Chapter 4: Techno-nationalism and Techno-Industrial Policy
4.5 The MLP and SEI
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
60
an innovation society as key to achieving sustainable growth over the coming decades and avoiding falling into the middle-income trap.” To do so it is “pursuing a techno-nationalist approach that supports domestic industry at the expense of foreign competitors.”168 This analysis is also shared by Roselyn Hsueh in her book China’s Regulatory State. According to Hsueh, while the Chinese state broadly moved toward relinquishing economic control across the board, in sectors deemed to be of strategic significance (such as telecoms) there’s been a general trend toward re-regulation. Writes Hsueh:
By pursuing a strategy of economic-wide market liberalization and sector-specific reregulation, China has managed to obtain technological know-how, foster domestic champions, and retain an upper hand over foreign forces even in a more liberal environment. By liberalizing market entry and strategically utilizing FDI at the sectoral and subsectoral level, the Chinese government has
modernized domestic infrastructure, maximized the domestic technology base, and promoted the competitiveness of domestic industry. At the same time, it has enhanced control of the most sensitive and strategic assets and restricted the business scope and market share of foreign companies in the most sensitive industrial sectors.169
4.5 The MLP and SEI
One key moment denoting the re-emergence of a more explicit form of Chinese techno-industrial policy was the 2006 release of “the National Medium and Long Term Plan for the Development of Science and
Technology” (MLP); a policy document broadly interpreted as codifying China's overall approach to future S&T development. The plan enshrined the primacy of “indigenous innovation,” setting out the end-goal of establishing China as a technology and innovation power.
168 Scott Kennedy. “The Fat Tech Dragon: Benchmarking China’s Innovation Drive.” CSIS. August 2017.
169 Roselyn Hsueh, China’s Regulatory State, 2011. 259.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
61
The impetus for the composition of the MLP began several years earlier under the direction of President Hu and Premier Wen; involving thousands of personnel with expertise in the fields of science, engineering, economics, military security and academia. The plan harkened back to earlier periods of extensive central planning, taking several years to complete and revealing deep fissures within China’s policy elite regarding the optimal strategy for technological development.170 Some involved in the drafting process argued in favor of perpetuating the existing development model based around attracting FDI and facilitating technology transfer, with others preferring a more proactive approach to cultivating domestic S&T capability.
Much of the analysis of the underlying rationale for China’s high-level strategic emphasis on “indigenous innovation” stresses the sense of frustration felt by high-level state officials over the extent of Chinese reliance on external sources of medium and high technology. While China enjoyed substantial rates of economic growth from the period of 1978-2008, it did not succeed in cultivating a national ecosystem conducive to technological innovation. Nor, for that matter, did it shed its dependency on externally-based sources of strategic technology. Naughton lays out the shortcomings of the Chinese technology model that emerged in the 1980s and 1990s:
Precisely because China’s specialized in the least technologically demanding stages of production, these linkages initially had few implications for technological development. Even when China was exporting finished goods that embodied high-technology components – such as laptop computers – the actual spillovers into indigenous technological capabilities were minimal. The global production networks involved in these high-tech commodities were largely closed, and Chinese domestic producers did not participate much, if at all.171
Chinese techno-industrial policy underwent a significant evolution since at least 1999, where many
170 Cheung etc. al. “Planning for Innovation.”
171 Naughton, 2007. 368
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
62
ideologically rooted statist policies were discarded in favor of “enabling” policies better capable of aligning government and corporate actors around a common objective of promoting high-tech development. Under the leadership of Hu-Wen government, technological and scientific development became a core rational for mobilizing public support for state economic policy. The Hu-Wen emphasis on “scientific development”
placed a newfound emphasis on human capital development, the adoption of foreign trade and promotion strategies geared toward the end goal of promoting native high-tech production capability.
According to Arthur Kroeber, the “indigenous innovation” strategy adopted under Hu and Wen and primarily enshrined in the MLP laid out an array of policy tools for promoting domestic technology:
subsidies for high-tech R&D; the creation of domestic technical standards; public procurement policies promoting the acquisition of domestic technology; and increasingly onerous technology transfer conditions on foreign MNCs operating in the China market.172
In finished form, the MLP keyed in on 11 sectors and 8 fields of technology for prioritization. The plan called for an idealized goal of devoting 2.5% of overall GDP toward R&D by the year 2020 while
simultaneously reducing the level of reliance on imported technology to substantially lower levels. Perhaps most notably, the MLP called for the roll-out of 16 “mega projects” geared toward absorbing and adapting foreign technology for the purpose of indigenization. Some of the targeted mega projects included:
integrated circuits, basic chips, software products, next-generation broadband wireless technology, advanced machinery, aircraft, and nuclear reactors. Underscoring the importance of the mega projects, powerful bureaucracies and planning agencies were assigned direct responsibility for implementation, namely the National Development and Reform Commission (NDRC), the Ministry of Finance (MOF) and the Ministry of Science and Technology (MOST).
