In his government work report to the annual National People's Congress (NPC) session in early March, Premier Li Keqiang highlighted the need for China to further implement the innovation-driven development strategy. He said China will promote scientific and technological innovation for industrial upgrading, eliminate the bottlenecks in supply chains and realize high-quality development through innovation. “To achieve innovation, core technology is a key,” said Ni Guangnan, Academician at the Chinese Academy of Engineering (CAE). Ni said that over the past year, China has made new breakthroughs in core technologies, including information technology. Domestic CPUs, operating systems and other basic digital technologies have been put into wide use. “Although the overall market share is small, the absolute number of such products has reached 10 million,” he said. “It fully demonstrated that China, as a super large market, has great advantages in driving innovation. The country’s scientific and technological innovation capabilities have also been significantly improved.”
In semiconductors, the government has intensified efforts to develop chips at home so as to reduce reliance on the foreign semiconductor industry. This generated unprecedented levels of enthusiasm and funneled capital from Chinese entrepreneurs into the domestic semiconductor industry, with even carmakers jumping on the auto chip bandwagon. According to market consultancy Preqin, China surpassed the United States in terms of semiconductor financing last year. Chinese chipmakers, integrated circuit designers and other semiconductor startups received USD8.8 billion in funding last year, more than six times the USD1.3 billion invested in comparable U.S. companies. Ding Wenwu, President of the China Integrated Circuit Industry Investment Fund, said that although investments in the chip design segment increased over the past decade, more efforts are needed in the fields of chip materials, equipment and manufacturing. “Chip design has a lower technological threshold and quick investment returns. But chip materials, equipment and manufacturing are the areas where China lags behind developed countries such as the U.S.,” Ding said.
China will raise the pretax deduction of research and development (R&D) expenses of small and medium-sized sci-tech enterprises from 75% to 100%, grant tax breaks to enterprises that invest in basic research, and accelerate the depreciation of equipment and tools. Preferential corporate income tax will be available for new and high-tech enterprises. “Our policy of tax and fee reductions is like applying fertilizer and water, and the initiative for mass entrepreneurship and innovation aims to help more market entities take root and grow,” said Premier Li at a news conference after the closing of the NPC session.
The 2022 draft plan for national economic and social development specified that faster breakthroughs in core technologies such as bio-medicines, high-end instruments, green and low carbon energy and basic software will be a priority. China will also intensify efforts to develop national laboratories, major research projects and innovation centers in Beijing, Shanghai and the Guangdong-Hong Kong-Macao Greater Bay Area. Liu Qingfeng, Chairman of iFlytek, a smart translation company, said such policy support has stimulated the vitality of high-tech companies and inspired more entrepreneurs to pursue innovations. “Companies should promote systematic innovation based on original innovations and continuously improve their ability of integrating key technologies into industries. More efforts are also expected to be made to guide tech and market talent to join in,” Liu said.
Premier Li's report also highlighted the efforts of developing the digital economy, building more digital information infrastructure, applying 5G technology on a larger scale and advancing digitalization of industries. Accelerated efforts will also be made for the development of fields like the industrial internet, artificial intelligence, key software and critical hardware, the report said. According to the China Academy of Information and Communications Technology, China’s digital economy reached USD5.4 trillion in 2020 in terms of market size, a growth of 9.6% year-on-year, the fastest worldwide.
“China’s digital economy has become a new driver of the country’s economic growth and will play an important role in driving economic recovery globally,” said Gong Ke, former President of the World Federation of Engineering Organizations and Executive Director of the Chinese Institute of New Generation Artificial Intelligence Development Strategies. China will scale up spending on R&D by more than 7% annually during the 14th Five Year Plan (2021-25) period to drive more technological breakthroughs, and according to McKinsey & Co set the country on the path to becoming the world’s largest spender on R&D.
One example of an innovative Chinese “little giant” is Chengdu-based XGIMI, China's largest intelligent projector manufacturer. Zhong Bo, CEO of XGIMI, said the company aims to become “the largest intelligent projector firm worldwide”. In 2020, its overseas revenue increased more than 300% year-on-year. China has 4,762 national-level “little giant” companies and over 40,000 provincial-level firms, the China Daily reports.