The Evolution of China's National Innovation System During the 40 Years of Reform and Opening Up

Yu Wenhao＊

Abstract: From the perspective of economic system transformations and scientific and technological system reforms, this paper investigates the evolution of China's national innovation system (NIS) during the 40 years of reform and opening up. It concludes that China's NIS has evolved from weak to strong,from a follower groping its way onto the track of independent innovation with Chinese characteristics. China's innovation system has experienced a trajectory from “introduction and imitation of complete sets of technology”to “market for technology and imitative innovation,” to “integrated and secondary innovation” and on to “integrated, secondary, collaborative and original innovation combined.” The path of independent innovation with Chinese characteristics is a natural choice of economic, societal, and technological development in the new era.

Keywords: reform and opening up; science and technology (S&T) systems; national innovation system (NIS); independent innovation

S ince the beginning of its reform and opening up, China has impressed the world with the “China miracle.” However, as its economy and society transitions to the new normal, facing constraints from resources and the environment and increasing pressure from global competition, China had to shift from a factor-driven, investment-driven mode toward an innovationdriven mode as there was an ever more urgent need for improving the national innovation system and accelerating the building of an innovation-driven country. The 16th CPC National Congress explicitly identified innovation as a driver for economic and social development. The report to the 17th Party Congress noted that it was the core of the national development strategy to enhance China's capacity for independent innovation and make China an innovative country. The report to the 18th Party Congress emphasized that China would implement the strategy of innovation-driven development and increase the development of the national innovation system. The report to the 19th Party Congress reiterated the goal that China would improve the national innovation system, boost strategic scientific and technological strength, and further reform the management system for science and technology (S&T). Over the past decades, since reform and opening up, how did the approaches to China's national innovation system evolve? What was the logic behind this historic trajectory? What is the theoretical basis underlying this evolution? How did China develop an independent innovation-driven path? What implications will it have on building an innovation-driven country by 2020 to review the developments, experience and lessons along the way?In this light, this paper, focuses on two main lines, economic and science & technology system reforms in combination with the dynamics, value propositions and policy tools of the different stages, and examines how China's NIS has evolved over the past four decades to provide a clear look at the ever evolving patterns that have so effectively increased the development of an innovative nation.

The academic community has provided only minimal literature dedicated to the evolution of approaches to China's NIS since reform and opening up. Academic research in this regard lags practical needs. From the research point of view, existing studies mainly address S&T policies,①Wang, 2000; Liu,2008; Gao, 2014; Jin, 2015.S&T incentives,②Wan, 1994; Li & Yao, 2001; He & Zhong, 2008.S&T management systems③Li & Li, 2008; Hu, 2010; Wang, Sun& Wang, 2009; Chen 2015., S&T plans④Li & Cai, 2014; Hu, 2003., and other S&T mechanisms⑤Fang, 2012; Song & Mu, 2012.. A study by Nelson suggests that innovation systems or models vary from country to country due to their different sizes, stages of economic development, and historical and cultural backgrounds. There is no uniform or optimum approach to national innovation systems which are instead rooted in country-specific realities.⑥Nelson, 1993Therefore, in studying China's national innovation system, an S&T system reform-only perspective does not help elucidate it as a whole. From an analytic perspective that combines economic system transitions and S&T system reforms, this paper attempts to investigate the trajectory of China's NIS since reform and opening up.

1. Getting started with government planned innovation: introduction and imitation of complete sets of technology (1978-1984)

Since reform and opening up, China's economic reform has roughly gone through two stages,the transition from a planned economy to a market economy from 1978 to 1992 and a Socialist market economy from 1993 to the present. Along with economic reform, China has seen a strategic transformation centering on economic development and a shift in development modes to introduce market competition mechanisms. These developments led to unprecedented changes in both the internal motives and external conditions of China's S&T system. During the 1978-1984 transition period, China's NIS began with government planned innovation, and developed an innovation approach featuring the introduction and imitation of complete sets of technology.

