Zhang Xiaoqiang: Speeding Up the Building of an Innovative Country and Actively Promoting the Development of Digital Economy

A speech delivered by Zhang Xiaoqiang, CCIEE Executive Vice Chairman and Director of the CCIEE Executive Board

The report of the 19th National Congress of the Communist Party of China proposes that we should accelerate the construction of an innovative country as innovation is the primary driving force for development and strategic support for building a modern economic system. The report also points out that we should deepen reform of the scientific and technological system, and establish a technological innovation system that is enterprise-based, market-oriented and featured with industry-university-research cooperation. We should strengthen support for SME innovation and promote the commercialization of research findings. Science and technology are the primary productive forces, and innovation-driven development is the trend of the world. In recent years, a new round of global scientific and technological and industrial revolution, represented by a new generation of information technology and life science and technology, is pushing the development of the world forward, leading the development of the international industry and reshaping the world’s competition.

China has made significant progress in strengthening independent innovation and building an innovation-driven country since the beginning of its reform and opening up, especially since the beginning of the new century. In 2018, China’s R&D expenditure accounted for 2.19% of its GDP, approximately US $ 370 billion, making it the world’s second-largest R&D investor, accounting for 16.6% of global R&D expenditure. In the fields of energy, transportation, information and communication, China has already gained great advantages. In terms of high-speed railways, high-efficiency clean coal power, UHV power transmission and transformation, renewable energy, e-commerce, and mobile payments, China has become one of the best market players. According to a report issued by the World Intellectual Property Organization (WIPO) on October 15, 1.54 million of the 3.3 million global patent applications in 2018 come from China, accounting for 46.7%, which is 2.58 times more than the second-largest, the United States.

In the same year, the number of China’s patent applications under the Patent Cooperation Agreement (PCT) exceeded that of Japan, ranked second in the world. Eight Chinese companies entered the top 50, including Huawei, BOE Technology, Tencent, and DJI. In the early stage of reform and opening-up, the development of science and technology in China was simply following other advanced countries but now, China has narrowed the gap significantly and even become the leader in some fields. China strives to become a strong innovation nation and has its uniqueness in scientific innovation. For example, a large number of companies have attached great importance to scientific and technological innovation and R&D investment in recent years: Huawei’s R&D expenditure was equivalent to 15% of its turnover and exceeded 100 billion yuan in 2018.

In 2018, China’s expenditure on science and technology was 1.97 trillion yuan, 77.4% of it is corporate spending, approximately 1.52 trillion yuan, which is much higher than many western developed countries. China’s SMEs account for 70% of all technological innovations. In some regions, SMEs play a particularly important role in technological innovations. For example, SMEs in Huangpu District of Guangzhou City possess more than 80% of the invention patents authorized in the district. Most of you here today are entrepreneurs. You have a great understanding of market demand and therefore, you can focus on technological innovation in the key areas of economic and social development. This is an important reason why China attaches great importance to speed up the establishment of an enterprise-based technology innovation system.

Of course, we understand that enterprises pay great attention to financial return, hope to invest less in technological research and achieve quick returns. Most of them are unwilling to make big investment in long-term technology research and development, let alone basic research, which is why the proportion of technological research and development expenditures in China are as high as 83.3%, while basic research and development expenditures is only 5.5%, much lower than the United States and Japan’s (12%). This is one of the important reasons for China’s lack of original scientific and technological achievements.

With the increased protectionism and unilateralism in recent years, China’s lack of core technical capabilities in information has made it very vulnerable to market uncertainties. In April last year, the United States announced sanctions against ZTE and banned the sale of chips. As a result, a company of 80,000 employees with the world’s fourth-largest sales revenue in the global communications system was faced with the danger of shutdown or even bankruptcy.

Since last year, President Xi Jinping has repeatedly emphasized that core technologies cannot be bought and we must keep them in our own hands to guarantee national security in economy, defense and other areas. In the future, we must make great efforts to improve China’s core innovation capabilities, firmly hold the science and technology development in our own hands, and provide strong scientific and technological support for China’s development. What I want to emphasize here is that to implement the innovation-driven development strategy, technological innovation is the core. At the same time, it must also be combined with institutional innovation, management innovation, business model innovation, and cultural innovation. Both the government and entrepreneurs should play an important role in stimulating the vitality of innovation.

When it comes to technological innovation, everyone has paid close attention to the new generation of information technology and digital technology in the past two years, including the Internet, the Internet of Things, big data, cloud computing, artificial intelligence, 5G, blockchain and so on. These technologies are rapidly developing and spreading to various fields. The deep integration of these technologies and traditional industries has improved the efficiency of resource utilization, opened up more space for development, and become important forces for promoting development.

