China ‘two sessions’ 2021: Beijing shifts country’s basic research and development, tech innovation into overdrive

The move follows the approval of the country’s 14th five-year plan and Vision 2035 development strategy
China will raise tax deductions for research and development expenses of manufacturing firms up to 100 per cent

Two Sessions 2021 (Lianghui)

Coco Fengin BeijingandJane Zhangin Hong Kong

Published: 9:00pm, 12 Mar, 2021

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China will step up scientific research and development over the next five years and beyond, after the country’s top legislature approved on Thursday an ambitious national policy blueprint to become a world-leading power amid a broad trade and tech rivalry with the United States.

Premier Li Keqiang vowed to pursue institutional reforms and introduce tax incentives to boost the country’s basic research and development (R&D) initiatives, which lag behind those in the US and other developed economies, after the country’s 14th five-year plan and Vision 2035 development strategy was endorsed by nearly 3,000 delegates of the National People’s Congress (NPC).

He made the commitment at the conclusion on Thursday of the “two sessions”, the annual gathering of the NPC and the Chinese People’s Political Consultative Conference in Beijing. This year, China will raise tax deductions for R&D expenses of manufacturing firms to 100 per cent, up from 75 per cent covering all industries, he said.

“Our R&D spending as a percentage of GDP is still of a modest amount, especially in terms of basic research,” Li said at a press conference. “We will continue to increase spending on basic research. We will also carry out institutional reforms regarding scientific and technological innovations.”

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Chinese premier addresses Hong Kong electoral changes, US-China relations, as ‘two sessions’ closes

The sharpened focus on basic research and development to drive more home-grown tech innovation forms an integral part of the latest five-year plan, which spells out the country’s economic goals for 2021 to 2025. That is also expected to provide a strong foundation for Vision 2035, which President Xi Jinping initially mentioned in 2017 as a way for China to “achieve socialist modernisation” and replace the US as the world’s top economy.

“Basic research has been a topic during the ‘two sessions’ every year, but it has never been highlighted as it was this year,” said Sun Yutao, a professor at the Dalian University of Technology, who focuses on science policy.

The term “science and technology” appeared about 86 times in the draft of the latest five-year plan, compared with 29 in the previous iteration, while Li discussed technology at length during his press conference on Thursday. The plan also mentions the fields of artificial intelligence, quantum information and blockchain technology for the first time.

“China senses the urgency to catch up [with programmes in the developed economies],” Sun said. “This may be attributed to US-China trade frictions since 2018, which widened to include technology.”

Under the previous Trump administration, Washington took a more confrontational stance on Beijing and China’s tightly controlled economy. The US government relied on a combination of sanctions, tariffs and blacklists in hopes of winning concessions on a variety of issues, including trade, national security and human rights.

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US President Joe Biden has chosen a slew of China specialists for key positions in his administration, signalling a shift in resources to continue Washington’s tougher approach against Beijing in a renewed “pivot to Asia”. US Secretary of State Antony Blinken will hold talks with top Chinese officials next week in Anchorage, Alaska, in a meeting that will address a range of issues, including those where the two sides have “deep disagreements”.

China spent a record US$2.2 trillion yuan (US$339 billion) on R&D in 2019, which represented 2.23 per cent of China’s GDP – another record high. That marked a big improvement since 2000, when the country’s R&D expenditure made up 0.9 per cent of GDP. In the same period, US R&D spending accounted for 2.6 per cent of its GDP, according to Chinese government data and the Organisation for Economic Cooperation and Development.

The prospect of higher annual R&D spending in China is welcome news for the tech sector. “The inclusion of blockchain in the 14th five-year plan will help the development of the [tech] industry and in a broader sense, grow the digital economy,” said Gao Chengshi, a cryptography expert and founding partner of blockchain developer Shanghai Hashvalue Information Technology.

State-level support for quantum computing research, meanwhile, augurs well for more domestic companies to take part in this field. Quantum computing today is like the semiconductor industry many decades ago when the US started early, according to an engineer at the Institute for Quantum Science and Engineering, part of the Southern University of Science and Technology in Shenzhen, who declined to be identified because he is not allowed to comment publicly on the matter.

China’s ‘two sessions’: first mention of blockchain in five-year plan boosts still-nascent industry

Li on Thursday said “scientists and researchers will be granted greater autonomy” and “they should be able to fully concentrate on doing research” under the country’s national policy blueprint.

The Chinese Premier also emphasised a market-first principle. “We must rely on market forces in driving scientific and technological innovations,” Li said. “Companies are the most important force in making such innovations.”

Still, he indicated that achieving innovation takes patience. “We must reject the urge for quick success and take solid measures one step at a time,” he said.

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Last year, several government agencies issued guidelines on how universities can apply and commercialise their intellectual property and patents, which received complaints from the academe. “Researchers can’t do everything,” said Sun of Dalian University of Technology.

Other problems within China’s existing R&D environment, according to Sun, include lack of autonomous rights for researchers and an evaluation methodology that needs to change. Measures to revise the evaluation of researchers began in 2018 as part of a push to address a “research paper-only” mindset and cover other criteria, such as academic titles, degrees attained and awards.

“China ranks second in many criteria, such as R&D input and the number of academic publications,” Sun said. “It appears easy to catch up with the US in this regard, but science and technology isn’t only about those numbers. It’s also about how the nation’s scientific development can contribute to fixing practical problems around the world. There is a long way to go.”