Science and technology policies, industrial reform and technical progress in China : can socialist property rights be compatible with technological catching up?

This paper analyses the quest for technological progress in China, a large, semi-industrialized, socialist developing country. In the introduction, it is argued that international income convergence is not an automatic product of market forces. Therefore, the path of technological progress in a less advanced country is dependent on its bsorptive capacity, which can be enhanced by the development of an effective national innovation system. The specific meaning attached to key terms such as technological progress, market-compatibility and “socialism” are also explained. Section II briefly illustrates the relative position of China in the international division of labour, as well as some basic economic and social indicators. Section III contends that the huge amount of FDI flowing to China is not per se a major source of technical progress, but important gains can be obtained t h r o u g h strategic bargaining with large transnational corporations from industrialized countries. Section IV sketches the main lines of evolution of Chinese technological culture since the inception of the reforms and provides basic data on China’s R&D system. Section V analyses the new focus of innovation and research policies and describes the major science and technology programmes. Section VI shifts the analysis to the level of industrial enterprises, arguing that a kind of symbiosis exists among the two groups of public firms. Collective enterprises reali ze their comparative advantage specializing in simpler industrial activities and benefit from technological spillovers from state-owned enterprises, while the latter are undergoing a process of upgrading and rationalization in order to gain a strong position at the upper end of the technological spectrum. This section also presents and illustrates aggregate data on production and employment trends in China’s industry and proposes a tentative estimate of the technical change component of labour productivity growth in state-owned enterprises, showing that it has been substantial and increased in the late 1990s. Section VII concludes that China’s experience so far shows that a radical improvement in a socialist economy’s ability to achieve technical progress is not inconsistent with the reaffirmation, in a new and diversified form, of a fundamentally public framework of property relations.