For the past two decades, China’s spending on research and development (R&D) has grown significantly, reaching a record high in 2019. A reflection of the strategic shift in its economy, China now spends more on R&D than most countries in the world. China is surpassed only by the United States, and not for long – the UK Research and Innovation Agency predicts that China will be the world’s leader in R&D expenditure by 2022. The expedited economic recovery in China from the COVID-19 pandemic and the increasing tech competition with the U.S. may cause this transition to occur even sooner.
This rise of China in the R&D sector has caused concern in some countries – specifically with regard to China’s rise in the academic R&D sector. Academic R&D is classified by the Organisation for Economic Co-operation and Development as R&D collaborations at or between higher-education institutions. Academic R&D, often pursued through international collaborations, is important to economies in that it has the capacity to produce innovative ideas and technology, which can then 1) turn into intellectual property and 2) increase overall productivity and prosperity.
For a few years now, commentators in Australia, the U.S., and the U.K. have openly criticized academic collaboration with Chinese institutions, to the point of implementing legislation to control how these institutions engage with foreign partners. In Canada, too, China’s rise in R&D and bilateral academic collaborations with Chinese institutions are under increasing scrutiny.
China’s key to R&D growth
China’s overall economic growth has been unparalleled, described by the World Bank as the fastest sustainable growth by any economy in recent history. Despite this feat, China’s real GDP growth per year has started to slow down, dropping from 10.6 per cent in 2010 to 6.1 per cent in 2019. In response – and to stimulate economic growth – the Chinese government has begun to push a new economic growth model less focused on exporting and more focused on private consumption, domestic innovation, and R&D.
R&D especially is now proving to be one of the top priorities for the Chinese government. While China has long encouraged companies to increase their R&D spending and strengthen their innovation capabilities, China’s most recent five-year plan (2015-2020) set the ambitious goal of spending 2.5 per cent of its GDP on R&D by 2020. In 2019, China reached 2.23 per cent.
In addition, the release by China’s Premier Li Keqiang in 2015 of the Made in China 2025 (MIC 2025) initiative set the task of upgrading the manufacturing technological capabilities of Chinese industries and increasing the Chinese-domestic content of core components to 40 per cent by 2020 and 70 per cent by 2025. Although the MIC 2025 plan has disappeared from official discourse, it remains behind China’s push in R&D. As China looks to its science and technology sector to boost its economy post-pandemic, the trend will likely only accelerate.
Made in China 2025
MIC 2025 targets ten key sectors, including information and communication technologies (ICT), artificial intelligence (AI) and robotics, biotechnology and pharmaceuticals, and new energy. The goal is that by 2025, China will be the global leader in each of these sectors. As part of the initiative, hundreds of government funds were created to help finance R&D for Chinese companies, and significant tax benefits were promised to firms engaging in related R&D.
China’s progress in R&D investment has been impressive. Five years after the initial unveiling of MIC 2025, China has seen growth in fields such as AI, transportation equipment, and new energy. However, the past five years have also demonstrated that despite the initial goal of becoming the global leader in these sectors, China still has a significant dependency on foreign technology.
A re-focus of MIC 2025 priorities
China has not been able to produce certain fundamental base technologies domestically and still finds itself needing to import new materials, semiconductors, and the most advanced components and machinery. For example, while China makes up 60 per cent of the global demand for semiconductors, it only manufactures 13 per cent. This weakness proved evident when the U.S. implemented trade measures affecting the sale of U.S. chips to Huawei Technologies and ZTE Corp in 2019/2020, greatly hindering the ability of both companies to produce their technologies.
With this in mind, China has recently re-focused its MIC 2025 plan to prioritize domestic R&D efforts in the fields of manufacturing, new materials, and next-generation IT in an attempt to alleviate its dependency on foreign technology. Ironically, the threats of decoupling between the U.S. and China and Washington’s move to counter Chinese influence by banning chips have actually accelerated China’s domestic R&D focus. Indeed, with these new MIC 2025 priorities, China’s development of domestic innovation, production, and manufacturing capacity seems primed for continued growth.
Looking ahead: 14th Five-Year Plan (FYP), and China Standards 2035
China’s 14th Five-Year plan is set to be released in March of this year, although early discussions have provided insight into some preliminary priorities. First, we can expect the focus to remain on innovation and technological advancement, with self-reliance and self-sufficiency being promoted as goals for the Chinese economy. Continued investment in R&D will also be featured as a key theme in the upcoming growth plan, with a focus on the following sectors: AI, aerospace, integrated circuits, IT, and life and health science. The plan is also expected to outline continued support for companies and businesses that conduct R&D activities. China will also continue to prioritize research partnerships, talent programs, and the establishment of overseas R&D centres.
