National Outline for Medium and Long Term S&t development Planning (2006-2020)

Supporting and Encouraging Enterprises to Become the Main Player in Technological Innovation

Market competition is an important driving force behind technological innovation while technological innovation is the ultimate route to enhanced enterprise competitiveness. Along with deepened reform and opening up, Chinese enterprises are playing an increasingly important role in technological innovation. To substantially enhance the motivity and vitality of technological innovation at the enterprise level, more agreeable conditions need to be provided, a better environment created, and reforms deepened.

Firstly, let economic and S&T policies play a guiding role in order to enable enterprises to become the major R&D spender. Efforts must be accelerated to create a unified, open, competitive, and orderly environment for the market economy by way of fiscal, taxation, and monetary policies so that enterprises, particularly large enterprises, are induced into increasing their R&D spending and establishing their own R&D bodies. National engineering laboratories and sectoral engineering centers should be established at transformed research institutes or large enterprises possessing fairly strong R&D and technology spin-off capabilities, in collaboration with universities and research institutes. Encourage technology innovation consortia of various forms initiated by enterprises, in collaboration with universities and research institutes, for the purpose of technology innovation capacity building. Secondly, reform the modality of S&T programs to enable enterprises to undertake national R&D missions. National S&T programs shall reflect more of the major industrial needs for science and technology, and attract more enterprises to be part of such programs. In the fields of obvious market application prospects, establish an enterprise-led mechanism with the involvement of universities and research institutes. Thirdly, perfect the technology transfer mechanism to facilitate the integration and application of industrial technologies. Establish and perfect intellectual property rights related incentive mechanism, and an IPR trading system. Vigorously develop various kinds of S&T intermediary service organizations to meet the needs of enterprises, facilitating knowledge flow and technology transfer between enterprises, and between enterprises and universities and research institutes. National key laboratories and engineering (technology research) centers shall be made more accessible to enterprises. Fourthly, accelerate the establishment of a modern enterprise system so as to enhance the innate drive for enterprise technology innovation. Technology innovation capacity building shall be taken as important indicator in measuring the performance of state-owned enterprises while technology factor-based distribution be made an important part of property rights reform destined for the high- tech industry. Stick to the direction in which application-oriented R&D institutes are transformed into enterprises and deepen the reform of property rights at such institutes. This will not only lead to an improved management system and the establishment of a rational and effective incentive mechanism, but will also enable the transformed R&D institutes to play a major role in high technology industrialization and sectoral technology innovation. Fifthly, create a fine innovation environment to spur innovative activities at small- and medium-sized enterprises(SMEs). As SMEs, particularly technology-based SMEs, are highly innovative but frail in risk-taking ventures, a more favorable policy environment should be created for such enterprises by drafting and formulating preferential laws and policies, particularly in the context of market accessibility and anti-unfair competition. Vigorously develop an S&T investment and financing system and a venture capital mechanism and quicken the construction of S&T intermediary service bodies, so as serve the needs for technology innovation at SMEs.

3. 
   Deepening Institutional Reform and establishing a Modern Research Institute System
   

Research institutes engaged in basic research, frontier technology development, and public good research constitute a major force in the nation’s S&T innovation activities. Establish a stable, high caliber research contingent that serves national objectives and is devoted to S&T undertakings is crucial for the future and destiny the nation’s S&T enterprise. Thanks to efforts in restructuring and personnel diversion, a number of high quality research institutions have merged, to which stable support from the government is critical. While giving ample scope to the important roles played by these research institutes, innovation capacity building must be taken as an objective, mechanism improvement a focal point, management system reform deepened, so as to accelerate the establishment of a modern research institute system under the principle of “clearly defined terms of reference, scientific evaluation, orderly open access, and regulated management”.

