China's Innovation Wall

Beijing's Push for Homegrown Technology

If you want to get to the bottom of indigenous innovation, the Chinese policy so deeply aggravating Western businesses and governments, look at the bottom of your DVD player. Most likely, the machine was made in China. For Beijing’s leaders, that is part of the problem: for every Chinese-made DVD player sold, the Chinese manufacturer must pay a large royalty fee to the European or Japanese companies that patented various components of the unit, such as its optical reader. These foreign firms reap substantial profits, but the Chinese take is extremely small -- and is shrinking further as energy, labor, and commodity prices rise. Policymakers in Beijing, looking to strengthen China’s economy, are no longer satisfied with the country’s position as the world’s manufacturer. Their solution is to break China’s dependence on foreign technology, moving from a model of “made in China” to one of “innovated in China.”

The Chinese phrase for indigenous innovation, zizhu chuangxin, was introduced in a 2006 state-issued report, “Guidelines on National Medium- and Long-Term Program for Science and Technology Development.” The paper contained a curious mix of top-down, state-directed policies alongside bottom-up efforts meant to foster technological innovation. The top-down measures echo China’s old state planning system. They include 20 state-driven megaprojects, including initiatives to develop nanotechnology, biotechnology and new drugs, high-end generic microchips, and aircraft. The bottom-up efforts seem to follow a Silicon Valley model and are centered on university-industry collaboration, small start-ups, and venture capital.

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