ASIAN RISE IN ICT R&D Looking for evidence. Debating collaboration strategies, threats and opportunities Trends in the ICT industry and ICT R&D in China Ling WANG, Shiguo LIU Institute of World Economics and Politics (IWEP) Chinese Academy of Social Sciences (CASS) Brussels, Belgium Feb 16-17, 2011
Contents A. ICT Sector B. ICT R&D C. Conclusions 24 February 2011 2
A. ICT Sector 1. ICT sector in general 2. Structure of ICT 24 February 2011 3
Special Policies to Support ICT As in national strategies, ICT has been one of the most important subsectors since mid 1980s. ICT became one of 10 industries to be restructured and revitalized since 2008 Other supporting policies: tax holiday, R&D grant, green road to capitalize in security market, availability of bank credit, application and protection of IPR, etc. 24 February 2011 4
ICT Sector: Value Added ICT has risen as a pillar industry of China economy, but its ratio of VA to gross output ranks the 36 th lowest in 39 sub-industries during 1997-2006. ICT s value added, 2006 ICT National Value added, billion Euros 177 2110.00 Share in GDP, % 8.40 100.00 Annual growth rate, 1997-2006, % 30.58 a 15.05 Ratio of VA to gross output, % 21.42 38.88 b *Note: a. Growth rate for ICT manufacturing is nominal. b. National ratio of GDP to gross output is for year 2002. 24 February 2011 5
ICT Sector: Foreign Trade & Employment ICT s more highly externally oriented than non-ict industries. ICT s foreign trade & employment, 2006 ICT manuf. National total* Share of ICT man. in national total* (%) Export, billion Euros 323.7 773.0 41.9 Import, billion Euros 214.6 599.4 35.8 Surplus, billion Euros 109.1 173.6 62.8 Employment, million persons 7.6 764.0 1.0 Annual growth rate, 1997-2006, % Export 35.8 23.1 Import 31.5 23.7 Employment 11.5 1.0 *Note: a. ICT sector here covers only ICT manufacturing, telecommunications, computer and related activities. b. The data on national total for export and import only cover trade in goods. 24 February 2011 6
Structure of ICT Sector ICT services succeeded in catching up with ICT manufacturing by higher growth rate. Structure of ICT: manufacturing vs services Value added, billion Annual, growth rate, % Share in GDP, % Share in ICT, VA, % 1997 a 2006 1997-2006 1997 2006 1997 2006 ICT Manuf. 11.9 94.0 25.8 1.37 4.46 61.7 53.4 ICT services b 7.4 82.2 30.7 0.85 3.90 38.3 46.6 *Note: a. the unit for value added in 1997 is ECU while growth rates are nominal. b. ICT Services are composed of the followings: telecommunications and other information transmission services, computers services, and software. 24 February 2011 7
Structure of ICT Sector Guangdong, Jiangsu and Shanghai accumulated more comparative advantages than other provinces. Location of ICT industry: Top 3 vs Top 10, % Rank Region Shares in ICT s VA, % Shares in ICT s export, % 2006 Change from 1995 2006 Change from 1995 1 Guangdong 35.8 +6.2 41.7 15.0 2 Jiangsu 21.2 +12.4 21.7 +16.1 3 Shanghai 11.1 +0.3 16.2 +10.0 Top 3 68.1 +18.9 79.6 +11.1 Top 10 95.7 +12.0 99.2 +2.9 Note: Regions are ranked by shares in ICT s VA in 2006. 24 February 2011 8
B. ICT R&D 1. ICT R&D in general 2. ICT R&D strategies 24 February 2011 9
ICT R&D in general ICT contributes increasingly to China s R&D expenditure. R&D expenditure of ICT manufacturing, 1999, 2002 and 2006 1999 2002 2006 BERD of ICTm., billion Euros 0.57 1.86 3.83 GERD, billion Euros 7.70 16.53 30.02 Share of ICTm BERD in GERD, % 7.42 11.24 12.77 24 February 2011 10