In the early days following the founding of the PRC, China was relatively closed as it faced two confronting international camps and needed time to establish domestic political stability. This situation caused a widening gap in S&T development levels between China and the rest of the world. As a result,following the break-up of China and the Soviet Union in 1960, self-reliance and S&T catch-up became the underlying characteristics for the design of China's NIS. In the early years following reform and opening up, the introduction of complete sets of foreign technology emerged as a major approach to catching up with technologically developed countries.

At the first National Science Conference held on March 18, 1978, Mr. Deng Xiaoping noted that science and technology are part of the productive forces and intellectuals are part of the working class.Deng explicitly pointed out that the key to four modernizations lies in the modernization of science and technology. These views laid the theoretical foundation for charting a path to S&T development and innovation. When approving the Outline of the National Plan for the Development of Science and Technology (1978-1985) for distribution, the CPC Central Committee emphasized that “Science and technology are productive forces.”①Wu, 1989.The Communique of the 3rd Plenary Session of the 11th CPC Central Committee noted, “Built on self-reliance, China will actively engage in economic cooperation with the rest of the world on an equal footing and mutual benefit basis, and adopt the world's advanced technologies and equipment,”②Communique of the 3rd Plenary Session of the 11th CPC Central Committee, December 22, 1978.which became a basic principle for China's technology introduction. In April 1981, facing challenges posed by a new industrial revolution sweeping the world, the CPC Central Committee and the State Council forwarded the Outline of the Report on Guidelines for the Development of China's Science and Technology issued by the State Science and Technology Commission (SSTC),noting that “(1) science and technology must get ahead of production and construction; (2) it is an unwavering policy to assist economic development with science and technology work.”③Wu, 1989.The report to the 12th CPC National Congress stated that S&T was a strategic priority of economic development,catapulting S&T to a strategic place for the first time. To implement this strategic approach, several institutional arrangements and planning guidelines were developed to facilitate S&T progress in terms of technological transformations, technology importation, S&T incentives, and patent protections.

The Decision on Focused, Measured Technological Transformation in Existing Enterprises issued by the State Council on January 18, 1982 set out the policy of making technological transformations a primary means of extended reproduction.④Wu, 1989.The Decision on Rushing to Develop Key Technological Equipment required “active introduction of the latest foreign technology, and collaborative design and manufacturing of technological equipment for several major construction projects.”⑤Wu, 1989.On December 4, 1982, the 5th session of the 5th National People's Congress adopted the Constitution of the People's Republic of China. Article 20 of which stipulates that “The state promotes the development of the natural and social sciences, disseminates knowledge of science and technology, and commends and rewards achievements in scientific research as well as technological innovations and inventions.”①Wu, 1989.To provide protections and incentives for the innovation of the intellectual property system, the State Council approved the establishment of the China Patent Office (now known as the State Intellectual Property Office, or SIPO) on January 14, 1982. In March 1984, the Standing Committee of the National People's Congress promulgated the Patent Law of the People's Republic of China which was intended to protect the rights of invention and creation patents, encourage invention and creation and promote S&T development.

According to available data, during the period from 1980 to 1984, China introduced or imported 16,000 pieces of technology and equipment at a combined cost of USD 12 billion②Li, 2008.. Beginning in 1979,the introduction of soft technology dominated. Specifically, China prioritized the introduction of 3,000 advanced technologies and launched technological transformations for existing enterprises. Meanwhile,12 major projects were identified for technological absorption and digestion. These two approaches became key contributors to enhancing China's technological strength. To better accomplish S&T catchup objectives, China also increased bilateral S&T cooperation agreements with developed countries. By the early 1980s, China had concluded inter-governmental bilateral agreements on S&T cooperation with France, Italy, Sweden, the U.S., the U.K., and Japan. Further, S&T exchanges and cooperation with the third world saw new progress. In addition to inter-governmental bilateral S&T cooperation agreements concluded or renewed with more than 20 countries including Brazil, Thailand and Bangladesh, China established S&T relations to varying degrees with more than 40 countries.③Li, 1997.At this stage, China narrowed its S&T gap to the advanced level by opening up and bringing in world leading technology and equipment, and learning from and imitating others.

