2.4 China must insist on the national strategy of independent innovation

2.4.1 Independent innovation is beneficial to the sustainable development of the Chinese economy

Since the 1950s, several strategies have been put forward in China, such as “March to S&T,” “S&T is the chief productive force,” “Rejuvenate the country through S&T,” and “Construct a national innovation system.” These strategies contain the basic idea of independent innovation.

(1) The context for the formation of the inde-pendent innovation strategy in the new period

In China, the relevant concepts of independent innovation have experienced an upgrade from the integration into the S&T development plan to a national strategy. Especially in the 21st century, at the 18th collective study of the Political Bureau of the CPC Central Committee on December 27, 2004, then General Secretary Hu Jintao pointed out that independent innovation should be put in a prominent position in all issues of S&T, so as to enhance the ability for S&T innovation and core competitiveness, and establish a road towards S&T innovation with Chinese characteristics during the practical process. We must aim at the forefront of world S&T development, speed up the construction of a national innovation system, and strengthen the ability for original innovation and integrated innovation. We should insist on the guideline “Doing certain things and refraining from doing other things,” make use of those great tasks which have a strategic, fundamental, and crucial influence on the development of the Chinese economy, S&T, national defense, and society, and make a greater effort at bringing S&T resources into the field of strategic high technology related to the overall situation of modernization, into the field of public welfare research related to comprehensive, balanced, and sustainable development and into the field of basic research related to the sustainable development of S&T. We should intensify our tackling abilities of key problems for the breakthrough of science and technology. Some scholars think that this is a turning point in China's central policy-makers' understanding of independent innovation. The 21st, 22nd, and 23rd collective studies of the Bureau all regarded the improvement of China's capability for independent innovation as the core strategy.

In March 2005, at the State S&T Awarding Meeting, then Premier Wen Jiabao pointed out that independent innovation is the “muscles and bones” to support the rising of a nation. We must regard enhancing the ability of independent innovation as a national strategy, which should be carried out in various aspects of constructing a modernization plan for every industry and region. We should make our efforts at building an innovation-oriented country with international influence.

From August 19 to 23, 2005, then General Secretary Hu Jintao investigated into the provinces of Henan, Jiangxi, and Hubei again and had important discussions concerning the strategy of independent innovation. He emphasized that improving the capability for independent innovation was an important support for long-term stable and rapid economic development, for the adjustment of the economic structure and for a change in the economic growth model, as well as for the construction of a resource-saving and environment-friendly society, and for the improvement of the international competitiveness of the Chinese economy and its ability to resist risks. Enhancing the capability for independent innovation should be regarded as the focal point of technological development and the central link to adjusting the economic structure and changing the economic growth model, so as to establish a road towards S&T innovation with Chinese characteristics.

At the end of 2004 and the beginning of 2005, the Political Bureau of the CPC Central Committee held a meeting to discuss “the national medium-and long-term plan for the development of S&T,” where the following guiding ideology was clearly put forward,“ Independent innovation, leapfrogging major projects, supporting development, leading into the future with independent innovation as the core.”

(2) Only with independent innovation can we realize sustainable development

The basic connotation of independent innovation strategy is to enhance the capability for independent innovation in China as the basis for improving national competitiveness, to take this as a great choice for China to be able to cope with future challenges, and to regard independent innovation as the strategic guiding line for the future development of S&T and the basic solution for the construction of an innovative country. From a historical perspective, only when we have a strong ability for independent innovation, can we hold the opportunity and win the initiative in the fierce international competition. In particular, in the key areas related to the national economy and security, core and key technology cannot be bought; we must choose independent innovation. Only when we master a number of core technologies in several important areas and own independent IPR, create a batch of enterprises with international competitiveness, and enhance national competitiveness, can we cope with the fierce competition on the global market and keep our enterprises in an invincible position, so as to promote the sustainable development of the Chinese economy.

