R&D, innovation and China's 'peaceful rise'

When the EU Commissioner for Regional Policy Danuta Hubner recently visited Malta I got the impression that Government was far more interested in the infrastructure and the environment - laudable as these sectors may be - than in catching up in research and development (R&D), and innovation, where we happen to lag behind so badly that the EU Commission feels that it might take another half a century before we can reach the EU25 average.

We cannot gauge the strides forward necessary in these sectors in isolation or solely within a strictly EU perspective.

If we are to take stock of the threats and opportunities that globalisation poses we must also gauge the way countries like China and India are adapting to R&D and innovation in this day and age.

The Chinese have a penchant for developing buzz words when describing their new policies.

Their latest buzzword is China's 'peaceful rise', which asserts that China can thrive economically in a peaceful environment and also serve as a catalyst for global peace.

Premier Wen Jiabao made it clear recently that China's rise "will not come at the cost of any other country, will not stand in the way of any other country, nor pose a threat to any other country".

China watchers feel that this policy's focus is an attempt to continue to grow economically and increase China's diplomatic presence while keeping relations with other nations peaceful.

The British think tank The Foreign Policy Centre recently issued a highly interesting working document entitled: 'China's secret weapon? Science policy and global power'.

Where applicable some of its conclusions are highly relevant to a small country like Malta, positioned as we are in the central Mediterranean and by now an active member of the European Union.

Foreign invested R&D centres in China have almost quadrupled to 750 over the last four years, so much so that China is now ranked third in the world for total R&D spending.

It estimates that by 2010 it will have the same number of science and engineering graduates as the United States.

China is a technologically hungry nation in the sense that while good at development and adaptation of technology, it is not necessarily yet successful at independent innovation.

The Chinese leadership is determined to change this. It placed growing emphasis on the concept of "made by China" rather than "made in China".

As President Hu Jintao is reported to have said "borrowing and importing can never replace innovation".

The recent 2006 session of China's National Peoples' Congress has confirmed the high priority which China plans to give R&D.

The report rightly highlights the following factors:

¤ the priority China now places on extending its capacity in scientific education and training; and

¤ the growing emphasis China is now placing on encouraging private sector investments in R&D.

If China aspired to be a leading global power in the field of science and technological innovation, it needs international collaboration with more and more global companies undertaking research activities in China.

While many think that China is merely interested in seeking inward investment from abroad, the British think tank's report shows that the United Kingdom is seeking to increase efforts to attract more Chinese investment to the UK and particularly to encourage Chinese companies to base their overseas R&D centres in the UK.

What is Malta doing in this regard?

Has Malta Enterprise woken up to this new reality?

The China-Britain Business Council (when is something similar to be set up with local corporate interests?) has set up an Innovation and Technology Forum to increase UK commercial R&D partnerships with its Chinese counterparts.

Although many think that America is a net beneficiary of globalisation, we must bear in mind that globalisation is drawing away from the US the assets that have sustained its technological prowess over the decades.

Regarding the 2000 Lisbon Agenda to make the EU the most competitive and innovative hub in the world, there seems to be general consensus that this target seems unattainable as the EU25 struggle to do either.

Europe was the only area where the private sector failed to invest more in R&D than the previous year.

Only a few of its universities are in the top 20, while the rest are American.

Malta can gauge its progress or lack of it in the R&D sector by estimating our GERD, which represents our Gross Expenditure on Research and Development.

While Eurostat shows that we spend one tenth of the EU average in terms of our GDP, China has the largest GERD of GDP of any non-OECD nation.

The entrepreneurial culture in Malta is not being cultivated as actively as it should or could.

Although many think that Chinese R&D thrives because of government funding; the government has been pulling out of providing the bulk of finance to R&D. So much so that by 2004, 60 per cent of R&D funding was coming from enterprises. This has partly been accomplished by reducing financial aid while nurturing enterprises through tax relief or development zones.

This does not mean that the role of the state has been eliminated. The transition to reliance on market mechanisms is still incomplete while state influence remains felt across industries.

China is today trying to create a balanced agenda, between high level technology and more basic research. Yet analysis of the science and technology (S&T) system in China reveals that the majority of R&D activities are focused on applied research.

Firms have been encouraged to develop their own in-house capabilities and have taken over many R&D activities that had once been conducted by government-run institutes.

The measure of China's S&T output and input reports growth at a pace that is distancing it from other developing countries and pushing it toward more developed nations.

China's enormous market potential, increasingly educated population, multiplying home-grown talent and growing venture capital and FDI virtually guarantees that China will become a major innovative force in the global economy.

The report draws a worrying conclusion for the West. Primarily that as China becomes an alternative to Western science, money, jobs, trade, intellect and discovery will be drawn there.

This will inevitably reduce the influence of the US and the EU. China's appearance on the international stage as a technologically capable power will offer an alternative to the West.

There is one important lesson even for a tiny island like Malta - today a full EU member.

The real challenge for the West is therefore two-fold.

Maintaining its own scientific momentum and integrating Chinese S&T into the global network of innovation.

I am not implying that we should or could ever dream of catching up with China, but, on the ground, what is really being done to catch up with other entrants into the EU who joined on the same day that we did? Certain comments I heard from the Maltese side during Commissioner Hubner's visit did not encourage me much. leo.brincat@gov.mt

Leo Brincat is the Shadow Minister for Foreign Affairs and IT.