During this period, China's government planned innovation was different from the highly centralized government-led approach following the Soviet model prior to opening up. With regard to the establishment and approval of items to be introduced, there was a shift from direct control by the central government to two-tier control by both the central and local governments. Such “decentralization”reform boosted the enthusiasm of local governments and businesses and buoyed the scale and volume of technology introduction. However, the two-tier control approach led to the lack of an authority for holistic planning and coordination in the process, giving rise to blind, repeated importation, weak matching and applications of imported technology, and other problems. Nevertheless, the attention paid to digestion, absorption, imitation and innovation during this stage paved the way for shaping institutional guarantees going forward.

2. Reshaping stage featuring government-led innovation: market for technology and imitative innovation (1985-1996)

“Economic development-centered” S&T system reform emphasized that China, in light of its circumstances, needed to emancipate productivity and make S&T play its due role in innovation and change. In March 1985, Deng Xiaoping, in his speech at the National Conference on Science and Technology, said that reforms in both the economic and S&T systems were intended to liberate productivity. The new economic system should be good for technological progress, while the new S&T system should be good for economic development.①Wu, 1989.On March 13, the CPC Central Committee issued the Decision on Science and Technology System Reform, a move intended to address the flaws of managing S&T activities by merely administrative means, establish that technical results are inherently commercial as they are also commodities. The Decision introduced financial incentives, and proposed that “technological development should shift towards making imported technology play an important role in developing production techniques and transforming existing enterprises.”②Decision of the CPC Central Committee on Science and Technology System Reform, People's Daily, March 30, 1985.China's S&T system reform led by economic system reform was an important sign of fully reshaping the NIS.

The Plan for Science and Technology Development (1986-2000) followed “Science and technology must be oriented to economic development, while economic development must rely on science and technology” as a basic principle. The Plan reflected on the practice of blind technology introduction,and noted that a S&T system with Chinese characteristics was required to “be focused rather than allencompassing; and be practical and realistic, instead of a one-sided pursuit of catching up.”③Ministry of Science and Technology (MOST) website： http：//www.most.gov.cn/kjgh/lskjgh/

In September 1985, the CPC Central Committee's Proposals on Formulating the Seventh Five-year Plan for National Economic and Social Development explicitly proposed to “speed up the digestion,absorption and innovation of imported technology.” Beginning in 1986, in light of the characteristics of the S&T system and the needs of economic development, the Party and the central government approved the establishment of national high-tech industrial development zones, and rolled out a range of major project research programs and key results extension programs, including the Spark, 863, Harvest,Torch, and Climbing programs. To offer institutional safeguards for these policy initiatives, the State Council issued the Several Provisions Concerning the Further Promotion of the Science and Technology System Reform in 1987 and formulated the Law of the People's Republic of China on Science and Technology Progress according to the Constitution in 1993. In doing so, China introduced more market mechanisms into its S&T system, adopted “push” and “pull” approaches to give research institutions more freedom to engage in economic activities, and encouraged them to actively develop and organize the manufacturing of high-tech products. Thus, China ushered in a new landscape of government-led NIS.

In the 1980s, China was largely in trade deficits, which posed challenges to the foreign exchange spending power required for introducing foreign technological equipment. Also, the drawbacks arising from “introduction of complete sets of technology” set in, such as repeated introductions and blind development. Internationally, Western advanced countries were mired in stagflation and were in dire need of expanding markets. Such changes in domestic and foreign environments prompted a shift in the approach to technology introduction. On March 22, 1984, the State Council approved and forwarded the Report of the State Economic Commission on Properly Carrying out the Combination of Technology and Trade and the Purchase of Old Equipment, remarking that, “It is a major policy of China for accelerating technology progress to combine foreign trade in goods with technology importation, integrating technology and trade, and opening a part of the domestic market in exchange for advanced foreign technology.”①Institute of Law, Chinese Academy of Social Sciences (1986), ed. Collection of the Economic Laws and Regulations of the People's Republic of China (1984) (Vol.1).China Financial & Economic Publishing House.This was the first time that China did a strategic positioning for“markets for technology.” The Outline of State Industry Policies for the 1990s, issued in 1994 stated, “To exchange key technologies and equipment, China allows conditionally opening part of its domestic market,”②Party Literature Research Center of the CPC Central Committee (1995). Collection of Important Literature Since the 14th CPC National Congress (Vol.1), People's Publishing House.to ensure a “markets for technology” approach to attract costly, technologically advanced projects. To curb inefficient repeated introductions, identify priorities in technology introduction,and develop pillar industries, in 1995, China issued the Provisional Regulations on Direction Guide to Foreign Investment and the Catalogue of Industries for Guiding Foreign Investment, which acknowledged that foreign direct investment (FDI) had become a mainstream means of technology introduction.“Markets for technology” not only provided a platform for China to learn from advanced managerial expertise, operating models and advanced technology of the West, but also enhanced China's ability in imitative innovation through importation, digestion and bold improvement, providing the prerequisites for independent development and indigenous innovation. FDI, originally aiming at “markets for technology,” not only represented a new means of introducing technology, but more importantly, it helped chart out an open innovation model that better fit with world economic developments and allowed fast catching up.

