The Role of Chinese Government in Business Incubators
4.3 Policies Support
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4.3 Policies Support
In recent years, China is moving self-reform on many aspects. In 2016 WEF,
Premier Li appealed to enhance government efficiency and make it easier for
individuals and companies to do business and to startup businesses by reducing
government controls (中国网, 2016a). China realized that the burning issue of the time
is to further streamline administration, to delegate power to lower levels and to optimize
public services. Apart from tax incentives, some policies relaxations are worthy to
examine and discuss the role of government in incubation system.
(1) Law of Promotion of Transformation of Science and Technology Achievements
BIs in China have particularly emphasized providing technological services in
promoting transformation of S&T achievements as Chinese government views BIs as a
strategic asset. In light of this, the government believes that the criteria for measuring
BIs performance is their ability in commercializing S&T achievements, incubating
technology ventures, and cultivating innovation and entrepreneurship (中华人民共和
国科学技术部, 2002a).
Some studies (Peters et al., 2004; OECD, 2010b; Lesákova, 2012) pointed out that
BIs are designed to help bridge the gap between knowledge and innovation, and have
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the ability to transfer the knowledge from universities to industries in order to let the
research result to the marketplace.
The MOST kept emphasizing the importance of perfecting the incubation system
(中华人民共和国科学技术部, 2017b) as the Chinese government views that patent
counts are an important indicator of a country's output capacity of S&T, which reflects
a country's independent innovation ability (中国政府网, 2011). Patents are widely
recognized as providing a reliable and unbiased indication of the innovation effort in a
country (Hu & Mathews, 2008).
On 1 October 2015, the new Law on “Promotion of Transformation of Science
and Technology Achievements” (中华人民共和国科学技术部, 2015a) has taken
effect. This Law was first established in 1996, enacted for the purpose of promoting the
transformation of S&T achievements into real productive forces, standardizing such
transformation, hastening S&T progress and facilitating economic and social
development.
The Amendment allows state-owned research institutes and universities to transfer
or license the use of their discoveries or invest in them. In the absence of an agreement
or contract between the parties who make the discoveries, at least half of the value of
the invention would be paid to the contributing persons. In the past, any gains would
have gone to the Chinese treasury (中国人大网, 2015).
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In the end of 2015, with the enactment of the revision of Law, the number of
domestic application for patents have immediately increased in the following months.
Table 3 illustrates that the monthly growth rate in November and December were
significantly went up from negative rate to 30.4 per cent and 36.3 per cent respectively.
It shows that the Law of Promotion of Transformation of Science and Technology
Achievements that made it possible to stimulate the domestic patents application. In
addition, the annual applications for total patents received in 2016 was increased two
times since 2011, and the annual growth rate of total patents application received grew
to 25 per cent in 2016. The result is given in Table 4. The increase of domestic filings
of patent applications can reflect the growth of local innovation. The Amendment is not
only facilitating technology transfer, but strengthening BIs function in a positive effect.
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Table 3. Monthly domestic applications of patents in 2015
Invention Utility Model Design Total Monthly Growth Rate
Table 4. Annual applications for total patents received
Total Patents Received Annual Growth Rate
1985-2010 5,995,367
policy tools, China’s innovative capacity has improved. According to an annual report
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(2016) by the World Intellectual Property Organization (WIPO), China ranked top in
the world for patent applications, receiving over one million applications in 2015.
Chinese government is trying to transform the country from a manufacturing nation to
an innovative economy. All of this means that China's innovative capacity will become
more important and influential around the world.
(2) The Company Law
In 2013, the Chinese government launched the program of “Mass
Entrepreneurship and Innovation”. The program is not only to dedicate the technology
innovation but also to support the startups. The Chinese Premier Li Keqiang stressed
the role of Mass Entrepreneurship and Innovation in fostering a new engine of
economic growth (中国网, 2014). The program is an initiative that shows China's
determination in employment creation. A great deal of studies as well as Chinese
government considered BIs as an important platform for accelerating the activity of
Mass Entrepreneurship and Innovation (曾铁城, 2015; 李惠武等, 2016; 杨凯等,
2015; 中国政府网, 2016c). As discussed in previous chapters, BIs are agencies that
provide business resources to help entrepreneurs set up their companies. They are
hotbeds of SMEs as they have the ability to nurture micro and small businesses in their
early stages. And the growing number of SMEs can reflect the growth of new registered
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The Chinese Company Law has played a critical role in promoting new companies’
growth.
China’s Company Law adopted in 1993, revised for the first time in 1999 and
revised for the second time in 2004. On 1 March 2014, the third Amendment of
Company Law was approved and taken effect in order to improve entrepreneurship
environment by enhancing administrative efficiency (FDI, 2013). The law includes
eliminating minimum capital requirements, simplifying capital registration procedures,
establishing an annual reporting system to replace the annual inspection system, and
relaxing the requirements in relation to premises used for registered offices of
enterprises etc.
As the Amendment removes the current minimum registered capital requirements
including RMB 30,000 for limited liability companies, RMB 100,000 for one-person
limited liability companies, and RMB 5 million for limited liability companies by
shares (FDI, 2013), which can greatly help entrepreneurs to start their businesses
without capital. It means the more startups opening, the younger generation (such as
millennial entrepreneurs) involving. As mentioned previously, more and more Chinese
university and college students tend to join startups before they leave school, the
incubation-form of University Science Park from the number of 44 in 2002 to 100 in
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entrepreneurship, but also support the role of Chinese government in a positive effect.
The number of new registered companies were in a downturn before the
Amendment of Company Law has taken effect. With the enactment of the revision of
Law, on March 2014, the number of new registered companies has surged from 130,000
in February to 367,000 in April. The results are given in Figure 14. Since then, the new
companies established in China has increased significantly. The number of newly
registered enterprises grew by 52.44 per cent in the first three quarters of 2014, average
more than 10,000 new companies registered a day (中国政府网, 2014). This is due
mainly to exponential growth since late 2013, when the government recognized the
emergence of new companies as the new impetus to economic growth.
Figure 14. The monthly change of new registered companies since Jan 2014 to Jan 2015.
Source: 中华人民共和国国家工商行政管理总局 (2014a), (2014b) and (2015)
2014 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2015
10.000person
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Implementation of the Amendments of Company Law can reduce the bureaucratic
procedures and cost of market entry to stimulate investment, supported by a
strengthened corporate regulation environment with fairer and more transparent
processes. The relaxation of the policies and regulations can also help to rebuild a
flexible business environment, particularly in facilitating startups in incubation
ecosystem.
Upon observing the relationship between the Chinese BIs and Chinese government,
it could be concluded that the greater the government involvement in BIs funding and
operations, the greater the interdependence of the BIs and the government. The visible
hand of Chinese government is common everywhere in BIs system. As interdependence
is a dynamic process and ever changing, there is an inseparable relationship between
Chinese BIs and the government. The activities of Chinese BIs impact other activities
in society, and actions by government continuously affect BIs development.