One of WIM2020’s first speakers was Yang Yao, who spoke as dean of the National School of Development about the global implications of China’s Development path from the Perspective of Technological Innovation.
On December 9-12, EqualOcean was holding the World Innovators Meet (WIM) 2020. This year, the event's main topic was 'Technology and Innovation Connect the World.' WIM2020 gathered innovators from Asia, Africa, Europe and the Americas to share their knowledge and key achievements, promoting the concept of 'Tech for Equal.'
"China has the most complete industry chain around the world, which is progressing towards high-end products," underlined the lead speaker for the Leadership Chapter, Yang Yao.
During the 9-12th of December, innovators from all over the world met up online to discuss key achievements in 2020, marking out how breakthroughs are adding convenience to everyday life. Yang Yao, as the dean of the National School of Development at Peking University, spoke about China's great innovation and technological progress over the past 40-70 years, which was significant for developing countries and also added motivation for the developed countries.
At the beginning of his speech, Yang Yao focused on particular aspects of China's progress in the past 20-30 years.
First, investments in innovation and technology research. The pace of a country's technological and innovation progress depends on the investments in this field. Last year, China's investments in innovation and technology reached 2.17 trillion US dollars, which was 2.19% of GDP; total share was 2/3 of the amount the USA invested. There is still a big gap between China and America, but both countries have made great progress. Compared with other countries with the same income level, China's investments in technology and innovation are far ahead.
Secondly, a number of patents. China is already first in the world in terms of the number of patents. The real number of invention patents is relatively small; the majority consists of design patents. However, the number of inventions is also rising very fast, which shows China's innovation and technological strength.
Thirdly, the value-added proportion of exports has been greatly increased, because in recent years China has made great efforts to upgrade all its products. The value-added of processing trade in exports has risen fast in the past 40 years, and now it fluctuates between 40 and 50%. The value-added of general trade should be greater. The real estate chain is moving towards the high-end real estate chain.
On the one hand, total factor productivity is very important for economic growth. It's one of the indicators that economists use to measure the efficiency of a country or an enterprise. Particularly, it is the economic growth rate after deducting the growth of capital and labor. The growth of a country or an enterprise depends on the growth of labor and capital, and the other is the rate of technological progress. Therefore, TFP is a comprehensive indicator that shows the country's technological progress. In the past, some economists found that the growth rate of total factor productivity in China is only 20% of the total GDP growth, while in developed countries it is 40-50%. It means that China's economic growth efficiency is relatively low, and economic growth is mainly achieved by capital accumulation; before 2010 it was completed by labor growth. If we use another method (rate of change in the company's growth rate and rate to return) to calculate, the average growth rate of total factor productivity will be 4.1% per year, and the average contribution rate of total factor productivity growth to economic growth is 41.9%, that has reached the level of developed countries. Therefore, China's technological progress rate is relatively fast.
On the other hand, China's enterprises are developing very fast. In 2009, the number of Chinese enterprises in the Fortune Global 500 was only 30, and China has surpassed Japan to become the world's second-largest economy. After 10 years, there were 119 enterprises. And this year, China surpassed the USA, ranking first in the world. Chinese enterprises are not only large but also technologically advanced – e.g. Huawei, which has occupied 40% of 5G technology; the BAT companies have also a big success.
How did China achieve it? Yang Yao thinks that we should not separate the 70 years of the People's Republic of China. During the first 30 years, China adopted an unconventional way of development. At that time the rapid accumulation of capital in the shipbuilding and chemical industry was the most important. Now, 40 years after the start of reform and the opening up to the outside world, China has changed its development model and improved at a technical level. So China as the largest country in export categories; resource-based products, clothing and other products have been declining.
This year's export level in electronic products is more than 30%; the largest export products are mechanical products that were the foundation in the era of the planned economy. In the past, China's machinery didn't reach the world's leading level in infrastructure and manufacturing equipment fields, so China's machinery has been improving for 40 years. But now we can see that 50% of fields are machinery.
Why was China's progress significant for the world? Industrialization. India has begun to shape a strategy based on the idea that India should transfer all high paid jobs to India, and India should be a 'world office.' China is or was known as the 'world factory;' the office is for white-collar work, world factory or white-collar work is a harsher occupation. Yet there are many problems with this idea – we find that that the industrial profile is crucial if a country is to become a world power in anything. Yang Yao believes that if you don't have a well-developed industry, if your investment industry is low-cost, then you can't have high-cost investment industries, such as finance, insurance, design and so on. In this regard, India still has a low-cost investment industry.
The manufacturing industry also has its advantage, which is called accumulated capital. The capital strength is relatively high, the speed of capital accumulation recovers quickly, and becomes a source of technological progress. You may say that I have made technological progress in the service industry, but the types of the service industry are not enough. The types of products produced by the manufacturing industry should be infinite. Economists give the supply first and then look at the demand.
Before Apple produced the iPhone, Apple created such demand, but only when the manufacturing industry developed, Apple could participate in the world economy. This meant that the most important thing in the world is manufacturing. If you can't make products, you will fall behind in the world competition.
Historical experience tells us that a country can't become a world power without industrialization and manufacturing – because no country or region has yet been found to have become a high-income country or region without industrialization and manufacturing.
How do we look at the last 30 years and the next 40 years? The first 30 years laid the groundwork for a basic breakthrough. In the next 40 years, we will comprehensively set off the accumulation of capital and then drive innovation, so we can be sure that the explosive development of all innovation and technology will continue over 30 years in the future.
Could the government promote technological progress? This question still has no answer. Is industrial policy going back to government policy? Yang Yao's opinion is that the role of the government should be divided into periods and regions. In the early days, the role of the government was very great because, at that time, funds were scarce, so it would be better to use them in focused projects. The technical route was relatively clear and the government had the funds to carry out this movement towards innovation.
Now the role of the government is not as big as before. Our technology is close to the world's leading-edge, and there is no one in front of us. In this case, if you are still invested in by the government, it's inappropriate, because the government's funds are the money of the people, and shouldn't be wasted. We need a wide range of innovation and technology. The trial and error process of the market is more suitable than the centralized investment of the government. The market's failures are decentralized and will not affect the overall situation. If the government fails to invest, it will affect the overall situation. Moreover, the market has its mechanism to recoup the losses of these investment failures through the stock market, the bond market and so on.
"I would also like to say that China's achievements in innovation and technology in the past 40 or even 70 years were very great. These achievements are very significant for the developing countries and the whole world. But I think that the probability of failure will be very high if the industrial policies of developed countries are reintroduced," summed up Yao Yang.
About WIM
Hosted by EqualOcean, the World Innovators Meet (WIM) (click to watch the online event on December 9-11, 2020) is a global event for innovators. It provides limitless opportunities to learn from and connect with the most sought-after technology pioneers.
About WIA
The World Innovation Awards (WIA) are announced at WIM to recognize game-changers across various industries and geographies. Selected by a committee of distinguished experts, entrepreneurs and investors, WIA are designed to acknowledge technology disruptors striving to make a positive impact on a global scale.
See this year's WIA lists and download the research reports in English and Chinese on EqualOcean and 亿欧智库 respectively.