Wednesday, May 29, 2019

The trade dispute between China and the United States has not only created a significant impact on China's foreign trade, but also exposed that China's high-tech industries (for example the chip industry) are still lagging relatively behind. In particular, if certain core technologies are not well mastered, they will eventually fall under the control of others. Therefore, the domestic market set off a wave of investment in high-tech industries this year, and that includes the chip industry.

At present, many regions in China are proposing to develop high-tech industry and increase investment in the technology industry. The development of business parks, attracting businesses and capital are particularly significant in the high-tech industry, especially in the high-tech industry related manufacturing. However, there is no specific, authoritative and effective standard for evaluating the intelligence level of relevant industries in economic decision-making. The science and technology sector tends to measure the intelligence level from a technical perspective, whereas the industry sector measures the intelligence level by its technological contribution to the industry.

On January 29th 2016, the Ministry of Science and Technology, the Ministry of Finance, and the State Administration of Taxation issued the revised "Administrative Measures for the Recognition of High-Tech Enterprises" (Guo Ke Fa Huo [2016] No. 32). According to the regulations, the main conditions that high-tech enterprises are required to meet are as follows: The enterprise acquires the ownership of the intellectual property rights that play a core supporting role in the technology for its main products (services); the technologies in which the main products (services) play a core supporting role fall within the scope of "high-tech fields supported by the state"; relevant scientific and technological personnel accounted for not less than 10% of the total number of employees in the current year; the total research and development expenses of the enterprise in the past three fiscal years accounted for not less than 3% of the total sales revenue in the same period; the total income of high-tech products (services) in the past year accounted for not less than 60% of the total income of the enterprise in the same period.

As an independent think-tank, Anbound pointed out that such indicators do not succinctly and accurately characterize the intelligence level of the manufacturing industry in terms of its economics and policies. Based on an investigation of local economies and industries in China, Anbound's Chief Researcher Chen Gong believes that in the field of public policy design, a strength indicator is needed to measure and determine the intelligence level of the manufacturing industry. With this, Chen Gong proposed an "intelligence level of manufacturing technology" indicator, with its measurement formula as follow: (total project investment - cost of land investment) / Number of project employees = Intelligence level of manufacturing technology. Chen Gong further explained that "intelligence level of manufacturing technology" is an indicator which is significant at the level of public policy. The technological level of manufacturing is therefore measured from the direction of per capita non-land investment. If the investment in a manufacturing project is focused more towards the fields of talents, technology and manufacturing equipment (rather than land, house and other related assets), the higher scale of non-land investment will bring about a higher intelligence level of the manufacturing project.

In addition, the U.S.-China trade dispute has triggered a stressful reaction within China's science and technology field. Against the backdrop of the U.S. initiating a tech competition, the spirit of independent innovation and self-reliance brings new energy to the table, driving China to develop its high-tech industries. However, at the same time that independent innovation is emphasized, China should also be wary that it might be isolated in its development of technological industries. The actions taken by the United States on China means that it is now the high time for China should master the aspects of core technologies and core industries in its development of high-technology. However, independent innovation does not equate to isolated innovation, and neither does it mean that China should embark on the path of comprehensive self-reliance.

In the current system of economic globalization, for China the universal self-reliant production method does not carry significance for China, and at most it is about survival. Such self-reliant production models have low efficiency. Innovation can only happen with open exchange of knowledge, technology and information, but the current system does not fulfill this criterion. The history of technological progresses has shown that achieving a leading position in technology is not a result of merely executing and developing everything. Ren Zhengfei, the founder and CEO of Huawei, has repeatedly said that science and technology are a common property of mankind, and that China should step on the shoulders of technological predecessors in order to hasten its process towards achieving a leading position in the world. If China were to rely solely on its own efforts through its independent innovation, it would be hard for China to succeed. What China can do however, is to utilize global talents to engage in international innovation, and also creating favorable conditions for more scientists to come to China.

Final analysis conclusion:

From the perspective of public policy, the "intelligence level of manufacturing technology" indicator can be adopted to measure the technological level of the manufacturing industry with non-land investment per capita scale. Assuming this, the higher the scale of non-land investment, the higher the level of intelligence in the manufacturing project.

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