During the transition from a planned economy to a market economy, leveraging “markets for technology” and imitative innovation on an open basis, China managed to transform itself from a peripheral technology follower into an active technology adopter. However, the narrowing gap with developed countries came at a price with results that sometimes deviated from expected targets. For example, China did open some markets but got no core technologies in return. Core technologies still relied on foreign countries, with very limited spillover effects. With core technologies in their hands,foreign firms captured considerable market shares in multiple industries, while domestic enterprises were marginalized. This trend led to the deprivation of basic conditions for technology introduction effects. As a result, China's control over core technologies did not increase, and worse, domestic innovation capabilities were undermined. The “market for technology” approach faced increasing challenges.

3. Transition to market-oriented independent innovation: integrated and secondary innovation (1997-2005)

Following reform and opening up, China's innovation strategy shifted away from self-reliance towards a diverse approach combining technology importation and imitative innovation. This shift facilitated S&T progress in leaps and bounds and fueled rapid economic growth. Facing changes in development environments at home and abroad and fresh challenges posed by innovation, the state leadership revisited the relationship between internal development and external importation.As early as May 6, 1995, the Decision of the Central Committee of the Communist Party of China and the State Council Concerning the Acceleration of Advancement of Science and Technology was issued. The Decision set out the Strategy for Invigorating China Through Science and Education for the first time,making S&T development an important part of social and economic development and a major driver for economic development. Jiang Zemin stated at a National Conference on Science and Technology that, “We must learn from and bring in foreign advanced technologies, while unremittingly striving to enhance China's capability in independent R&D.” He stressed, “We must coordinate our planning for importing foreign advanced technology and domestic independent R&D to organically combine the two. We must avoid blind and repeated introductions of technology. For technologies that we can develop independently, domestic development should dominate.①Jiang,2006” To boost original innovation,enhance capability in independent innovation, and address major issues of demand orientation, in 1997,China developed the National Basic Research Program of China (973 Program). The roll-out of this Program showed that China's national innovative development strategy was shifting from a technology introduction-focused approach towards original and independent innovation. To shape a NIS that fit with the Socialist market economy, accelerated the innovation-driven development strategy, and facilitated integrated development of S&T and the economy, China issued the Decision on Strengthening Technological Innovation, Developing High-Technology and Realizing Industrialization in 1999. This decision provided specific approaches and policy guidelines for fueling leap-frogging development of social productivity through measures as suggested by the title. In 2001, China specifically mentioned“developing a national innovation system” in its national economic development plan for the first time.②The Outline of the Tenth Five-year Plan for National Economic and Social Development of the People's Republic of China. The Bulletin of the State Council of the People's Republic of China, 2001(12).The 10th Five-Year Development Plan for Science and Technology explicitly stated, “China will adhere to integrated innovation and exchange in science and technology,”...“adhere to combining independent research and development with importation, digestion and absorption, effectively strengthening basic research, value original innovation, substantially increase sci-tech input, and continuously improve independent innovation capacity.”③The Bulletin of the State Council of the People's Republic of China, 2001(11).As China was not well positioned in original technological innovation and major invention patents, it was particularly important for China to pursue integrated and secondary innovation, with the latter characterized by an introduction-absorption-re-innovation approach, as a way to generate a great leap in technology. In November 2002, the report to the 16th CPC National Congress stated, “We must encourage scientific and technological innovation and acquire key technology and independent intellectual property rights in key areas and a number of domains in frontier science and technology... quicken the pace of translating research achievements into practical productive forces. We must press ahead with the building of a national innovation system①Jiang, 2006..”