In the mid and late 1990s, China entered the middle stage of industrialization, but the economic development mainly relied on increasing investment and cheap labor, and the high energy consumption of mineral resources. According to the International Monetary Fund's earlier published data, the Chinese GDP was $5.75 billion in 2010, the second place in the world, but only accounted for less than 10% of the world's total GDP. However, the oil consumption was 20% of the world's, iron and steel 20%, and cement 40%. If we do not change the situation as soon as possible, it will be difficult for the Chinese economy to develop sustainably. To get out of this embarrassing situation, what we can only do is increase the contribution of the total factor production (generalized technical progress) for economic growth.

During the 30 years of reform and opening up, depending on the introduction of large amounts of foreign capital, advanced technology and management experience, the Chinese economic development was effectively promoted. But the lack of core technology and independent IPR resulted in Chinese enterprises having more than 60% of foreign technology dependence. Thus, in order to increase the contribution of the total factor production (generalized technical progress) for economic growth, China will have to become dependent on the advanced technology of developed countries. But in the fierce international competition, the lack of core technology and independent IPR not only threatens national security, but also affects the promotion of national competitiveness and leaves China in a very disadvantageous position in the labor division of the international industrial chain. Based on these considerations, independent innovation must be taken as the basic strategy at present and in the future for the sustainable development of the Chinese economy. We must obtain core technology through independent innovation, cultivate independent brands, and grasp the control rights of the market and profits; we must speed up the actual process of the adjustment of the economic structure and the change in the model of economic development through independent innovation.

2.4.2 Related practice shows that underdeveloped countries are likely to realize independent innovation

The experience of China and other countries shows that, after a long period of hard work, it is possible for us to rapidly reach a good level of independent innovation and construct an innovative country from our present dependence on foreign technology and imitative innovation.

(1) The Republic of Korea and Japan have proved that underdeveloped countries can realize independent innovation

Among all industrialized countries, Japan and the Republic of Korea are emerging countries with an earlier industrialization process than China. The experience of these two countries has shown that it is possible for underdeveloped countries to realize independent innovation.

First, laying the foundation by imitation, and developing by improving innovation in Japan. From the analysis in Section 2.2, we have seen that Japan rose quickly from the ruins after World War II and became one of the major developed countries leading the world's economic trend. Relying on “building the country through technology,” “building the country through patents,” and “building the country through science and technology,” and so on, Japan stepped rapidly into the process of industrialization, becoming a world power. And its core was the implementation of “the introduction of advanced technology from European countries and the US, innovative improvement after imitation.” After making the effort from the 1950s to the 1980s, Japan found a suitable road towards its independent development. After importing a large number of foreign patents, the Japanese emphasis was gradually transferred from applied research to basic research, and then transferred from technology imitation to independent innovation. In this process, a group of enterprises gradually emerged. Accordingly, all of Japan's comprehensive S&T strength, economic strength, and innovation ability formed and got promoted. In the late 1980s, Japan had become an innovative country with strong independent innovation ability. In the period from 1982 to 1986, Japanese importations of cutting-edge technology increased by 86%, which decreased to 9% in the period from 1990 to 1992. Of course, the change from introduction and imitation to independent innovation was inseparable from the strong policy support and guidance from the Japanese government. For example, the Japanese emphasized investment in R&D, provided protection to enterprise achievements, and promoted the establishment of a cooperative inter-firm innovation mechanism. Besides, the Japanese government promoted the enterprisization of national research institutes and national universities, improved relevant laws and implemented the national S&T plan; moreover, it also emphasized the establishment of an enterprise organization system dominated by horizontal information flow, which is beneficial to innovation. All the above give a certain enlightenment to China.

Second, laying the foundation by introduction and then leading into the future by innovation in the Republic of Korea. From Section 2.3, it can be seen that the Republic of Korea was a “poor and empty” agricultural country in the early 1960s with GDP per capita less than $100, and it could not even produce bicycles. But in 2004, Korean national overall competitiveness and scientific competitiveness had ranked second and fifteenth respectively in the world, and it was the sixth or seventh IPR power. With the above achievements, the Republic of Korea gradually stepped into independent innovation from introduction and imitation. In particular, the introduction of technology focused on effectiveness. By means of technological alliances, the Republic of Korea implemented the technology that had been introduced and established by technological enterprises and research institutes in foreign countries at the right time. The government formulated a powerful S&T policy, and enterprises were the main force of innovation, and so on. These are the main reasons that the Republic of Korea was able to become an innovative country rapidly.