This year, the Ministry of Industry and Information Technology officially issued four 5G commercial licenses. The entire industrial chain such as 5G system equipment and mobile phones has taken the active engagement. A large number of related industries such as the Internet of Vehicles, Industrial Internet, digital high-definition video, and smart medical care have also followed suit. The report of the China Academy of Telecommunication Research predicts that from 2020 to 2025, the economic output directly and indirectly driven by China’s 5G business will exceed 35 trillion yuan. 10.6 trillion yuan will be driven directly and the economic value added will be 3.3 trillion yuan.

 For example, Zhejiang Xilinmen Furniture Co., Ltd. has started to connect the equipment in the production workshop to the 5G network, making the enterprise data acquisition monitoring system (SCADA) more efficient and reliable. Consequently, the probability of equipment damage and production accidents due to interrupted control signals has been reduced significantly. Previously, the workshop used LAN communication. After switching to 5G, the cost of wiring cost per machine was reduced from about 3,000 yuan to less than 1,000 yuan. The overall efficiency of the equipment increased by more than 20%, and the product quality qualification rate increased by 11%.

The report of the 19th National Congress of the Communist Party of China proposes to promote the deep integration of the Internet, big data, artificial intelligence and the real economy, cultivate new growth points in the fields of mid-to-high-end consumption, green economy, sharing economy, modern supply chain, human capital services, and form new momentum. To a certain extent, the digital economy has become the main economic form after the agricultural and industrial economies. It is about to enter a major era of transformation and drive the transformation of production and people’s lifestyle. Nowadays, people generally believe that data resource, like commodities, capital and labor, is an important production factor. Through the important carrier of modern information networks, data resource is integrated with information and communication technologies and gradually become the driving force for inclusive economic growth and sustainable development.

According to the report released by the Ministry of Industry and Information Technology at the Sixth World Internet Conference in Wuzhen last year, the scale of China’s digital economy in 2018 reached 31.3 trillion yuan, equivalent to 34.8% of China’s GDP last year (11 trillion dollars in the US, equivalent to 53% of its GDP). 191 million jobs are in the digital economy, accounting for about 24.6% of total employment. As can be seen, the digital economy has become a new engine of economic growth. In the future, we have a lot of works to do in terms of promoting the development of China’s digital economy.

At the government level, we should issue guidance and plans timely, accelerate the construction of a new generation of information infrastructure characterized by high speed, mobility, security, and ubiquity, strengthen support for basic research and core technology research, improve the governance and supervision system on digital economy, and expand digital public services. For example, increasing access to public data resources and creating new smart cities.

At the enterprise level, companies like Ali, Tencent, Baidu and other Internet companies need further development, and forge ahead in the areas of productive services, service trade, cross-border e-commerce, cultural tourism. At the same time, they should focus on the integration between the digital economy and the real economy, so as to open up broader development space in manufacturing, transportation and other aspects. For example, Ali has announced the development of artificial intelligence (AI) chips. For the secondary and tertiary industries that still account for the majority, the most important thing is to follow the tide of digital economy development and promote the transition to digitalization.

Over recent years, companies like Haier have achieved satisfactory results in the digital development of home appliance production. Through the application of digital technology, the global monitoring center of Sany not only understands the status of its global equipment and services in real time, but also gradually formed a unique “excavator index” to analyze the trend of the regional and world economies. The achievement has been affirmed by leaders of the State Council. Many entrepreneurs here have also made a lot of efforts in this regard, I hope that you can achieve greater results in the future.

It is indispensable to carry out global exchanges and cooperation, jointly build cyberspace and a governance system for the digital economy. We must promote the establishment of universally accepted rules under the United Nations framework, strengthen intergovernmental and non-governmental cooperation, and move towards a multilateral, democratic, transparent, secure, and efficient international system. The making of new rules for international trade and investment in cross-border e-commerce, market access, and data flow has become the focus of WTO reforms. We should actively come up with solutions and contribute our wisdom.

In terms of international cooperation in technological innovation. We insist on enhancing our independent innovation capabilities and mastering key technologies. At the same time, we will strengthen international cooperation in scientific and technological innovation comprehensively and integrate ourselves into the global scientific and technological innovation network. Meeting global challenges such as climate change, large-scale infectious diseases, and ensuring food and energy security requires the international community to work together, go hand in hand, and oppose protectionism in technological innovation. Only in this way can we give full play to the comparative advantages of various countries in cooperation and competition, improve efficiency, seek common benefits and avoid disadvantages, and achieve win-win results. This will also allow innovation to play a more active role in benefiting people in all countries and achieving sustainable world development.