Driven by market-based integrated and secondary innovation, China's overall R&D strength improved notably. According to China S&T Statistics for the relevant years, R&D spending in 2005 posted RMB 245 billion, next only to the U.S., Japan and Germany, or 1.34% of GDP, ranking at the top place among developing countries though there was a big gap between R&D spending to GDP ratios of approximately 3% by innovative countries. During the period from 1995 to 2005, R&D spending to sales ratio of large- and medium-sized businesses rose from 0.49% to 0.76%, digestion and absorption of the technology introduction spending ratio went up from 0.036% to 0.2338%, and domestic technology purchase spending increased from RMB 2.547 billion to RMB 8.34 billion. These developments reflected China's reduced dependence on importing foreign equipment and improved capabilities in integrated and secondary innovation. The production capacity of high-tech products soared, with its share in total goods exports up from 6.8% in 1995 to 28.6% in 2005.

Over this decade, by establishing the Socialist market economy system, China's NIS saw great changes, with improved independent innovation capabilities and original innovation results in a few fields. However, there was a big gap between developed countries as integrated and secondary innovation was constrained by the dependence on existing technology. For example, digestion and absorption of the technology introduction spending ratio, though increasing to 0.036% in 2005, was still far below many advanced countries like Japan who had long kept this ratio at about 7%. As for R&D spending intensity in high-tech industries, only that of the aerospace manufacturing industry at 15.8%approximated the levels in developed countries, while other industries largely had low R&D intensity and scale. This made China a passive follower in independent innovation while the paramount goal of developing China's NIS was to transition from a follower into a leader.

4. Takeoff of market-oriented independent innovation: integrated,secondary, collaborative and original innovation combined (2006 to date)

Technology introduction and imitative innovation following reform and opening up through the mid-1990s laid a strong foundation for subsequent integrated and secondary innovation. The 12 major S&T projects launched in 2002 demonstrated that, in practice, China no longed needed to depend on an innovation model centered on importation and imitation. As integrated and secondary innovation developed, China's technological innovation strength grew substantially, with some major original innovations in basic research, priming China for big strides in the pursuit of independent innovation.Facing challenges posed by economic globalization and a new world sci-tech revolution, China badly needed to drive a shift in its economic growth from a quantity-oriented model to one oriented to quality and efficiency. This posed higher requirements for increasing S&T content in economic development and boosting independent innovation. China's social, economic and technological development required the exploration of an independent innovation path with Chinese characteristics.

In January 2006, then President Hu Jintao explicitly said at the National Conference on Science and Technology, that China would adhere to independent innovation with Chinese characteristics and strive for building a country of innovators, because “only those countries with strong independent innovation capabilities can take the initiative in fierce global competition.” “Real core or key technology cannot be bought, instead we must rely on indigenous innovation.”①Hu, 2006.President Hu noted that “Independent innovation is all about strengthening original innovation, integrated innovation and re-innovation based on importation, digestion and absorption with a view to enhancing national innovation strength.”②Hu, 2006.This marked the beginning of independent innovation with Chinese characteristics, and a thorough shift from the technology introduction approach in the early days following reform and opening up towards an independent innovation approach.

The Outline of National Medium- and Long-term Science and Technology Development Plan (2006-2020) set out a policy for “making independent innovations and "leapfrog" advances in key areas of science and technology and supporting and guiding future development.” The Plan set out the goal of building an innovation-driven country by 2020 and shaping a NIS with Chinese characteristics in an all-round way, finally pulling off the transformation from a big sci-tech country to a world sci-tech power. The Plan also set out specific S&T targets: “By 2020, China will increase its total social R&D spending to GDP ratio to above 2.5% and a contribution rate of S&T progress to above 60%, lower its dependency on foreign technology to below 30%, and drive its annual number of invention patents granted and the number of international sci-tech paper citations to rank among the world's top 5.”③State Council. Outline of National Medium- and Long-term Science and Technology Development Plan (2006-2020), February 9, 2006.