(2) Lots of Chinese enterprises have had a number of successful experiences of independent innovation

After the founding of the People's Republic of China, Chinese enterprises have experienced three waves of innovation. The first wave of innovation occurred in the traditional planned economy era when “independent innovation was in a closed state, with the government as the innovation subject”; the second innovation wave occurred after the reform and opening up when “technological introduction and re-innovation were in an open state,” with the subject of innovation gradually changing from the government to the enterprise, and the position of the enterprise as the subject of innovation becoming more obvious day after day. After joining the WTO in the 21st century, with the chance for the adjustment of the global industrial structure, Chinese enterprises saw the third wave of innovation, which was characterized by “independent innovation in an open state.” In this wave, many Chinese enterprises gradually established a dominant position by independent innovation.

Typically, in the field of agriculture, the team of hybrid rice led by the academician Yuan Longping, not only solved the food problem for 1.3 billion people, but this technology has also made the world's grain production increase. After joining the WTO, Daqing Oilfield, Huawei, ZTE, Haier, Chery, Lenovo, Nuctech, Datang, Neusoft, Zhenhua, etc. acquired a strong awareness of competition, survival, development, and innovation, and they realized that the survival and development of enterprises cannot come about without innovation. Moreover, they also realized that independent innovation must be market-oriented in order to strengthen the competitiveness of the enterprises' service, so as to carry out practical activities of independent innovation. Daqing Oilfield developed a stable oil exploration technology with high yield, which contributed to ensuring the Chinese oil supply security. In the iron and steel industry, the energy consumption level per ton of Baosteel, Ansteel, WISCO, and other companies has been close to the international advanced level through introduction, implementation, and re-innovation. In the machine tool industry, since the 12th Five-Year Plan, the high performance of the CNC machine tool technology has been greatly improved, and has broken the technology blockade of the US, Japan, and Germany. The manufacturing industry of communication equipment, represented by Huawei and ZTE, has made China world-class in communication equipment manufacturing through the strategy of introduction, implementation, and re-innovation. In the manufacturing industry of household appliances, the production capacity of Chinese electrical appliances has ranked first in the world, as it has the independent innovation of Haier, Hisense, etc. in recent years. In the transformation of the university S&T achievements, Nuctech is a typical example. The enterprise integrates the S&T achievements of Tsinghua University, and then developed independently. Its isotope detector technology of the van container is more advanced than its French counterparts. At the same time, the performance and price have many advantages compared to its Western competitors, which results in its success both domestically and abroad.

Particularly in the computer field with extensive use, regarding super computers, the R&D of the Galaxy and the Dawning led the US to reduce the limitation regarding price and quantity for exporting computers to China. Concerning basic software, domestic office software gradually opened up the market. In 2004, the govermental procurement of domestic office software exceeded that of Microsoft Office; domestic office software was able to replace Microsoft Office in the general government offices. Relevant tests showed that the performance of domestic office software has reached 80% of that of Microsoft Office. Especially, for the R&D of the Office software of Microsoft Corp, about $7 billion has been invested for more than 15 years. However, the R&D investment of Chinese enterprises is less than 100 million yuan, and the R&D cycle is much shorter. In terms of operating systems, several years ago, China had to buy foreign operating systems which are worth billions of yuan. But in recent years, China has independently developed an operating system based on the open-source Linux, and it has gradually mastered the technology of the operating system. The domestic Linux server has been widely applied in many areas, and the domestic desktop Linux has been used in some government departments as well.

2.4.3 China has the basic conditions and environment to implement independent innovation

The development of Chinese S&T and economy during the over 30 years of the reform and opening up vividly interprets great experience on the road towards independent innovation with Chinese characteristics.

(1) The central government made a series of important decisions and strategic deployments for the development of Chinese S&T

The experience of the development of S&T and the economy after the reform and opening up has proven that the central government should always have a broad and long-term view in the important moments of national development and make appropriate strategic deployments on the development of S&T and the economy, including the exploration of the independent innovation theory and pre-deployment.