ICT R&D in general ICT shows much higher R&D intensity than non-ict industries. R&D and R&D intensity, ICT sector vs national, 1999-2006 35.0 30.0 25.0 20.0 billion euros R&D intensity of ICT manufacturing (right) National R&D intensity (right) % 5.0 4.5 4.0 3.5 3.0 15.0 2.5 10.0 5.0 2.0 1.5 1.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 0.5 Note: Total GERD (left) national RD internsity (right) BERD of ICT manuf. (left) RD internsity of ICT manuf. (right) 24 February 2011 11
ICT R&D in general ICT s R&D inputs and outputs increase at higher speeds than non-ict industries. R&D employment, million persons ICT s R&D inputs and outputs, 1997 2006 Annual growth rate, % Number Share in national total, % 1997 2006 1997 2006 1997 2006 8.3 5.4 12.0 0.77 1.58 Patent applications 54.0 157 27,946 0.19 4.88 24 February 2011 12
ICT R&D Strategies 1. Role of Foreign Invested Enterprises (FIEs)* in China s ICT R&D 2. Role of Chinese firms in overseas R&D *Note: Foreign Invested Enterprises (FIEs) refer to foreign companies, enterprises and other economic organizations which have establishments or places in China according to Chinese law and engage in production or business operations, and which, though without establishments or places in China, have income from sources within China. It includes Chinese foreign joint venture enterprise, Chinese foreign cooperative joint venture and Foreign sole source investment enterprise. 24 February 2011 13
Role of FDI in ICT R&D R&D intensity of FIEs in most ICT subsectors are increasing as trends, but always lower than Chinese firms. Selected indicators of FIEs in ICT manufacturing, 2006 Value Added, mn Euros R&D, mn Euros R&D Intensity, %* R&D personnel, persons ICT manufacturing 57,495 1,819 3.16(-0.43) 53,738 of which: 3000 18,086 574 3.17(-0.26) 18,797 3210 20,549 641 3.12(+0.35) 17,878 3220 6,809 259 3.80(-4.90) 8,287 3230 9,449 319 3.38(-1.83) 7,279 3312 2,602 26 1.00(-3.88) 1,498 Share of FIEs in overall ICT, % 75.0 50 41 *Note: The figures in brackets are difference of FIEs with the population in the same subsector. 24 February 2011 14
Role of Chinese Firms in Overseas R&D Chinese ICT firms overseas behave as an infant compared to their foreign partners, but grow quickly. Some Chinese ICT firms, such as Lenovo, Huawei, ZTE and Haier, operate their small-scaled R&D units abroad, which focus on technology monitoring and other non-indigenous research activities. These firms lag far behind foreign firms in innovation ability. 24 February 2011 15
Role of Chinese Firms in Overseas R&D Some leading Chinese ICT firms stand with high R&D intensity. R&D intensity of selected ICT firms, 2009 Huawei ZTE Tencent Baidu R&D expenditure, m 1,406 609 126 45 R&D intensity, % 9.0 9.6 9.6 9.6 Note: R&D intensity is the ratio of R&D expenditure to revenues. 24 February 2011 16
C. Conclusions China s emerging as a developing open large economy, bringing many huge opportunities for global ICT firms. ICT, especially ICT services, growing with rather high rate on the base of various supporting policies, played increasingly important roles in China s production particularly foreign trade. China s ICT activities clustered only in a few provinces such as Guangdong, Jiangsu and Shanghai. 24 February 2011 17
Conclusions ICT contributes increasingly to China s R&D expenditure for their much higher R&D intensity than non-ict industries, thus has become an increasing important source of China s innovation. FIEs R&D expenditure grew less rapidly so their R&D intensity was always lower than local firms. Some Chinese ICT firms, e.g. Huawei and ZTE, are achieving great global progress for their enormous R&D input, but as a whole lag far behind foreign firms in innovation ability. 24 February 2011 18
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Ratio of Value Added to Gross Output, by subindustries, 2006 24 February 2011 20