A medium-term strategy titled China Standards 2035 is also set to be released soon. It is a 15-year plan focused on technology and is meant to complement and build on the MIC 2025 – which implies that we can expect the R&D focus to continue. The release of these two plans is certainly something to keep an eye on, but for now, it appears that China’s R&D focus is here to stay – if not set to grow.
Western countries’ growing concerns regarding academic R&D collaborations
The U.K., the U.S. and Australia react . . .
Currently, businesses account for the most R&D spending in China, followed by government and then institutions of higher learning. However, in 2019, expenditure by higher learning institutions rose by 23.2 per cent compared to 2018. This substantial increase indicates that academic R&D is quickly becoming an important avenue for R&D spending in China. In comparison, the U.S. reported a 5.7 per cent growth in higher institution R&D in 2019 compared to 2018, and Canada reported a 5.2 per cent increase.
While international collaborations between universities are being praised for the benefits they bring to both sides, they are also becoming a cause for concern in some countries. For example, early in December, Australia passed the Foreign Relations Bill. The bill requires any Australian subnational entity, such as state governments, cities, or universities, entering into an agreement with a foreign organization to have ministerial approval before proceeding.
When announcing the legislation, Australian Prime Minister Scott Morrison emphasized that it is not intended to target any particular country. However, analysts widely suspect that this bill is aimed towards China and was implemented partly in response to recent collaborations between Australian universities and Chinese academic institutions. Universities, in particular, have openly critiqued this bill, stating that it could severely impact academic collaboration and innovation, especially considering the important contributions that Chinese researchers have made to the research landscape.
While this bill is surprising to many, it does not seem to be unprecedented in its goals – in May of 2020, then-President Trump issued an Executive Order stating that the United States would take away visas for any student or researcher with direct ties to the Chinese military. Trump alleged that the Chinese government was conducting “illicit espionage” through research knowledge acquired at American universities. This move was also highly critiqued, with academics stating that revoking visas would be disastrous for the academic community.
More recently, on February 8, it was announced that about 200 scholars from 12 U.K. universities were being investigated for unknowingly breaching export laws and transferring research in advanced military technology to China. If found guilty, the academics could face up to 10 years in prison.
Rising anxiety in Canada . . .
While some approve of the increased scrutiny that academic collaborations with China are now under, others emphasize the importance of academic freedom, and the negative impact that any kind of regulation on collaborations would have on the research landscape. Others still point to the important contributions that Chinese researchers have made to the research landscape in countries like the U.S., Australia, and Canada. For example, the Paulson Institute found that about one-third of the most advanced AI work in the U.S. is performed by Chinese nationals. The same goes for Canada – while there can be risks involved, academic collaboration with China is beneficial to Canada’s economy and research landscape.
Canada and China have a strong history of academic collaboration on R&D, which has led to the development of new and innovative technologies in sectors such as clean energy, transportation, and nanotechnology. For example, the Joint Research Centre for Future Energy and Environment, a collaboration between the University of Alberta and Tsinghua University, is developing low-carbon, sustainable energy solutions to fight climate change.
However, some question China-Canada partnerships. Experts have raised doubts about the real benefit of these partnerships for Canadians, and others have warned that core technologies behind China's surveillance network and repressive regime have been developed via partnerships with Canadian universities. Just recently, in a speech on February 10, the director of the Canadian Security Intelligence Service (CSIS) declared that Canada's most advanced sectors face a severe threat, partly due to the potential security risks that are associated with international academic collaboration.
Those critical of the current system state that there is minimal oversight regarding international academic collaboration. Of particular concern is the lack of any regulated mechanism for tracking R&D collaborations within universities because it is the responsibility of individual professors to initiate and manage their own partnerships. This means that in addition to an absence of regulation surrounding collaborations, there is also little knowledge within Canadian universities of the collaborations that are taking place.
A better understanding of the nature and outcomes of academic collaborations between China and Canada – while still ensuring the preservation of academic freedom within the Canadian research landscape – would help Canadian policy-makers craft policies beneficial to the Canada-China relationship and Canada’s economic and security interests.