First, establishing the guiding ideology of “S&T is the chief productivity” and promoting S&T to serve economic and social development. In March 1978, the Central Committee of the CPC held the First National Conference on Science and Technology; in his speech, Deng Xiaoping reiterated the basic Marxist viewpoint that “S&T is productivity.” In order to meet the needs of reform and opening up and economic construction, the Central Committee put forward the major principle that “economic construction must rely on S&T, and S&T must serve the economic construction.” In 1985, the Central Committee made “the decision to reform the S&T system”and clearly claimed that S&T achievements must be widely applied in production. In 1986, the Central Committee set the goal of “developing high technology” and “realizing industrialization,” and launched the high technology R&D program (863 Program) and the Torch Program aiming at the industrialization of high-tech achievements. In 1988, Deng Xiaoping put forward the scientific statement “S&T is the chief productivity,” which laid the early ideological foundation for the S&T development and the present strategy of independent innovation.

Second, the implementation of the strategy “revitalizing the nation through science and education, ” and the deployment of the development of S&T at the national strategic level. Independent innovation must be based on independent research and development and on personnel training. In the early 1990s, in order to ensure a smooth realization with modernization with the three-step development strategy, the CPC National Congress held a national S&T conference in 1995; it issued “the decision about accelerating the progress of S&T,” clearly put forward the idea of “putting S&T progress and innovation in the key position of economic and social development”; moreover, it announced “the strategy of rejuvenating the country through science and education” and “the strategy of sustainable development as well as transferring economic construction to be dependent on S&T progress and the improvement of the labor quality.” In 1997, China began to implement the National Basic Research Program (973 Program), so as to solve the key scientific problems in economic and social development in the deeper and more extensive fields. In 1999, the Central Committee and the government held the First National Technology Innovation Conference and issued “the decision on the strengthening of technological innovation, developing high-level technology, and realizing industrialization”; it also proposed to further optimize the layout of S&T power and the allocation of S&T resources, to formulate and improve relevant policies, to promote the transformation of applied scientific research institutes and to update the classification of public research institutes, and to improve the support ability, public service ability, and sustainable innovation ability of S&T.

Third, enhancing the independent innovation ability and building an innovation-oriented country. After entering the 21st century, technical innovation further became the focus of international competition. In January 2006, the Central Committee held the National Conference on Science and Technology again; it promulgated the “national medium- and long-term science and technology development plan (2006-2020),” and issued “the decision to implement the layout plan of S&T and enhance the ability for independent innovation.” This conference made the major strategic decision to strengthen independent innovation and build an innovative country, and put forward the guidelines of “independent innovation in key areas to support development and lead in the future.” The 17th CPC National Congress made new requests: “significant enhancement of the independent innovation ability, a sharp increase in the amount of contribution of S&T progress to economic growth, and becoming one of the innovative countries,” in order to realize the goal of constructing a society that is well-off in all aspects. Enhancing the independent innovation ability and building an innovation-oriented country are regarded as the core aspects of national development strategies and the key to improving comprehensive national strength.

(2) Substantial improvement in technical conditions and the institutional environment that are beneficial to independent innovation

During over 30 years of reform and opening up, there were profound changes from the concept of scientific research to the position of S&T, from an S&T system and mechanism to environmental research conditions, and from scientific layout to the strength of S&T, which resulted in a rapid increase in S&T activities and a sharp improvement in the level of S&T achievement.

First, basic conditions of scientific research have been improved significantly. Basic conditions have been completed for scientific research, including state key laboratories, large scientific instruments, natural S&T resources, scientific data, S&T literature, etc. By the end of 2009, there had been 3.184 million R&D and technical personnel, ranking first in the world. From the beginning of 2003, together with relevant departments and regional governments, the Ministry of Science and Technology and the Ministry of Finance started“The platform construction plan for the basic conditions of S&T.” The digital technology platform was built based on the informationalization of the conditions of S&T resources; the network platform was also built to serve the whole society; the mechanism and policy were improved for the opening and sharing and performance evaluation; the construction of a standard system was promoted for complete scientific data and data sharing. These promoted an open sharing and the effective use of scientific resources. At the same time, the scale of investment in S&T kept increasing. In 2007, the total expenditure in social development funds was 366.4 billion yuan, which accounted for 1.49% of the GDP.

