Success of A Philosophy:
Combination of two mechanisms
The Meaning of China
Innovation Strategy
Peijun Duan
段培君

Two Mechanisms
Two Cases
Four Conclusions

Independent Innovation became the
National Strategy of China in 2005
• The Political Bureau of Central Committee of
CPC pointed out that making an innovative
country should be national strategy on June 27
of 2005
• Premier Wen Jiabao said that enhancing the
ability of independent innovation must be
regarded as National Strategy in the explanation
of the suggestion of “the 11th 5-year Plan”.

• Duan further proposed in 2006 that
enhancing the ability of independent
innovation, making an innovative country
should be the core strategy in China
development.
• “On Independent Innovation as the Main Bases of National
Strategy, Its Realistic Intension and Implemental Approach”
,BULLETIN OF CHINESE ACADEMY OF SCIENCES,2007, N0.3

The report of the 17th National
Congress of the CPC
• Enhancing China's capacity for
independent innovation and make
China an innovative country is the
core of our national development
strategy.

ensure rapid economic growth
• To quadruple the per capita GDP of the
year 2000 by 2020
• greatly enhance our capacity for
independent innovation, enabling scientific
and technological advancement to
contribute much more to economic growth

• 中国要实现2020年翻两番的经济发展目标，
要求连续40年保持7％以上的经济增长。
万亿元
40
连续40年7%的增长率
35
30
25
20
15
10
5
0
76
80
84
88
92
96
00
04
08
12
16
20
19
19
19
19
19
19
20
20
20
20
20
20

ensure sound economic growth
To transform the development pattern and
push forward strategic economic
restructuring
To reduce consumption of resources
To protect the environment.
To enhance the overall quality of the
economy and its international
competitiveness.
。

Why as a core strategy?
• Not only to ensure rapid and sound
economic growth ,but also because the
connotation of innovation strategy is
making a innovative country which
includes a very important thought of
philosophy:
• the combination of two mechanism

The Connotation of
Innovative Country
-Technological Innovation
-Institutional Innovation
-Cultural/Theoretical Innovation
improve our capacity for independent
innovation in all areas of modernization.

Schumpeter Technological Innovation
外生的科学
New Profit
Enterprise Investment投 Production Money
Market 来
New 资 自创新的利润或
mode生产模式 亏损
Tech
新生产模式
企业家活动
Roy Rothwell and Walter Zegveld [1985]:Reindustrialization and
Technology, Longman Group Limited.p.62

Innovation activity
• Innovation is combination of technology
and economy, Institution and economy,
culture and economy. It relates to all
aspects of people‟s activities.

Who are in activity:
National innovation system
变变化了的新生
内生的科学技术（主要是指
R&D institutes Enterprise Government
Innovation result

Self-organization and
hetero-organization
• So, among them there are two kind of
activities which are typical ,one is the
activity by enterprise through market,
that is the activity of self-organization,
another is the activity by government
through regulation, that is the activity of
hetero-organization

Two Mechanism
-Enterprise → Market
-Government → Regulation

Market and Regulation
Mechanism
• Market Mechanism: Freely-competitive,
incentive, autonomous adjustment by
price;
• Regulation Mechanism: Guiding and
adjustment by Plan, Policy and law.

• So, If we want to attain the success of
Innovation, we must deal with the
combination of two organizations, and the
combination of two mechanisms.

Case I - China Economy Growth
• China„s economy, has grown to rank as the
fourth largest in the world; GDP 24.66万亿 in
2007
• its import and export volume has become the
third biggest.
• The impoverished population in rural areas has
dropped from more than 250 million to just over
20 million.

Why has China succeeded in
Economical growth?
- Combination of two mechanisms
Market
+
Regulation

Market Mechanism
• transforming from a highly centralized planned
economy to a market economy.
• promoting institutional reform and innovation in
various sectors, try to make its systems and
mechanisms full of vigor, highly efficient and
more open.

Macroeconomic Regulation
• give play to the guiding role of national
development plans, programs and
industrial policies in macroeconomic
regulation
• combine the use of fiscal and monetary
policies to improve macroeconomic
regulation.

Combination of two mechanism
• the basic role of market mechanism in allocating
resources, and the important role of
macroeconomic regulation have been combined.
• In some sense, we can say, the success of
China is the success of the combination of two
mechanisms, the success of a methodology of
philosophy.

Case II : Shenzhen
• High-Tech output value ￥326.6 billion in
Shenzhen in 2004
＞50% of local GDP
＞50% of output value is from the
product with proprietary intellectual
property rights

Forming of Market Mechanism
• In 1993, “The regulations of keeping
technological secret”, and“the Assessment
regulations of the knowledge property”.
• In 1990s,forming the markets of innovation
elements：person with ability, managers,
exchanging market in technological property.
• In 1990s,forming service system: assuring, risk
investment, assessment, consultation.

Market-oriented System
• Establish a market-oriented system for
technological innovation, in which enterprises
play the leading role
• Over 90% R&D institutes are in enterprises
Over 90% R&D personnel are in enterprises
Over 90% R&D outlay are from enterprises
Over 90% R&D patents are applied by
enterprises.

Regulations and Policies
• 1993,“Regulations in high technology industry”.
• 1995,“Regulations in science and technology
progress”.
• 1998, “The Policies on supporting high technology
industry”.
• 2004,“Regulations on improving innovation
system”.
• 2005,Decision on the construction of innovation
city”.
• 2006，“Decision on the construction of nation
innovation city”.

7 Policies in 2005
• 1、Financial Policy for supporting enterprise in
innovation；
• 2、Government Purchase Policy incentive to
innovation.
• 3、Bank Policy in stimulating innovation；
• 4、The Policies in Building scientific and technical
base and management；
• 5、The policy of person with ability；
• 6、Policies for intellectual property rights and
industry
• 7、10 Programs in science and technology

Regulation can be beneficial to
market and development
• improving the legal guarantee, policy system,
incentive mechanism and market conditions
,combining the efforts are important.
• Here it seems to us that we need to emancipate
the mind.

Chinese magic instrument
:Emancipate our minds
• Emancipating the mind is a magic
instrument for developing China.
• If we want to succeed, we must
emancipate our minds, seek truth from
facts, keep up with the times, make bold
changes and innovations. So we can keep
to the path of independent innovation with
Chinese characteristics

Both Chinese and American need to
Emancipate their minds
• the social system, just same as National Innovation
System, is not linear system, but complex one；So,
No sole mechanism can solve all problems of the
development of the system. We must change the mind.
• Regulation Mechanism is not necessarily contrary to
Market Mechanism. Regulation is contrary to market
in some conditions; However, it can be consistent
with market and beneficial to development in some
conditions. We must study the concrete conditions.

Alan Greenspan started to
Emancipate his mind
• Alan Greenspan admitted that he “made
a mistake” in trusting that free markets
could regulate themselves without
government oversight.
• “I have found a flaw. I don‟t know how
significant or permanent it is. But I have
been very distressed by that fact.”

• As the development of globalizaton ,world
has become and is becoming more and
more complex, we need to consider new
philosophy and methodology for dealing
with the complex world.
• The following four Conclusions may be
important:

Four Conclusions
1) Rely on combination of two mechanism
or two systems‟ role, not just one;
2)Play basic role of market mechanism in
allocation of resource and important role
of regulation mechanism;
3) The mode of combination of two
mechanism is changeable, not fixed.
4)How to change depends on conditions.

•
•
•Thank You
谢谢
•
•
010-62808373 13601118941
Email:duanpj@ccps.gov.cn
http://blog.sina.com.cn/peijunduan