【Research Center for the Legal System of Intellectual Property】

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Could private companies be the savior of technical innovation in China?

RC Yi YUAN

China has introduced foreign technology from former Soviet Union in the 1950s and from industrialized capitalist nations since 1972. Until the 1990s, there was no long-term consistency in the policy of technology transfer because the policy changed a lot in conjunction with political moves.

Although technology introduction has been steadily promoted since the 1990s, the degree of dependence on foreign technology in 2005 was 50 % and the degree of dependence on import of facilities like factories ran as high as 60%. In addition, China pays 20% of the sales of domestic cellular phones and 30% of the sales of domestic computers as patent royalty to overseas.

One of the reasons for the dependence on foreign technology is the "foreign addiction", which can be seen at many Chinese companies. Among Chinese companies, the idea is established that technology innovation equals technology introduction. Few companies develop their own proprietary technology. Only 0.03 % of all Chinese companies possess core proprietary technology.

However, medium and small companies play an important role in technological innovation in China. Currently 65 % of Chinese patent of invention was done by medium and small companies. Especially there are more than 140 thousand private technological companies. The number of employees is more than 12 million. The percentage of engineers is over 30%.

The increase of labor cost has weaken China's competitiveness as a "world's workshop". Now is the time for Chinese lasting economic development to rely on not only technology introduction but also nurture of medium and small companies which are building up technological capabilities.