Chinese province Guangdong raises R&D target, turns to innovation to revive economy
Guangdong authorities plan to increase investment in research and development as the province turns to innovation to revive its slowing economy.
The provincial government said yesterday that it would ramp up spending to increase private and public investment in R&D from 2.5 per cent of gross domestic product to 2.8 per cent in five years.
But experts said the target was not ambitious enough to make any real change to the grim economic conditions facing in the province.
Governor Zhu Xiaodan (朱小丹) unveiled the 0.3 percentage point increase as he outlined the 13th five-year plan at the start of the province’s annual legislative session.
Guangdong, which relies heavily on traditional manufacturing, spent 2.5 per cent of its GDP on R&D last year, above the 2.1 per cent national average for 2014 and the 0.7 per cent outlay by Hong Kong in recent years.
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But it is still lower than many innovative economies around the world. In 2013, South Korea invested 4.1 per cent of its GDP in R&D; while Japan ploughed in 3.4 per cent and Sweden 3.3 per cent.
Qu Jian, deputy director of the Shenzhen-based China Development Institute, said Guangdong was aiming too low and moving too slowly on R&D.
He said Guangdong should be more ambitious and aim 4 per cent – matching the bar set by Shenzhen, which is becoming an innovation hub.
“The severe economic situation Guangdong is now facing is exactly a result of the lack of investment earlier in R&D. Its products are not competitive,” Qu said.
“It takes at least three years to see significant economic benefits from R&D investment.
“If Guangdong wants innovation, it should invest now; otherwise it will be nothing more than a slogan.”
He warned that Guangdong risked losing economic momentum if it failed to invest enough in R&D, especially under the “new normal” of slowing growth.
The mainland’s GDP growth fell to its lowest level in a quarter of a century last year and its exports declined for the first time since 2009.
Guangdong is aiming for 7 to 7.5 per cent economic growth this year and an average growth rate of 7 per cent in the next five years – a shadow of the double-digit growth the province registered in its heyday.
Lin Jiang, a finance professor at Guangzhou’s Sun Yat-Sen University, said Guangdong’s efforts to put the economy on a more innovative track would take a long time to realise because private enterprises in the province were used to making easy money and had long ignored investment in the technological cutting edge.
The provincial government is also trying to promote entrepreneurship by adding 5 million square metres of incubator space for start-ups this year and attempting to attract pioneering professionals from overseas.
But Lin said that as relations between Guangdong and Hong Kong soured, many Hong Kong professionals might opt not to work in Guangdong, further hindering progress on initiatives such as the free-trade zones in Shenzhen, Zhuhai and Guangzhou.
Guangdong has also pledged to increase the share of non-fossil fuels in the province’s energy mix to 25 per cent by 2020, well above the 15 per cent national goal.