China must continue to grow and develop if its future is to be secure. According to the report delivered by Chinese President Xi Jinping at the 18th National Congress of the Communist Party of China in 2012, innovation has been increasingly acknowledged as a crucial tool and key driver to achieve this goal. Obviously, the government of China has clearly recognized that innovation must be a vital determinant in China's future success and its ability to realize Xi's Chinese Dream.
These participants include research intensive universities that focus on basic research and technical universities, with their focus on applied research. It includes businesses through their expenditure on research and development (R&D). Other indirect participants are major banks, venture capitalists, other investors such as partners (domestic and foreign) and others who provide the capital that is required especially for expensive high tech innovation.
Government policy, regulatory guidance and funding are vital to ensure strategic allocation of major resources on industries that will give China a maximum competitive advantage. Examples are computing, outer space, robotics, nanotechnology, biotechnology, alternative energy, transportation and infrastructure (roads, bridges, construction etc).
Another important component of China's innovation system is a legal framework that makes it easy to start a new business, protects intellectual property and other rights, and enforces those rights through competent and independent system of judicial administration and the application of the rule of law.
Also critical in China's system of innovation is the constant improvement of processes. Indeed, the headlines often focus on highly disruptive innovation while ignoring the role played by and importance of day-to-day incremental small improvements that should be part of the culture of all organizations.
The most effective innovation systems also benefit from societies that are open. Since 1978, China has seen rapid economic development by implementing the policy of "reform and opening up," followed by an industrious upgrade of almost all areas of economic activity, especially its online economy. As President Xi and CEOs like Jack Ma have noted, in order to win the innovation game, China needs to attract the best talent from all over the world.
In addition, international cooperation should not be disregarded in the course of implementing innovative policy. It is not contradictory to both introduce foreign technology and encourage innovation. The key to balancing this relationship is to find new approaches to cooperation.
Some alternatives such as talent exchanges, rather than technology purchases, should be encouraged. By 2011, the number of foreign experts who were working in China has sharply increased from 10,000 to 530,000. These experts provide enormous assistance for China's modernization. Also encouraging is the fact that China now ranks only behind the U.S. and the U.K. in the number of international students coming to the country to study. As Steven Johnson said in Where Good Ideas Come From: The Natural History of Innovation: "Chance favors the connected mind."
An effective system of innovation is one in which results and progress can be and is regularly monitored so that it continuously improves, especially in comparison to major competitors in other countries. Examples of current measures are university rankings, number of research papers published in leading journals, number of patents filed, amount of intellectual property dollars earned by Chinese creators in comparison with copyright license fees paid for foreign IP rights, the amount of direct foreign investment, the number of new start-ups and so on. While the concept of a "national innovation system" has been around for twenty years, much work remains to be done to create reliable measures of success.
An old view of innovation is that it is the activity of universities, company research and development or individual inventors. Today, however, China, in common with other leading countries around the world, views innovation as a national system of intertwined and interdependent participants.
In order to maximize the effectiveness of its national innovation system, China also must continue to strengthen the network of communication and relationships among all of the stakeholders mentioned above. Indeed, the whole is much greater than the sum of the parts. For example, within education stronger links must exist among elementary, secondary and tertiary levels.
Enhanced networks that bring together industry and the professions working together with universities are also important. China should continue to work to strengthen these various networks, linkages and collaborations so that resources are used wisely and efficiently, innovation spread rapidly, and maximum synergies achieved.
In conclusion, China's economic future will depend upon how effectively it builds and continues to improve its national system of innovation. This will require continual reform and adjustments, a capacity and willingness to let go of the old, be creative and embrace the new.
To be successful, the challenge requires greater synergies among all of the interconnected parts of its innovation system; a system that involves multiple stakeholders, is multi-faceted and multi-dimensional. Achieving an effective system of innovation also requires a compelling national vision, and China's leadership seems well on the way and heads in the right direction.