Firstly, strengthen the capacity building of research institutes in keeping with the terms of reference defined by the state. Earnest efforts must be made to address the problem where some research institutes suffer from undefined terms of reference, uncoordinated research efforts, and weak innovative capability. The allocation of resources should be optimized in order to make concerted efforts in creating disciplines and research bases with clear superiority. Public good research institutes shall take advantage of technical strength in their respective fields, raising S&T innovation and service capability, and addressing major S&T issues in the social development. Basic science and frontier technology-oriented research institutes shall take advantage of their disciplinary strength in uplifting research levels, striving for theoretical innovation and technology breakthroughs, and addressing major S&T issues. Secondly, establishing a stable S&T investment mechanism designed to support innovation activities at research institutes. Given the fact that disciplinary capacity building and major innovation achievements are the results of tireless efforts over a long period of time, state treasury should provide fairly stable appropriation support to research institutes engaged in basic research, frontier technology development, and public good research. Per capita overhead expenditure level will be raised in line with different types of research institutes in support of disciplinary capacity building, basic research activities, and cultivation of talented S&T personnel. Thirdly, establish an operational mechanism conducive to original innovation at research institutes. Freely selected research topics are extremely crucial for raising the original innovation capability and for nurturing high caliber personnel. The support for free research topic selection based research should therefore be strengthened. While perfecting the system under which the director assumes all power and responsibility at research institutes, delegate more autonomous decision-making power to research institutes in S&T expenditure and personnel affairs so as to ensure greater capability in coordinating and integrating innovation activities at the institute level. Fourthly, work will be carried out to establish a system to assess the overall innovation capability of research institutes. Accordingly, a scientific and rational system will be established to make an overall assessment of institutional innovation capability in terms of the quality of S&T achievements, the buildup of S&T talents, and management/operation mechanisms, in order to raise the management level and enhance innovation capability. Fifthly, efforts will be made to put in place an effective mechanism for opening up and collaboration. Establish a personnel management system featuring the combination of permanent staff and temporary or contract personnel by introducing a retainer and vacancy management mechanism for full-fledged open recruitment of research and management personnel. For the purpose of promoting knowledge flow, personnel mobility, and S&T resource sharing, effective mechanisms should be put in place to facilitate various forms of collaboration between research institutes, enterprises, and universities.
Universities are not only an important base for nurturing high caliber innovative talents but also a principal player in basic research and original technology innovation activities and a commendable force in addressing major S&T issues in the national economy, materializing technology transfer, and effecting technology spin-off and commercialization. Accelerating the establishment of high caliber universities, particularly world-class research universities, is a prerequisite for enhancing the nation’s S&T innovation and establishing a national innovation system. At present, our country has already built a number of high-caliber universities with appropriate scales, comprehensive disciplines, and assembled talents, and these universities should be given full scope for their important roles in S&T innovation.
Vigorous support and encouragement need to be provided for university-based original innovation in basic research, frontier technology development, and public good research. Universities should be encouraged to enter full-fledged cooperation with enterprises and research institutes so that they can provide better and more extensive services to economic development at the national, regional, and sectoral levels. The capacity building of major academic disciplines and S&T innovation platforms at universities will be accelerated in order to nurture and assemble a number of world-class academic leaders and build up a faculty contingent with high ethical standards, strong innovative spirit, and international competitiveness. Further accelerate the reform of university internal management system by optimizing education structure, S&T related organizational structure, and innovation mechanism and associated management system. Establish a scientific, rational evaluation system and an operational mechanism conducive to the nurturing of high quality talents and the improvement of innovative capability, so that every talent finds ample scope for his abilities and a constant stream of talents is sustained. Vigorous efforts should be made to explore ways and means of building a modern university system with Chinese characteristics.

3. Advancing the S&T Management System Reform
In view of the protuberant problems in our country’s S&T management at the macro level, the reform of the S&T management system must be advanced, and be centered on improving the national S&T decision-making mechanism, overcoming systemic and institutional barriers, strengthening inter-ministerial, inter-province, ministry/province, defense/civilian overall planning and coordination, so that our ability can be substantially enhanced in mustering S&T resources for initiating major S&T undertakings.
Firstly, a national S&T decision-making mechanism should be created and then constantly improved. The business discussions procedures for the nation’s major S&T decision-making should be improved so that a normative consultation and decision-making mechanism is in place. Efforts should be made to expand government roles in overall configuration and macro management of S&T development, strengthen coordination in formulating major S&T policies, implementing major S&T programs, and in constructing S&T infrastructures. Secondly, establish and improve a macro S&T coordination mechanism at the national level. Define the basic status of S&T policies as a national public policy and develop an interactive policy coordination system between national S&T policies and national economic policies, in response to the objectives of promoting S&T innovation and indigenous innovation capability. Create a mechanism to coordinate inter-agency allocation of S&T resources. Accelerate government mandate shift at the government agencies in charge of S&T management, practice governance according to the law, and upgrade the macro management and service level. Ways by which programs are managed must be improved to bring into full play the role of government agencies and local authorities in program management and project implementation. Thirdly, the S&T review and evaluation system must be reformed to reflect principle of fairness, impartiality, openness, and encouraging competition, thereby creating conditions for the springing up of various types of talented people, especially the young. The review of major projects must be brought in line with national objectives. The peer review system should be improved by creating a reviewer credibility system and a review mechanism involving international peers, by strengthening the supervision of the review process, and by expanding the openness of review activities and ensuring reviewees’ access to appropriate information. Special attention and support shall be given to highly innovative small projects, uncommon projects, and interdisciplinary projects, with emphasis on the evaluation of quality, capability, and research level of individuals or teams, and on whether it is encouraging original innovation. Establish an independent review system to evaluate the implementation of major national S&T programs, the Knowledge Innovation Program(KIP), and projects funded by the National Natural Science Foundation. Fourthly, reform the S&T achievements evaluation and award system. Perfect the research assessment and indicator systems in light of different characteristics of S&T innovation activities and in accordance with the principle of openness, fairness, rule abiding, and streamlined procedures. Avert excessive evaluation or desires for quick success and short-term behavior. For innovation activities involving market-oriented applied research and experiments, evaluation shall be conducted mainly on the obtaining of proprietary intellectual property rights and the contribution to industrial competitiveness. Public good research activities shall be evaluated in line with public needs and social benefits derived, while basic research and frontier scientific exploration shall be evaluated in line with scientific significance and academic value. Establish a personnel assessment system capable of judging personnel qualifications in different S&T fields. Reform the national S&T award system by reducing the number and levels of awards. Give prominence to government conferred awards by focusing on talented individuals while rewarding prize-winning projects. In addition, the creation of non-governmental awards should be encouraged and regulated.

