Economy

Domestic innovation crucial to prosperity

(China Daily)
Updated: 2011-01-04 08:30

China's impressive leaps in technological innovation in 2010 support the policy of promoting indigenous innovation's development and show the country is capable of breakthroughs.

Gao Xudong believes China has the capability to make technological breakthroughs.

The country needs to cultivate indigenous innovation to ensure reliable sources of technology, improve exports' quality and realize sustainable development.

An important characteristic of the Chinese economy since the reform and opening-up has been a reliance on technology transfers. The model has been successful but is becoming less efficient.

Transfers have become more difficult with globalization and China's World Trade Organization ascension.

Multinationals have been reluctant to transfer technology for fear of Chinese enterprises becoming strong competitors. So, local companies must become self-reliant in core technologies' development.

Another prominent characteristic of the economy had been a heavy reliance on imports and exports. But exporters face the challenge of sustainable growth. They have low profit margins because they focus on high-quality, low-cost manufacturing.

With the renminbi's appreciation and mounting competition, these enterprises are facing stronger threats. They must improve their competitive positions through indigenous technological innovation and high value-added products.

The third economic characteristic of China is high-input-based high growth. This is an unsustainable model, given the resources required and consequential environmental damage.

Indigenous technological innovation is a crucial precondition of a shift toward sustainability. Such innovation can take various forms.

One approach is to innovate on technology transfers, as had been done with high-speed railways. Another is internal research and development, which has led the country's aerospace innovation.

The country's technological innovation capacity has global implications. However, misunderstandings block the path.

Some believe China will stop foreign technology transfers if it becomes innovative or that its innovation will make it difficult for other countries to develop.

However, the more successful China's indigenous technological innovation, the more foreign technology can be transferred to China, if multinationals are willing to do so.

And homegrown technological development will provide a solid foundation for the domestic economy, creating more market opportunities for other countries.

Ultimately, China's indigenous technological innovation will generate sustainable paths to prosperity for the country and the world.

The author is a senior research fellow at the Research Center for Technological Innovation of Tsinghua University.