The report to the 18th CPC National Congress pledged to “implement the strategy of innovationdriven development, and pointed out that “Scientific and technological innovation provides strategic support for raising the productive forces and boosting the overall national strength, and we must give it top priority in overall national development. We should follow a path of making innovation with Chinese features and take steps to promote innovation to catch up with global advances. We should increase our capacity for making original innovations and integrated innovations and for making further innovations on the basis of absorbing advances in overseas science and technology, and place greater emphasis on making innovations through collaboration... and ensure that the wisdom and strength of the whole society are directed toward promoting innovation-driven development.”④Hu, 2012.Collaborative innovation is a paradigm of independent innovation that breaks down barriers between innovators and releases the vitality of innovation factors including people, capital, information and technology and partners to realize in-depth cooperation by effectively pooling resources and factors for innovation primarily through state guidance and institutional arrangements. As stressed by President Xi Jinping,“The implementation of the innovation-driven development strategy relates to the future and destiny of the Chinese nation.③Xi Jinping. Notes on the CPC Central Committee's Proposals on Formulating the 13th Five-year Plan for National Economic and Social Development. People's Daily, November 4, 2015.” President Xi also said, “China will make innovation-driven development a major national strategy to drive the shift from a factor-driven and investment-led mode towards an innovationled one.”④This strategic choice marks the point when China ushered in a new era of innovation across the board and innovation by all.

In the report at the 19th Party Congress, Xi Jinping noted that “Innovation is the primary driving force behind development; it is the strategic underpinning for building a modernized economy.” The report sets out the strategic deployment for making China a country of innovators, “We should aim for the frontiers of science and technology, strengthen basic research, and make major breakthroughs in pioneering basic research and groundbreaking and original innovations.” Xi also commented,“To enhance innovation capabilities, China must hone the physical and technological foundations for independent innovation, focus on considering the establishment of national laboratories in some major fields of innovation to pool top domestic and foreign brainpower, and organize collaborative key projects with significant leading effects. By doing so, China is expected to shape its national S&T innovation strength, be recognized by peers, have a greater voice on the international stage, and emerge as a strategic force for innovation in the international race to command the heights of science and technology.”①Party Literature Research Center of the CPC Central Committee (2016). Collection of Treatises on Science and Technology Innovation by Xi Jinping. Central Party Literature Press.