4. 
   Vigorously Pushing Forward the Construction of a National Innovation System with Chinese Characteristics
   

The objective for deepening S&T system reform is to advance and enhance the construction of a national innovation system. The national innovation system is a government-led public system which gives full play to the basic role of the market in resource allocation while letting various innovation players forge close links and interact with one another. Currently, the construction of the national innovation system with Chinese characteristics shall emphasize the following:

Firstly, build an enterprise-led technology innovation system featuring the combination of enterprises, universities, and research institutes, which will be a breakthrough point for the full-fledged construction of the national innovation. Only when such a system is led by enterprises, it can ensure the market orientation of technology innovation and effectively combine industry-university-research strengths for the enhancement of national competitiveness. Only when enterprises, universities, and research institutes work together, can S&T resources be efficiently allocated, the vitality of research institutes be activated, and enterprises acquire capabilities in sustaining innovation. While drastically improving enterprises’ technology innovation capability, it is imperative to establish new mechanism allowing research institutes and universities to provide services tailored to the needs of enterprises’ technology innovation activities. Secondly, with creating an open, mobile, competitive, and collaborative operational mechanism at the core, efforts should be made to promote the collaboration and resource sharing between research institutes and with universities. Strengthen the construction of public good scientific research system. Develop research universities and a number of top-notch, resource sharing basic science and frontier technology bases. Thirdly, establish a national defense S&T innovation system highlighting the combination of both the defense and civilian needs as well as a civilianized defense industry by making defense S&T part of the civilian operations. Promote the close combination of civilian and defense S&T findings in a range of areas, including macro management, development strategies and planning, R&D activities, and commercial applications of S&T findings. Strengthen the development of dual-use technologies, creating an environment where high caliber civilian S&T personnel provide services to defense S&T innovation, while defense related S&T achievements find quick conversion to civilian applications. Fourthly, establish regional innovation systems with diverse characteristics and strengths. Regional innovation system planning and associated innovation capacity building shall be made in a unified and coordinated manner, taking into account the characteristics and strengths of the regional economic and social development. Deepen the reform of the local S&T system, with a view to mustering S&T forces at the central and local levels. Take full advantage of the important roles played by universities, research institutes, and national high-tech industrial parks in establishing regional innovation systems in order to enhance S&T innovation support for the local economic and social development. Reinforce S&T capacity building in the country’s central and western regions while earnestly strengthening the construction of grassroots S&T systems at the county (city) level. Fifthly, establish a socialized, networked S&T intermediary service system. In view of the fact that the S&T intermediary service sector is small in size, unitary in function, and weak in providing services, efforts should be made to vigorously nurture and develop S&T intermediary service organizations in diverse forms while taking full advantage of the important roles played by universities, research institutes, and social organizations and groups in providing S&T intermediary services. S&T intermediate service organizations should be guided in the direction of professionalism, scale, and standardization.

6. 
   Major Policies and Measures
   

To ensure the implementation of the missions defined in the Outline, efforts should be made formulate more effective policies and measures, in addition to addressing system and mechanism related issues. All policies and measures shall be made as such that they are conducive to enhancing indigenous innovation capability, spurring the enthusiasm and creativity of S&T personnel, making full use of S&T resources both at home and abroad, supporting economic and social development through science and technology. The S&T policies and measures listed in the Outline are designed to address major discrepancies and protuberant problems we are facing today, but will be adjusted and perfected in line with changing situations and progress in the implementation of the Outline.

