channeled almost entirely into military applications such as nuclear weapons, intercontinental ballistic missiles, and nuclear submarines. This history certainly contributes to the wariness now being expressed about China's scientific development.

Whatever scientific momentum the country gained early in the Communist era dissipated, however, during the break with the Soviet Union, and the chaos of the Cultural Revolution.

China's progress resumed with the market reforms initiated by Deng Xiaoping in 1978. Deng included science and technology as one of the "four modernizations" and the Chinese government began to implement new science and technology reform strategies based on Western models. The old State Science and Technology Commission was supplanted by the Ministry of Science and Technology (MOST), and the Chinese Academy of Sciences (CAS) was formed to provide oversight to more than 100 independent research institutes.

In addition, the National Natural Sciences Foundation of China (NSF/C) was consciously modeled after the National Science Foundation of the United States when it was founded in the mid-1980s. NSFC funds basic and applied research, with most grants going to Chinese universities and Chinese Academy of Sciences institutes. Research focuses on natural science fields such as physics, mathematics, and chemical and life sciences.

Since the restructuring, the Chinese science and technology system has made remarkable progress. Initially dependent on imported technology — which fueled its rapid economic growth, China has increasingly turned to development of home-grown technology and is channeling enormous financial and human resources into this effort. In the mid-1990s, according to an evaluation done by the U.S. Embassy in Beijing, Chinese research and development funding as a percent of Gross Domestic Product ranged between six and seven tenths (0.6 and 0.7) of one percent. By 2000, it exceeded one percent of a rapidly-expanding GDP.

By comparison, the U.S. in 2000 spent 2.76 percent of GDP on research and development. Only Japan spends more, at nearly 3 percent, and other developed nations range between two and two-and-one-half percent. China, however, has the largest research and development expenditures of any Non-OECD7 nation, and stands out among developing nations.

The backdrop of China's scientific transformation is a simultaneous transition of the country from an agricultural to an industrial and service economy, and from a command economy to a socialist market economy. Given the complexity of such transitions, the speed with which they are being undertaken, and the size of the country, these are enormously difficult tasks.

Moreover, China is joining a changing world scientific community. The communications revolution and the trend toward globalization are combining to accelerate the pace of scientific discovery worldwide, as more scientists share more information quickly across more borders.

In effect, China is climbing on board a rocket that is lifting and moving more and more rapidly, and it is trying to do so not with a small careful step, but with, one might say, a great leap.

This time, however, instead of isolating itself, China is seeking interaction with other countries. Success will depend first on the completeness of China's assimilation into the community of nations, second on the skill with which it develops and operates its scientific and technological infrastructure, and third, on the degree to which it allows its scientists the latitude to innovate.

China's important achievements in economic growth over the past quarter century, as I have mentioned already, have largely been built on technology imported and/or sometimes unfortunately appropriated from other countries.

For a time, China was felt to be a risky target for international entrepreneurs, who stood either to gain enormously from penetrating the world's largest single market, or to lose everything to an inefficient and sometimes unreliable manufacturing system.

China has realized that its ambitions for economic growth hinge on its reputation in the world economy, and has expended great effort in developing legal standards, particularly in the area of patent law reform which offers intellectual property protections, which eventually led to its accession to the World Trade Organization (WTO) in 2001.

WTO membership provides an important normative influence on its members, since they must conform to the rules of the organization or else face sanctions for trade infractions such as "dumping" or protectionism.

Adherence to the rules of world trade promises to be very lucrative for China, as shown by the $20 billion dollar trade surplus this year and by its 6.7 percent economic growth. As China's state-owned enterprises are supplanted by private enterprise, the manufacturing base is thriving, and the country requires less and less technological expertise offered by foreign companies. China has shown itself capable of producing a range of consumer goods which compete in quality and price.

Perhaps the foremost example of this is Haier, the largest consumer appliance maker in China, regarded as "the GE of China." From a small factory on the verge of bankruptcy in 1984 because of poor product quality, Haier has become a multi-billion-dollar conglomerate with more than 30,000 employees worldwide. Haier appliances are sold in many major U.S. appliance chains, and the company could well become the model for future Chinese global competitors.

However, China's emerging private sector is lagging somewhat in the crucial area of research and development. Between 1993 and 1999, private enterprise expenditures increased by about 150 percent, about the same level of increase as the government R&D institutions, which spend about the same amount. But the ratio of Chinese enterprise R&D expenditures to sales revenues — known as "R&D intensity" — was only about one-half of one percent through the 1990s, compared with an R&D intensity of two percent for U.S. firms.