Second, basic research has achieved great original innovation. From 1996 to 2010, the number of Chinese SCI papers went from the 14th place to the first in the world. In 2006, the sum of Chinese patent applications ranked fourth in the world. In some great technological fields, China has achieved breakthroughs and gained a number of great independent innovation achievements, representative of which are the manned spaceflight and lunar exploration projects, the super hybrid rice project, high performance computers, and ultra large-scale integrated circuits.

Third, the ability of S&T to support industrial technological innovation has significantly improved. The technological innovation capability of basic industry, of the manufacturing industry and of new industries has enhanced markedly; the ability for independent development of a great technological and technical level of complete sets of equipment has obtained significant improvement, which has supported the engineering construction of the Three Gorges Project and the Qinghai-Tibet Railway. The ability of S&T in trying to solve the problems of saving energy, reducing emissions, and climate change has also improved significantly.

Fourth, the institutional environment stimulating independent innovation keeps optimizing. The laws and regulations based on the Law of Science and Technology Progress have improved sustainably; more than 30 systematical policies and measures meeting those introduced by the “national medium- and long-term science and technology development plan (2006-2020)” were formulated and helped to initially form a legal environment conducive to independent innovation. In particular, the environment related to IPR of independent innovation was greatly improved. For example, a relatively complete system of intellectual property was established. A series of laws and regulations were formulated, such as the Patent Law, the Trademark Law, the Copyright Law, the Countering Unfair Competition Law, Regulations on the Protection of Computer Software, Regulations on the Protection of Layout Design of the Integrated Circuit, and Regulations on the Protection of New Varieties of Plants. We have basically achieved this by acting on international convention. A relatively complete IPR protection system was built within a period of more than 20 years in China, while within a period of hundreds of years for Western countries. Accordingly, from 1999 to 2005, the number of patent applications to the Chinese Academy of Sciences was 15,092, which was 4.5 times the sum of the previous 14 years. Since 1998, the number of patent applications in the field of national defense has also shown a rapid growth trend with an average annual increase of 46%. At the same time, the breadth and depth of international S&T cooperation combined with Chinese independent innovation has expanded further. China has established a relationship of cooperation in S&T with 152 countries and regions, and it has participated in the International Thermonuclear Experimental Reactor (ITER) project, the Galileo Global Satellite Navigation System (GNSS), the Human Genome Project (HGP), and other major international science and engineering projects.

2.4.4 While insisting on independent innovation strategy, attention should be paid to its relevant restraining factors

Independent innovation is helpful to the sustainable development of the Chinese economy. The experience of China and other countries over several years has proved that it is entirely possible for an underdeveloped country to realize independent innovation. China has created the basic conditions for environment construction to be conducive to independent innovation. However, the Chinese independent innovation strategy also faces a series of restraining factors.

(1) Technical foundation and ability

Since the reform and opening up, the technical level of lots of industries in China has been improved to different degrees; some industries also have a certain extent of ability for technical competition on the international market. But overall, the technological foundation of many industries is still very weak, and technical ability very poor, which is bound to restrict the process of Chinese independent innovation.

First, the ability for introduction, implementation, and re-innovation is weak. Of the three types of independent innovation, original innovation is the most difficult; integrated innovation depends on a new effort; and implementation, adoption, and re-innovation is the most realistic. Currently, the ability for implementation, adoption, and re-innovation of imported technology is weak. Implementation and adoption is essentially a learning process of advanced technology and an approach to the accumulation and formation of the technical ability of underdeveloped countries in the process of catching up with advanced countries. There are some reasons why the ability of introduction, implementation, adoption, and re-innovation is weak. The first is the little attention that has been paid to the implementation and adoption of imported technology for a long time, or introduction without implementation and adoption. For example, the proportion of the money spent on importing to investment in the implementation and adoption of the technology that has been introduced into Chinese industrial large and medium enterprises (LMEs) accounted for only 1∶0.15 in 2004. In other words, when $1 was spent on importing, only $0.15 was used for implementation and adoption, while those proportions in Japan and the Republic of Korea were 1∶5 and 1∶8, respectively. The second is the lack of technical ability for the adoption and implementation of imported technology. Nowadays, the majority of Chinese industries are situated at the end of the international industrial value chain, and the overall technical level is relatively low. Regarding the shipbuilding industry, China is still in a backward situation in the key technology field. In ship designing with high added value, there is a big gap between China and other countries. Compared to Japan and the Republic of Korea, the Chinese shipbuilding industry falls behind by about 10 years and behind the overall level of the ship equipment industry by about 20 years. Other industries also have this problem. Because of the current low level of technology, it is very difficult to implement and adopt advanced foreign technology in these areas.