1. 
   Financial and Taxation Policies Encouraging Technological Innovation at the Enterprise Level
   

Encourage enterprises to increase R&D spending and strengthen technology innovation capability. Accelerate the imposition of a consumption based value added tax, and make the industrial payment to equipment procurement favored with a deductible value added tax. On the basis of further implementing a range of taxation holiday policies aimed at spurring technology innovation and accelerating S&T findings spin-off and equipment upgrading, encourage and support enterprises to develop new products, new techniques, and new technologies, by raising the level of incentive policies, including pre-tax deduction of enterprise R&D expenditure, in an effort to provide taxation holidays for the development of high tech businesses. Along with the reform of corporate income tax and corporate financial system, encourage enterprises to establish special funds earmarked for R&D activities. Enterprises shall be allowed to accelerate the depreciation of the instruments and equipment used in R&D activities. Enact taxation holiday policies for procuring advanced scientific instruments and equipment. Enhance foreign exchanges and fund raising support for enterprises establishing R&D facilities overseas, and provide convenience and quality service for Chinese enterprises’ investment overseas.

Implement the PRC Law on Promoting Small- and Medium-Sized Enterprises, and support the establishment of various types of SMEs, in order to take full advantage of their vitality in technology innovation. Encourage and support SEM initiated collaborative R&D efforts in the form of joint venture or consignment by providing policy support for the commercialization of innovation achievements.

2. 
   Strengthening assimilation and absorption of imported technologies, and re-innovation
   

Adjust and improve national policies on industrial technology so as to reinforce the assimilation and absorption of imported technologies and re-innovation. Policies should be developed to encourage indigenous innovation and restrict blind and duplicative technology importation.

Readjust the structure and priorities of government appropriations and establish special funds that can be used to support assimilation and absorption of imported technologies and re-innovation, and support the development of major technologies and equipment and critical common industrial technologies. Proactive policies and measures should be formulated increase investments through multiple channels in support of enterprise-centered efforts in the assimilation and absorption of imported technologies and re-innovation, in collaboration with universities and research institutes.
Major national construction projects should be taken as major carriers of uplifting indigenous innovation capability. Through the implementation of major national construction projects, assimilate and absorb a series of advanced technologies, master a number of critical technologies concerning the nation’s strategic interests, and develop a range of major equipment and key products that possess proprietary intellectual property rights.

3. 
   Government Procurement Favoring Indigenous Innovation
   

Formulate implementing regulations of the “PRC Government Procurement Law” to encourage and protect indigenous innovation. Establish a coordination mechanism for government procurement of indigenous innovative products. Government practices a first-buy policy for major domestically made high-tech equipment and products that possess proprietary intellectual property rights. Provide policy support to enterprises in procuring domestic high-tech equipment. Develop relevant technology standards through government procurement.

4. 
   Intellectual Property Rights Strategy and Technology Standards Strategy
   

Protecting intellectual property rights and safeguarding the interests of IPR owners is not only necessary for perfecting the nation’s market economy system and promoting indigenous innovation, but also important for establishing the nation’s credibility and image in international cooperation. It is important to further perfect the nation’s IPR system, and create an agreeable legal environment that respects and protects IPR, increase public awareness of IPR, uplift the nation’s IPR management level, enhance IPR protection, and crack down on various IPR piracy activities according to law. In the meantime, it is necessary to establish a special IPR examination process for major economic activities, including mergers and acquisitions and technology trade, in order to avoid the loss of proprietary IPR. Prevent the abuse of IPR intended to unfairly restrict market competition or obstruct the diffusion and application of innovation and S&T achievements. Make IPR management part of the entire S&T management process to raise the nation’s S&T innovation level. Reinforce S&T personnel’s IPR awareness while enabling enterprises, research institutes, and universities to attach more importance to and strengthen IPR protection. Give ample scope to the important role of industrial associations in IPR protection. Establish and perfect a professional employment qualification system and public credit system that are conducive to IPR protection.

In line with the nation’s strategic demands and industrial development needs, cultivate a number of inventions and creations of major importance to economic, social, and S&T development in order to produce indigenous IPR. Organize enterprise-led collaborative efforts involving universities and research institutes in overcoming technological snags while providing support for patent application, standard formulation, and international trade.
The development of technology standards should be made an important objective of national S&T programs. Government agencies concerned and industrial associations shall strengthen guidance and coordination for the development of major technology standards, which are to be adopted as a priority. Promote the system construction for technology laws and regulations and technology standards, and the integration of the development standards with scientific research, development, design, and manufacturing, in order to ensure the advanced nature and validity of standards. Encourage industry-academia-research collaboration in studying and developing major national technology standards, and associated priority adoption. Take an active part in international efforts for standards development, and strive to make our country’s technology standards international standards. Strengthen the development of system construction for technology trade measures.

5.