Universities are the third of the three major sectors in China performing science and technology work. They have traditionally accounted for less — about 10 percent of total Chinese R&D expenditures.

The Ministry of Science and Technology reports that about 75 percent of the work conducted by China's S&T community in recent years has focused on product or process development, and another 20 percent on applied research. This is understandable in light of China's economic ambitions. However, that means only five percent of Chinese effort is directed toward basic, or "pure" research.

That raises several questions. First, should the Chinese government be so heavily involved in product development and applied research. The U.S. government has been less than successful in transferring the fruits of its applied research to the marketplace, although it continues to try through mechanisms such as the Bayh-Doyle Act, which allows the results of federally sponsored research in universities to be commercially exploited.

There are other lessons — learned, or, at least issues, which come to mind from the U.S. experience.

The question of self-interest within a government's research establishment may affect the type of research conducted. One other side of the picture — not unlike some U.S. research universities, many of the Chinese Academy of Sciences institutes began developing spin-off enterprises in the early 1980s to make up for government budget cuts. Some have been incredibly successful, others have not. This raises the potential for conflict between fundamental research priorities and entrepreneurial endeavors. And, it is possible that divided attention could diminish the contribution both to fundamental science and to applied science.

This also raises the issue of technology management. China is trying to develop means of program evaluation to gauge the success of its many special programs. This is an area where the research expertise and experience of other countries might be of use.

Greater success in product development and applied research might come if the roles of the research institutes were clarified, and if the private sector stepped up and increased its investment. However, the growing interest by multinational corporations in establishing research centers, or in otherwise procuring research and technical services, presents important policy considerations — again, such as intellectual property ownership, exploitation, and global competition, as well as the overall role of foreign direct investment.

A further question concerns the role of university (as opposed to research institute) research. China now has more than 1,000 institutions of higher learning — many more than existed in China 30, or even 20 years ago. As they are proliferating, universities are no longer funded exclusively by the government. Some universities have dealt with funding problems by developing spin-off enterprises. That suggests a potential for conflict similar to that cited in the case of the Chinese Academy of Science (CAS) institutions.

The number of students in science-related disciplines in China more than doubled, to 3.3 million, between 1995 and 2000. Increases in the number of students, attending relatively new institutions, have resulted in demand for improved university management systems. The government is working to avoid duplicative specializations, to reform curricula, and to broaden the educational base.

As these reforms occur, many U.S. colleges and universities have undertaken joint programs with universities in China. This movement raises a broader question involving the proper role of the international science community in China's overall S&T development, on and off university campuses.

In my own field of nuclear physics, for example, concern about the uses to which China would put knowledge acquired in this field led to a long delay in sharing the technology to develop a nuclear power generation program. That was finally resolved in 1998, with an agreement on technology sharing, in accordance with our laws on the Peaceful Uses of Nuclear Energy and International Atomic Energy Agency (IAEA) requirements. Since that time, China has ordered seven reactors from foreign suppliers, and hopes to order four more by 2005, and to have about 16 units in operation by 2020. The next Chinese orders may be advanced design reactors that operate more safely than existing units in the U.S. and elsewhere in the world.

The Chinese nuclear program has an additional benefit in terms of mitigating environmental quality issues. The prospect of global warming has led some developed countries to express concern that rapid industrialization in China and India might greatly increase the emission of greenhouse gases, since both countries possess large reserves of coal. Groups in the U.S., such as the Nuclear Energy Institute (NEI), argue that the more nuclear energy China employs, the less coal it will have to burn.

Chinese officials have cited environmental concerns as a reason for their desire to expand nuclear energy's contribution to electric generation. In fact, the Chinese have recently begun to show interest in environmental science itself, perhaps realizing that a degraded environment is a heavy price to pay for economic advancement. The ecosystem, and related environmental sciences, were a focus of interest in a meeting of the U.S.-PRC Joint Commission on Scientific and Technological Cooperation last year in Beijing.

That joint commission, chaired by China's Minister of Science and Technology and the Director of the White House Office of Science and Technology, is one of a number of efforts by science policymakers in the two countries to find common ground.

The Chinese and U.S. governments have agreed to cooperate in energy and the physical sciences, on nanotechnologies, nuclear fusion, plasma physics, genomics, catalysis, quantum computation and controls, photonics, and treatment of nuclear waste.

