China’s technology sector is expected to double down on research and development over the next five years, as the country’s new economic road map pushes for increased self-reliance and innovation amid trade disputes with the United States, according to analysts.
The 14th five-year plan – from 2021 to 2025 – has put self-sufficiency in technology as a major pillar of China’s economic development, marking a shift in priorities towards industrial and national security as well as reduced tech imports.
“China still stands at the middle and lower-end of global supply chains, and relies heavily on others for core technology and parts such as aircraft engines and chips,” said Liu Qiao, dean of the Guanghua School of Management at Peking University. “US-China trade tensions make [supply chains] more complicated … Increased investment in research and development is an important step [for the tech sector to achieve the plan’s goal].”
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The Communist Party’s top policymaking body, the Central Committee, on Thursday endorsed the country’s 14th five-year plan in a communique at the end of their four-day closed-door meeting, called the fifth plenum, held in Beijing.
China’s new economic strategy, called “dual circulation”, would see the country remain open to foreign investments and trade, while pivoting to build an internal economic ecosystem less prone to external sanctions and turbulence.
It is a move that shows China has learned its lesson from the ongoing trade war with the US. Washington has also waged a complex tech war with Beijing, which has seen Huawei Technologies and other hi-tech companies added to the US trade blacklist.
The Trump administration’s “Clean Network” programme also threatens to further disrupt China’s technology industry, as the campaign seeks to restrict the international expansion of Chinese apps, cloud services and undersea cable networks.
“The biggest challenge for Beijing five years ago was a weak economy,” said Larry Hu, Hong Kong-based China economist at Macquarie Group, in a recent report. He said the country’s challenge today is “a potential decoupling with the US”.
Apart from reducing dependence on foreign suppliers of semiconductors and other strategic technologies, China must make domestic demand its growth driver, Hu said in the report.
While Beijing has been pushing greater policy support for the country’s tech sector, including new tax incentives for domestic semiconductor players, problems remain.
“We do not have enough investment into basic science and underlying technologies,” said Liu from Peking University.
Citing official data, Liu said basic research accounted for only 6 per cent of China’s total annual research and development expenditure. That is lower than that the US, at 18 per cent, and France’s 25 per cent tally.
Achieving self-reliance in technology would also need highly skilled talent from overseas.
“Talent is very important for tech innovation and self-reliance,” said Guo Wanda, executive vice-president of Shenzhen-based think tank China Development Institute. “China has to create more tech-friendly policies, such as on intellectual property protection, to attract more overseas talent.”
Last year, China’s Ministry of Public Security announced a relaxation of immigration rules to pave the way for more highly skilled overseas workers to work in the country.
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