Second, the situation of dependence on advanced foreign technology will be difficult to change in the near future. China has implemented the strategy “market for technology” over a very long period, but has not obtained core technology. And the enterprises in developed countries still pose a technology blockade on emerging countries by means of a patent strategy. First, though China is a country that exports industrial products, Chinese R&D ability for advanced processing technology and major technical equipment, which reflects industrial competitiveness, is very weak; coupled with a backward product design, it all leads to a crucial shortage of technical products with high technology and high added value in a market with an urgent need of them. At the same time, the acquisition of some important equipment required by the country and high technology industries depends on importations. For example, 100% of the optical fiber manufacturing equipment, 85% of the integrated circuit manufacturing equipment, 80% of the petroleum chemical equipment, as well as 70% of car manufacturing, numerical control machine tools, textile machinery, and printing equipment depend on importations. The more important and higher technical value-added the equipment is, the more importing and the lower the self-sufficiency rate will be. In general, industrial equipment with excellent technical and economic performance accounts for only 1/3, and nearly 1/5 has already aged and its overuse rate is nearly 40%. Second, under the technology blockade of developed countries, the acquisition of key technology depends on foreign enterprises. There are few Chinese independent IPR in industrial technology. Among the authorized invention patents in China, the foreign enterprise patents accounts for 2/3, most of them in the high-tech industry. At the same time, in the high-tech field worldwide, the United States and Japan have about 90% of all the patents in the world; other countries, including China, only about 10%. The lack of independent IPR will inevitably lead to the purchasing of foreign patents in order to acquire key technology to develop some products or industries.

Third, the technology blockade of developed countries is intensified, which can be divided into three categories. The first is a wide range of patent layout. Taking the auto industry as an example, from September 1985 to November 2005, 10 major domestic auto enterprises, including FAW, Dongfeng, Chery, and Geely, acquired 116 patents accumulatively. Fourteen major joint ventures, such as Shanghai Volkswagen, Shanghai GM, and Dongfeng Nissan, acquired 10 patents. In the meanwhile, Honda alone acquired 2,654 patents, 20 times the sum of Chinese enterprises; in addition, the Japanese company Toyota acquired 960 patents, 580 for Japanese Nissan , 402 for Korean Hyundai Motor, and 200 for German Volkswagen, much higher than that of Chinese domestic auto manufacturing enterprises. Under the background of the patent layout of the enterprises of developed countries, the rising Chinese auto industry inevitably faces numerous intellectual property barriers.

The second is transferring the “patent pool” to the industry standard. In some technological fields, some enterprises in developed countries combine core patents in a “patent-pool,” and then establish the industry's technical standards based on it. They leverage their economic and technological advantages to control the international standard organization on the one hand; on the other hand, they construct patent-pool based on their own patents, and then formulate standards with their national power, so as to make their patent-pool become international industry standards in some fields, such as WCDMA and CDMA2000, etc. Therefore, the developed countries have established an insurmountable monopoly in some industries and control the industrial technology development track of some newly-industrialized countries. The enterprises in underdeveloped countries can only take orders from developed countries. So are some Chinese industries such as the computer, the mobile communications, the integrated circuit, the auto manufacturing, the numerical control machine industries, etc.