To date, China has been steadily on track for independent innovation with Chinese characteristics by pursuing integrated, secondary, collaborative and original innovation combined. According to S&T statistics from the Ministry of Science and Technology (MOST), in 2016, China's R&D spending totaled RMB 1,567.67 billion, second only to the U.S. China's R&D spending intensity reached 2.11%,staying above 2% for three consecutive years with an upward momentum. Specifically, corporate R&D spending reached RMB 1,214.40 billion, or 77.5% of total R&D spending. So far, China's R&D input intensity has exceeded that of the EU, i.e. the average R&D spending intensity of its 28 member states is 1.96%, which is on par with that of moderately developed countries but less than the 2.5%to 4% of some developed countries. The R&D spending to product sales ratio of large- and mediumsized industrial enterprises grew from 0.77% to 0.94% in 2016, demonstrating an increasing trend.This shows that these large- and medium-sized industrial businesses pay great attention to independent innovation and keep increasing their innovation input. According to the National Corporate Innovation Survey Yearbook 2017, in 2016, about 40% of Chinese businesses conducted innovation activities,with approximately 8% realizing innovation across the board. Manufacturing companies recorded high success rates in innovation. Independent innovation stood out as the dominant form. In the 192,000 businesses with technological innovation activities, 120,000 or 62.5% engaged in collaborative innovation. Among the 160,000 companies that succeeded in technological innovation, 70.8% engaged in collaborative innovation. This is evidence that collaborative innovation has become an important part of corporate independent innovation. Patents are important outputs of such corporate independent innovation. In terms of Chinese large- and medium-sized industrial companies, patents applied for grew from 69,000 in 2006 to 287,000 in 2016. Invention patents applied for increased from 26,000 in 2006 to 770,000 in 2016. Such fast growth trends suggest that Chinese companies have transitioned from pursuing short-term benefits to seeking long-term benefits by enhancing their innovation capabilities by developing independent innovation with Chinese characteristics. The corporate technology importation to R&D spending ratio declined substantially from 18.5% in 2006 to 4.3% in 2016, showing a significant improvement in independent innovation capabilities for these large- and medium sized industrial enterprises and a much reduced reliance on foreign technology. Particularly, the corporate spending in technology digestion and absorption to corporate technology importation spending ratio was sustained at above 23.0%, providing important guarantees for fostering corporate learning and innovation capabilities. Total imports of high-tech goods grew from USD 500 billion in 2005 to USD 1.1 trillion in 2016. Though exports of high-tech goods were still dominated by wholly foreign-owned enterprises (WFOEs) and Sino-foreign joint ventures, their share of the total presented a declining trend from 86.2% in 2006 to 66.4% in 2016. Other businesses, primarily private enterprises contributed 26.4% of the total exports of high-tech goods, maintaining a rising trend. In addition, the share of hightech products exports by SOEs in total sustained small increases, reaching 7.2%.

5. Experience and implications of the development of China's NIS over four decades since reform and opening up

Over the four decades since reform and opening up, the NIS with Chinese characteristics has followed a trajectory from “introduction and imitation of complete sets of technology” to “markets for technology and imitative innovation,” “integrated and secondary innovation” to “integrated, secondary,collaborative and original innovation combined.” Its evolution has the following key implications.

First, reform and opening up has provided a favorable environment for shaping an independent innovation-led NIS with Chinese characteristics. The spread, to Europe, of major technological inventions created by the Chinese nation up to the Ming Dynasty contributed greatly to the Renaissance. In contrast, the closed-door policy following the late Ming widened the gap between China and the West, which reduced China to the victim of Western predatory powers. “This period of history has taught us a lesson, that to develop, progress and prosper, China must open its door to the outside world, increase economic S&T and cultural exchanges and cooperation with the rest of the world, and absorb and draw upon all advanced things.”①Jiang, 2006.President Xi Jinping has reiterated the dialectical relationships between opening up and independent innovation on many occasions. He remarked that, “We must firmly adhere to the opening up strategy, but also must facilitate independent innovation in this process.”①See http：//www.chinanews.com/gn/2016/04-28/7852481.shtml.“Independent innovation requires an open environment, instead of a closed-door which will never work. It should pool and leverage resources from across the world.②Xi Jinping. Speech at the 19th Meeting of Academicians of the Chinese Academy of Sciences (CAS) & the 14th Meeting of Academicians of the Chinese Academy of Engineering (CAE). Xinhua News Agency, May 28, 2018.”

Second, S&T system reform and institutional innovations laid a solid foundation for establishing an independent innovation-driven NIS with Chinese characteristics. In the 1980s, the Chinese government decided to launch resolute, measured reforms to its S&T system which geared S&T activities to serve the main field of economic development, increased the commercial translation of S&T results, and made clear the relationship between China's S&T system reform and building a country of innovators. China reinvented its S&T incentive system, intellectual property system, S&T results translation system, S&T credit management system and capital markets, which unleashed and mobilized innovation forces,facilitated more effective allocation of S&T resources, fundamentally changed the dichotomy between S&T and the economy, and pushed ahead the establishment of a NIS across the board.