172 Kroeber, 2016
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
63
Language contained within the MLP reinforces an emphasis techno-nationalism as the underlying rational for pursuing development through indigenous innovation. One passage of the MLP states “facts tell us that we cannot buy core technologies in key fields that affect the lifeblood of the national economy and national security.”173 Another line in the report stresses the need for making imported technology subservient to broader policy goals, baldly stating that, “one should be clearly aware that the importation of technologies without emphasizing the assimilation, absorption and re-innovation is bound to weaken the nation’s
indigenous research and development capacity.”174 Evidence of the sea-change in China’s techno-industrial landscape was quickly pointed out by observers of China’s political economy. In summarizing the move toward the indigenous innovation” strategy, Hout and Ghemawat wrote in 2010 that:
Local-content requirements, mandatory joint ventures, forced technology transfers – these aren’t new elements in Asian development strategies. Japan, South Korea, and India, among others, have used them and were less tolerant of foreign investment than China has been. However, the Chinese
government is remarkable in how aggressively it applies these policies, how many of its agencies are involved, how quickly and radically it changes the rules, how many unique technology and product standards it tries to impose, and how subtly its regulations violate the spirit, if not the letter, of multilateral agreements.175
More positive analysis was found in the scholarship of Xielin Liu and Peng Cheng in an East-West Center report on China’s indigenous innovation strategy. Lin and Cheng argue that China’s 2006 embrace of indigenous innovation resulted in serious structural changes in China’s innovation practices, incorporating old aspects of the “national innovation system” (central planning, universities, SOEs, government research) with new players in the innovation process (regional government, private firms, foreign MNCs). They concluded that indigenous innovation strategy has been largely “constructive and efficient” in facilitating innovation and technological catch-up, whereby “China’s central government has used the leverage of the
173 McGregor, “China’s Drive for ‘Indigenous Innovation.’”2010.
174 Ibid
175 Hout and Ghemawat, HBR
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
64
nation’s exceptionally large domestic market and a dynamic movement in China’s economic history to mobilize both domestic and global resources in support of its indigenous innovation strategy.”176
Building off the blueprint laid out in the MLP, the Strategic Emerging Industries (SEI) initiative emerged several years later in the immediate aftermath of the 2008 global financial crisis. The plan gained traction through a policy document released in 2010 through the State Council entitled “Decision on Accelerating the Development of Strategic Emerging Industries.” The SEI specifically keyed in on seven “emerging”
industries seen as integral to China’s ongoing transition toward an economic growth model tied to innovation and rising productivity. The seven sectors included: high-end equipment, ICT, biotechnology, advanced materials, alternative energy, eco-tech, and new energy-powered vehicles. Major government bureaucracies tasked with the implementation of the SEI included the NDRC, MOFCOM, MOST, MOF, and MIIT, with the NRDC playing the leading role in coordination. In keeping with the PRCs tradition of extensive state planning, the SEI called for the seven targeted industries to comprise roughly 8% of overall Chinese GDP by 2015 and 15% by the year 2020.
However, the SEI demonstrated a more nuanced and inclusive understanding of S&T development than its MLP predecessor.177 Evidence of this can be seen in the SEI’s greater emphasis on promoting international collaboration, focus on encouraging competition/exports with foreign markets, reduced emphasis on
security-centric language, narrower overall focus in terms of goals and objectives, and greater willingness to situate technological development into the framework of economic development and ecological
considerations.
The MLP and SEI demonstrated a renewed (albeit revamped) commitment to using techno-industrial industrial policy levers in service of promoting technological development under the banner of indigenous innovation. Taken together, the two marquee initiatives heralded a substantial increase in budgetary
176 Liu and Cheng. “Is China’s Indigenous Innovation Strategy Compatible with Globalization.”
177 Cheung. “Planning for Innovation.”
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
65
resources allocated high-tech R&D, targeted policy support for specified “strategic” technologies, sectors, and individual firms, and the increasing usage of related policy instruments designed to promote indigenous firms and protect them from foreign competitors.