The third is turning the basic research achievements into patents. In 1980, the United States issued the Bayh-Dole Act, which broke the long-standing international convention that “the achievements in scientific research with federal funding will be turned into public products” and allowed the achievements of scientific research funded by public resources to be translated into patents of the funding institution. Other developed countries followed the United States and modified their patent laws, which resulted in basic research achievements falling into the field of private goods. Regarding the field of biotechnology, the United States and other developed countries allowed researchers to translate the functional gene, gene isolation tool, and its possible future use into patents, for example the whole research chain of pure protein, gene isolation, gene expression sequence, gene isolation reagent, semi-antigen, and vaccine, has formed a patent. Under this rule, the discovery of a functional gene means the occupation of a subdivision industrial field. Once they have occupied an industrial field, other countries must be subject to their patents in the process of technological development and technology path. In terms of this, the Chinese biological industry is suffering.

(2) Fund input and personnel

From the experience of Japan, the Republic of Korea, and China, enough funds and personnel input are a must to transfer imitation innovation to independent innovation. However, at present, China faces insufficient fund investment and personnel reserve for independent innovation.

First, investment in technological innovation is seriously insufficient. Innovation investment reflects the degree of attention a nation pays to technological innovation, but Chinese innovation input has remained far lower than developed countries and even lower than some other developing countries. For example, as for the proportion of R&D investment in the GDP from 1999 to 2003, it was 3.035% in Japan, 2.494% in Germany, 2.672% in the US, 2.215% in France,1.908% in Canada, 1.863% in Britain, 1.54% and in Australia, while in China it was only 1.086%. But at the same time, the proportion of S&T funding in fiscal expenditure showed a downward trend, falling from 4.43% in 1995 to 4.12% in 2008. Due to insufficient government investment, innovation investment of enterprises was even less sufficient. The proportion of R&D funds in the sales revenue of industrial LMEs has been 0.8% for a long time. However, this proportion in developed countries was 2.5%-4%. The proportion of S&T expenditure in the main business revenue in China was 1.19% in 1995, and 1.57% in 2008, still lower than most developed countries of more than 5%. The problem lies in the fact that the enterprises with more than 5% of the main business revenue spent on S&T have enough competitiveness; the enterprises with 2% can only maintain their development, and the enterprises with less than 1% are finding it difficult to survive from a general international view.

Second, generally, enterprises lack talents and corresponding mechanisms suitable for independent innovation. Talents are the key to enhancing the independent innovation ability of enterprises. Taking an anonymous enterprise as an example, it recruited more than 20 R&D personnel from an enterprise in northeast China to develop and produce large- and mediumsized woodworking machines in 2001. In the same year, the enterprise independently developed and produced the BSG2312E type sander with three shelves and BPF2225F type joinery felt-board machine with high technology content, and pushed them onto the market at the right time. That alone made the enterprise successfully achieve a sales revenue of 180 million yuan in the same year. At present, its woodworking machine has been developed into six categories with 162 varieties, its corporate profit increased sharply, and export volume doubled year after year. It is not difficult to see the importance of talents for independent innovation. But the problem lies in the following aspects: The first one is the lack of suitable talents for independent innovation in the majority of Chinese enterprises. This has led to the low proportion of industrial LMEs with special research institutes. In all industrial LMEs, 39.8% of them had special research institutions in 1995, but it decreased to 24.66% in 2008; in all industrial LMEs, they had an average of 0.569 scientific research institutes in 1995, but it was even lower at 0.328 in 2008. The second aspect is the low proportion of top talents who are willing to work in an enterprise that lacks independent innovation. According to a relevant survey, more than 80% of the engineering students are willing to get a job in universities and colleges, scientific research institutes, and transnational corporations, but the proportion of students hoping to work in domestic enterprises is very low. In order to enter transnational corporations, some students prefer to wait and remain unemployed. For example, the number of engineering graduates in 2003 was more than 40,000, including about 1,000 engineering PhD graduates. However, the number of personnel engaged in technology development with a PhD degree in more than 2,700 large-scale enterprises was only more than 3,000. The third is the lack of a mechanism in lots of enterprises in making the talents play a role in independent innovation, which to some extent suppresses the enthusiasm and creativity of technicians in technological innovation.

A weak technological foundation and ability and insufficient capital and talent investment limit the process from imitative innovation to independent innovation. At the same time, it deserves to be mentioned and emphasized that the limits in thinking, policy, and culture puts a restriction on the independent innovation.