Third, the Chinese government played a leading and guiding role in building an independent innovation-driven NIS with Chinese characteristics. Four decades of experience since reform and opening up have proven that relying on executive power alone to allocate innovation resources or fully leaving it to the market have their respective limitations. The leading role of government is reflected in top design of and macro-control over the development of an independent innovation strategy. Government promotes the improvement in independent innovation capabilities by developing a national innovation strategy, plans and programs, and leveraging economic and legal means to guide independent innovation. While, the guiding role of government involves creating a favorable environment for innovation. Government does not directly intervene with independent innovation,instead it reduces organizational barriers and encourages corporate independent innovation and market competition by facilitating the sharing of innovation resources, establishing generic innovation platforms, and other means. The aim is to guide the free flow of people, capital and other innovation factors.

The evolution of China's approaches to NIS reveals that the NIS has evolved from weak to strong,from a follower groping the way onto the track of independent innovation with Chinese characteristics.This trajectory followed a historic logic from “science and technology are productive forces” to“science and technology are primary productive forces,”③Deng Xiaoping (1993). Science and technology are primary productive forces. Selected Works of Deng Xiaoping (Vol.3). People's Publishing Housefrom “invigorating China through science and education” to “enhancing independent innovation capabilities,” and from “building a country of innovators” to “innovation-driven development strategy.” Underlying this historic logic is the technology catch-up theory of latecomers. The prerequisites for technology latecomers to catch up in both economic development and technological innovation include the ability to absorb, imitate and apply and reinvent advanced technologies, and technical innovation capabilities based on this. The independent innovation path of China's NIS has put in practice the catch-up theory. When China possessed certain capabilities to absorb technology, the first thing to do was to enhance the diffusion rate of imported technology by directly acquiring and importing advanced foreign technology and give play to latecomer advantages to expand production capacity; second, by strengthening reinnovation capabilities built on imported technology, enhance the diffusion rate of improved introduced technology and leverage cost advantages to increase productivity; and finally, by implementing the independent strategy to encourage, support and facilitate S&T resources and technology markets,enhance independent innovation capabilities, boost industrial competitiveness and pursue independent innovation-driven technology catch-up and development by leaps and bounds. History has told us that only through independent innovation can we acquire core technology with proprietary intellectual property rights, thus overcoming the bottleneck of technology monopolies in global competition,protecting national interests and security, safeguarding the sustainable development of the economy and society, and ultimately realize the great rejuvenation of the Chinese nation.

Over the four decades following reform and opening up, the NIS with Chinese characteristics has undergone a process from introduction, digestion and absorption to innovation. This process has taught us a few lessons: core technology cannot be bought with money; the “markets for technology” strategy had its limits; and the lack of impetus for innovation impedes the development of an innovation system.Drawing up thee lessons, going forward, to pursue sustainable independent innovation, China must accomplish the following two aspects.

One is the leapfrog development of independent innovation that requires more input in basic research. In 2016, China's basic research spending accounted for 5.2% of total national R&D spending,much lower than about 20% of most developed countries. The National Medium- and Long-term Development Plan (2006-2020) set out 20 strategic projects, of which only one is basic science. This seems to indicate that weak basic research is a weakness of China's independent innovation. The ZTE chip episode in 2018 suggests that, a major bottleneck of China's technological innovation lies in its weak basic research. In a new era where original innovation competence and intellectual property are increasingly important, it will be costly to share basic research results with developed countries.

The other is, in response to the call for “continuing to put enhancing independent innovation competence at a prominent position” and “building a country of innovators,” independent innovation requires creating an innovation culture and advocating innovation education, while further rolling out supporting measures that directly motivate integrated, secondary, collaborative and original innovation combined. There is an inherent need to address the lack of impetus for innovation to create an innovation culture that advocates innovation, pursues successes and embraces failures and to raise people's awareness of intellectual property. Among existing planned supporting policy measures,there are very few measures that link the four forms of independent innovation. In 2016, China's corporate technology importation spending to digestion and absorption spending ratio recorded 1:0.23.In contrast, this ratio was about 1:3 in developed countries, with some key fields up to 1:7. Here is the functioning mechanism for enhancing independent innovation competence: encourage businesses with fiscal, financial, tax and other incentives to carry out secondary innovation based on digestion,absorption and re-innovation, and built on this, facilitating integrated and collaborative innovation of technology and resources, and finally pursuing original innovation that masters core technologies and proprietary intellectual property rights.