The Role of Chinese Government in Business Incubators
4.1 Overview the Acts of Government in Incubation Development
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Chapter IV
The Role of Chinese Government in Business Incubators
Over the past decades, China has been employing various policies to strengthen
its innovative capacity through relevant policies and infrastructure construction to
enhance BIs capability and functions, such as building the incubators system by
launching Torch Program ( 火 炬 计 划 ), promoting SMEs by initiating Mass
Entrepreneurship and Innovation (大众创业, 万众创新), and announcing guidance
related to BIs’ construction by implementing a series of Five Year Plans. The Chinese
government is placing increasing focus on BIs development as an important engine of
growth for economy. This also includes massive financial support and substantive
policies direction to the incubation program. This chapter will deliver the key policies
and measures which can examine the contribution of BIs in China.
4.1 Overview the Acts of Government in Incubation Development
The Chinese government plays a key role in the history of Chinese incubation
development. Some principal policies and initiatives have important influence on BIs
system:
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Torch Program. China's Torch Program from MOST is one of the most
conspicuous entrepreneurial programs which generated a heated discussion in the world,
as well as was regarded the largest government-run entrepreneurial program. As a core
part of the Torch Program, the goal of BIs is to cultivate technology SMEs and
innovative-oriented enterprises.
As one of the most important policy initiatives, the Torch Program was put in place
in 1988 with the purpose to reinforce overall environment for technology innovation
and to promote high-tech industrialization, and to lead the development of S&T with
an orientation toward economic construction (Torch High Technology Industry
Development Center, n.d.). Of all the programs initiated by Chinese government, the
Torch Program is not only the one program to start China's high-tech innovation but to
boost startup companies. BIs are one of the four major parts of the Torch Program in
promoting S&T development in China.
The Torch Program is aiming at providing great support of BIs in China, and has
made massive investments in BIs through its incubating funds. In order to speed up the
establishment of BIs fostering and tutorial system, the government has several lines of
dedicated funds to support BIs in the form of construction funds for BIs, seed capital
funds for startups and innovation funds for SMEs that are in the growth phase of their
life cycle (中华人民共和国科学技术部, 2002a).
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Mass Entrepreneurship and Innovation. The concept of “Mass
Entrepreneurship and Innovation” was first proposed by Chinese Premier Li Keqiang
in his keynote speech at the World Economic Forum (WEF) in Tianjin, 2014 (中国网,
2014). He emphasized Mass Entrepreneurship and Innovation as a new driver of
Chinese economic development, and can make China's economy towards high-end
level (中国政府网, 2015c). BIs are considered as the carrier of the initiative Mass
Entrepreneurship and Innovation and can create an entrepreneurial environment of the
regional innovation in China (中华人民共和国科学技术部, 2015b). As mentioned
previously, BIs can coordinate to convert technology innovation into productivity. The
Chinese government strives to integrate BIs' program into Mass Entrepreneurship and
Innovation.
In the background of China's “new normal”2 ( 新 常 态 ) economy, BIs are
considered as an important platform for accelerating the activity of Mass
Entrepreneurship and Innovation, as well as a driving force to promote regional
technological innovation (曾铁城, 2015; 李惠武等, 2016; 杨凯等, 2015; 中国政府
网, 2016c). In 2014, benefiting from central government policies' support, more than
1,600 BIs have cultivated 80,000 incubatees, created 1.75 million jobs, achieved nearly
2 According to public statements by Chinese President Xi Jinping during 2014, China’s “new normal”
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300,000 items of technology transformation, and reached the turnover in technical
contract around RMB 857.7 billion (中国政府网, 2016b).
In 2015, the State Council of China announced four guidelines on Mass
Entrepreneurship and Innovation, mentioned the importance of BIs construction and
relevant policy reforms. Enhancement of the cooperation among enterprises,
universities and research institutes could accelerate to transfer scientific and
technological achievements (中国政府网, 2015b; 中国政府网, 2016b).
Benefiting from government support, BIs have been one of the channels that
Chinese people can join the tide of Mass Entrepreneurship and Innovation. By 2015,
more than 2,500 BIs have cultivated 100,000 incubatees (中国政府网, 2016c). The
number of startups reached 443.9 million, and over 12,000 enterprises were born every
day, while driving the transformation of industrial structure (中国政府网, 2016d).
A Series of Five Year Plans. China began implementing Five Year Plans
(FYPs) in 1953 to align the economy with top policy objectives and communicate this
directive throughout the government system. Over the past few decades, FYPs have
been designed as overarching roadmaps to guide the numerous ministries and local
governments toward priorities set up by the central government. Since the year of 2001,
a series of FYPs, the 10th, 11th, 12th and 13th FYPs provided guidance related to BIs’
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development. The government believes that BIs can make significant contributions to
technology transfer, promote the development of technology-based SMEs, increase the
employment opportunities, make sustainable growth of the national economy and
construction of a well-to-do society (Zhao, 2002).