A number of scientific, academic, and science policy organizations also are holding periodic conferences.

The U.S. National Science Foundation has an ongoing dialogue with its Chinese counterpart, the National Natural Sciences Foundation of China, on subjects such as science policy, and biotechnology and biomedicine.

The expressed aim of a 1999 joint conference, entitled R&D and the Knowledge-Based Society was, "the assumption that a deeper understanding and appreciation of differing perspectives and approaches to associated issues will improve planning — nationally, bilaterally, and regionally — for the effective and balanced development of science and engineering resources and their utilization in the service of cultural, social and economic goals."

That statement expresses the reasons for cooperation — and also for science — in the service of cultural, social, and economic goals.

It also acknowledges that China may have differing perspectives on science and technology, which must be appreciated and understood on both sides. This issue comes up in various ways. For example, just as we once mistrusted China's motives for seeking nuclear technology, so might China's stem cell and genomic research now be met with concern that China may go into areas such as cloning. The recent news of Chinese use of cloning techniques to create hybrid embryos containing a mix of DNA from humans and rabbits made headlines.

The Chinese researchers explained that they were hopeful the work would yield a new and plentiful source of embryonic stems cells for research and eventual medical use, and many U.S. scientists expressed support. The work also passed the criteria of Chinese ethics authorities, who demanded that the embryos not be allowed to grow more than 14 days.

This is the kind of approach many Western scientists appreciate.

To minimize misunderstanding, it behooves the world scientific community to take China into full partnership, for China's benefit, and for ours. However, in doing so, we must exercise leadership in finding common ground and in nurturing China's enormous potential for discovery and innovation. China should exercise similar leadership in demonstrating sensitivity to global norms — and in making a commitment to the employment of science and technology to benefit its citizens and the global community.

China is attempting to accomplish an unimaginably large task with astonishing speed, and science and technology can be the agents that bring success to this effort. But because science and technology have become global endeavors, the Chinese cannot do it alone. It will take leadership, cooperation, and a degree of trust, from all sides. Building trust based on knowledge and understanding is what conferences such as this one help to foster. As I close, let me leave you with a few summary thoughts.

The change taking place in China is very great. The possibilities are equally great. Having the change occur in ways which obviously benefit China, but also advance its role as a responsible world leader requires enabling mechanisms which China might employ and which the world science and technology community might help with. They include:

1. To foster innovation: Investment in fundamental R&D and graduate education — by the government through mechanisms such as the NSFC (National Natural Sciences Foundation of China) and by the private sector — more than is being done today.

2. To exploit innovation: Technology transfer mechanisms

  • Licensing of IP
  • Bayh-Doyle type mechanisms which allow and foster translation of university-based, government-sponsored research into the market place, but in a way which does not pollute the educational mission of the university.

3. Adherence to international norms

  • WTO policies
  • Especially IP protection polices

4. A balance between foreign direct investment and home-grown entrepreneurship.

5. Efficient and transparent capital markets.

Now, both of these latter two points are important because, even in the industrialized world, experience has shown that smaller, start-up enterprises are as capable, and, in general, are more capable of innovation than many larger, more cumbersome, overly regulated enterprises, especially in the most advanced, knowledge-based sectors. Their creation and growth requires access to capital. As suggested in a recent article in Foreign Policy Magazine (July/August issue) by Professor Yasheng Huang of MIT, and Professor Tarun Khanna of Harvard Business School, a contrast of the Chinese vs. the Indian approach to economic development might be instructive in this regard. The authors argue that, macroeconomically, China is clearly ahead, but on a micro-economic level. India's reliance on organic growth may be more sustainable in the long-term.

We will see, but, clearly, there will be lessons gleaned from the evolution and development of both countries.

As I have frequently said, if the world is to achieve peace for all nations, and plenty for all peoples, it will be scientific and technological developments, and their intelligent and sensible deployment, that will enable these achievements. A scientifically productive China will be much more able to achieve those ends for its people, and to play a role in bringing the benefits of peace and plenty to the rest of the world.

Thank you for your attention.

Source citations are available from the division of Strategic Communications and External Relations, Rensselaer Polytechnic Institute. Statistical data contained herein were factually accurate at the time it was delivered. Rensselaer Polytechnic Institute assumes no duty to change it to reflect new developments.

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