Image of Photo of Prof Xiaolan Fu

The Past, Present and Future of Innovation in China

The China Forum seminar on Wednesday 8 May 2024 was delivered by Professor (Professor of Technology and International Development, and Director, , (Oxford Department of International Development), ).

Professor Fu Xiaolan began her lecture by noting that China’s progress in innovation in the past 45 years is roughly equivalent to that of the West in the past 200-300 years. This took place alongside rapid economic growth that helped to bring 800 million people out of poverty. ‘Ground-breaking innovation’ is still highly concentrated in firms from the high-income economies. However, this type of innovation is only a small share of total innovation. China has moved to the forefront of global patents, with 25% of total applications under the Patent Co-operation Treaty (PCT). China’s R&D spending ranks second to the USA and exceeds the total for the 27 countries of the EU. Moreover, China is at the world frontier in areas such as artificial intelligence and electric vehicles.

Government policies play a central role in explaining China’s innovation progress. In 1985 China initiated the policies of ‘marketization’ of science technology (R&D institutions were ‘thrown into the market’) and ‘exchanging market for foreign technology’. In 1995 the government began to give priority in resource allocation to high tech industries. In 2005 the government started to emphasise indigenous innovation. By 2016 this had evolved into a comprehensive innovation-driven development strategy under the policy ‘Made in China 2025’. Through this decades-long endeavour China developed a strong and open National Innovation System (NIS) involving close links between industry, universities and government.

Professor Fu used her fieldwork experience at Tencent to analyse the development of China’s innovation system in recent years. Tencent captured the ‘digital window of opportunity’ by providing a safe and secure service to billions of people, emphasising in-house R&D, and relying on deep cultural understanding of its customers.

China’s innovation faces many challenges, including the shortfall in China’s ground-breaking innovation, rising geopolitical tension, falling GDP growth, ‘de-coupling’ of international trade and investment, and increased barriers to technological transfers to China. However, there are also wide opportunities for innovation progress in China, including China’s world-leading position in green technologies, its potential contribution to global public goods, its strength in artificial intelligence and continued international engagement with China through trade and investment. Professor Fu ended her talk by asking whether China can become a major contributor to groundbreaking innovation. She observed that US sanctions against China have ‘pushed innovation into Chinese people’s hearts’.

The following issues were discussed in Q&A: comparison of China’s innovation progress with that of other developing countries; the role of the CPC in China’s National Innovation System; the role of finance in serving the real economy through support for innovation; the contribution made to China’s innovation progress by having a highly educated population; the role of big data in China's innovation catch-up; the relationship between human freedom and the achievement of ground-breaking innovation; the difference between ‘diffusionary’ and ‘ground breaking’ innovation; and comparison between China’s National Innovation System and that of Japan and Germany.

Xiaolan Fu is the Founding Director of the Technology and Management Centre for Development, Professor of Technology and International Development at the University of Oxford, and a Fellow of the . She is currently Director of Research of Oxford Department of International Development at the University. She is Founder of.

Her research interests include innovation, technology and industrialisation; trade, foreign direct investment and economic development; and emerging Asian economies. She is appointed by the Secretary-General of United Nations to the Governing Council of the Technology Bank for the Least Developed Counties and to the Ten-Member High Level Advisory Group of the UN Technology Facilitation Mechanism. She is a winner of 2021 Falling Walls Scientific Breakthrough Award.

She has published extensively in leading international journals. Her recent books include (2022), (2020), (2015), (2011), and (2010)