During the 10th FYP (2001-2005), the development of BIs was gradually became
the nation’s priority. A policy guidance of BIs construction (中华人民共和国科学技
术部, 2002a) emphasized that supporting and building BIs system is an effective way
to promote transformation of scientific and technological achievements, to cultivate
tech-based SMEs, as well as to create a platform of innovation and entrepreneurship for
scientists and engineers. BIs were considered a crucial carrier in accelerating
industrialization of high-tech industry and an important part of building a national
innovation system.
It is worth mentioning that a guidance (中华人民共和国科学技术部, 2002a)
emphasized that all successful BIs are attributed to the efficient management and
market-oriented operation mechanism enforced by local governments. Zhao (2002), a
former director of the Torch Center mentioned that the development of Chinese BIs
adheres to a principle whereby government takes the lead in providing support. As a
result, BIs in China were strongly relied on the top-down governmental funding and
directives with the government plays a predominant role. During the period, the MOST
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set aside RMB 50 million in annual funding for BIs construction (中华人民共和国科
学技术部, 2002b).
In the period of the 11th FYP (2006-2010), the government kept pushing BIs
construction. In May 2006, the MOST formally established an office of Incubator
Management Office (李志远, 2006). The office is authorized to undertake management,
coordination, organization, evaluation and establishment etc. of BIs (中华人民共和国
科 学 技 术 部, 2013a). This decision reflects that the country has attached great
importance to BIs development.
During the period, the construction and development of the BIs was still dominated
by the government. Due to the fact that many BIs are not profitable, the adequate
finance is important for BIs' survival. The MOST invested RMB 20 million annually to
build a platform of integrated incubation information, setting aside annual funding of
RMB 40 million on supporting advanced BIs development, such as BIs in high-tech
sector, distinctive industries or innovative oriented cluster (中华人民共和国科学技术
部, 2006b).
In addition, the MOST (中华人民共和国科学技术部, 2012) initiated a plan
“Action of Torch Venture Instructors”, which was a counseling team with more than
3,500 instructors to counsel startups in providing business consulting and training. A
total of 896 BIs were established, and more than 56,000 incubatees were in processing.
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By the end of 2010, BIs created more than 1 million employment opportunities with
nearly 40,000 ventures creation and more than 158 listed companies (中华人民共和国
科学技术部, 2013b).
The MOST has compiled the 12th FYP (2011-2015) for state-level BIs, based
upon National Medium- and Long-term Scientific and Technological Development
Program (2006-2020), National Medium- and Long-term Talent Development Program
and the 12th FYP for Scientific and Technological Development (中华人民共和国科
学技术部, 2012). The Plan aims to promote a sustainable environment to BIs, including
high-tech startups service centers, overseas returned scholars' business parks and
international BIs. The goal was to create an enabling environment for innovation and
entrepreneurship to flourish, so as to lay a solid basis for shifting China's economic
growth pattern and building an innovative nation
During the 12th FYP, one of the principles of BIs development is to strengthen the
function of government guidance (中华人民共和国科学技术部, 2013b). In order to
strengthen BIs functions and entrepreneurial environment, the government improved
BIs construction by launching a program of entrepreneurial mentorship, improving the
financial cooperation between BIs and third parties, and building a BIs training system
(中华人民共和国科学技术部, 2013b). The number of incubatees reached 102,170 in
2015, which provided over 1,662,000 job positions. In addition, the total income of
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incubatees exceeds 400 billion and 74,853 incubatees graduated from BIs system (科
学技术部火炬高技术产业开发中心, 2017a). The results are given in Table 2. BIs
have becoming a ubiquitous phenomenon in many places of China and are viewed as a
tool for promoting economic development and technology-based enterprises.
Table 2. The statistics data of BIs during the 11th and 12th Five Year Plan (2006-2015)
Source: 科学技术部火炬高技术产业开发中心 (2017a)
As the first major part of the 13th FYP (2016-2020), which emphasize that
innovation is the cornerstone of China’s development strategy as it “essentially set the
overarching framework from which many of the other areas of the plan flow” (中国政
府 网, 2015a; Ma, 2016). The government pledges to implement the strategy of
innovation-driven development and improve the overall quality and competitiveness of
the real economy. The objectives include the implementation of additional tax
deductions for their R&D activities and increase tax support for BIs system and
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To improve regional innovation capabilities, in the next five years, the government
plans to create a sound ecosystem that encourages mass innovation and
entrepreneurship, improve the BIs system that serves the real economy. The
government expects to level up the value-added chain by using innovation to accelerate
the transformation of manufacturing industry, which underscores China’s vision to
develop itself into an innovative country (中国政府网, 2016a).
According to the annual report of global entrepreneurship, released by Global
Entrepreneurship Monitor (Kelley et al., 2016), China is listed third in the ranking of
“Government policies in support and relevance” and “Government entrepreneurship
programs”. It shows that Chinese government has strong influence on shaping an
entrepreneurship environment.
As an important part of the policy framework of China's S&T, Chinese BIs have
gained strong support since the 10th FYP. Under the direction of the State Council and
MOST as well as with strong support from the local governments, BIs have grown into
a main policy tool for commercializing scientific achievements, cultivating enterprises
and entrepreneurs, and promoting innovation and entrepreneurship.