Developmental State and Innovation: Nanotechnology in China



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Developmental State and Innovation: Nanotechnology in China
 

Richard P. Appelbaum, Rachel Parker, and Cong Cao


Richard Appelbaum is MacArthur Chair in Sociology and Global & International Studies at the University of California, Santa Barbara, where he is co-PI at the Center for Nanotechnology in Society. Email: rich@global.ucsb.edu


Rachel Parker is a Research Staff Member at the IDA Science and Technology Policy Institute, Washington, D.C. Email: rparker@ida.org
Cong Cao is Senior Research Associate and Director of the Center for Science, Technology, and Innovation in China at the Levin Institute, State University of New York. Email: Cong.Cao@levininstitute.org
Abstract In this paper we examine the role of the Chinese Government in fostering advances in nanotechnology, looking at the promises and pitfalls of state-led development in the world’s fastest-growing major economy. Like many countries involved in catch-up development, China is convinced that manufacturing prowess alone is insufficient to becoming a leading economic power in the 21st century. Our concern here is how the debate over innovation is reflected in China’s approach to national development, within the context of nanotechnology. In many countries, including the United States, government spending on nanotechnology is seen as being essential to creating world leadership in this emerging field. The USA, for example, is projected to spend $1.8 billion in 2011 on its National Nanotechnology Initiative – primarily to foster basic research and development. In comparison with the US approach, in China – which has an economy that is in transition from state-owned to privately-owned enterprises, and still suffers from a lack of private investment capital – nanotechnology is being funded largely through government sources. Moreover, in China, such funding extends more broadly across the value chain than in the United States, from fundamental research to commercialization. Through field research and extensive interviews, this paper documents China’s state-led efforts to become a global nanotech leader, evaluating the effectiveness of these efforts.
Keywords: nanotechnology, China, developmental state, policy, research and development, commercialization

China, along with the United States, Europe, Japan, and some 40 other countries, is pushing to become a global leader in nanotechnology, cashing in on what was once predicted to be a $2.6 trillion market by 2014, accounting for some 15 per cent of manufacturing output in that year (Holman et al. 2007: Table 1). While the initial expectations for the commercial returns to nanotechnology may have been overly optimistic, and there are intensifying concerns regarding the risks associated with nanomaterials, it is clear that nanotechnology serves as a platform technology for a wide range of industries, holding the promise of solving some of the world’s most critical problems related to energy scarcity, finite clean water sources, diminished availability of sustainable food resources, and pandemic diseases.


China hopes to become a major player in nanotechnology and other high-tech fields by ‘leapfrogging development … [aiming] at the forefront of world technology development, intensify[ing] innovation efforts, and realiz[ing] strategic transitions from pacing front-runners to focusing on “leap-frog” development in key high-tech fields in which China enjoys relative advantages’ (MOST 863 2005). The plan to accomplish these goals is laid out in China’s Medium and Long-Term Plan for the Development of Science and Technology (2006-2020) (MLP), issued in early 2006. The MLP called for China to invest heavily in research and development in advanced technologies, singling out nanotechnology as one of four ‘megascience’ programs for targeted funding and research activities (the other three are development and reproductive biology, protein science, and quantum research). China is uniquely situated to make such a push, since it has $1.2 trillion in foreign reserves – generated by its export-oriented industrialization – to invest in high-tech development initiatives, although it remains unknown whether the foreign reserves have been, or will be, put to effective use in R&D.
In this paper we examine the pros and cons of China’s aggressive approach to fund nanotechnology. We begin with a brief discussion of public efforts to promote nanotechnology, before turning to a review of China’s plans and current efforts. Our analysis is based on extensive field interviews in China, including more than 60 interviews conducted with Chinese government officials, and nanotechnology scientists and engineers engaged in research and commercialization. This is supplemented by an examination of English- and Chinese-language government publications and an analysis of Chinese patent data.1 We conclude with some predictions about where China is headed, given its current trajectory.
Nanotechnology: a public approach to realizing the promise

What is nanotechnology? While definitions vary, the characterization of nanotechnology presented by the National Science Foundation (NSF) and the National Nanotechnology Initiative (NNI) (and subsequently echoed in similar policies and initiatives globally) involves working with materials at a scale of less than 100 nanometer (Roco 2007: 3), which provides ‘the ability to work at the molecular level, atom by atom, to create large structures with fundamentally new molecular organization’, allowing materials and systems to ‘exhibit novel and significantly improved physical, chemical, and biological properties, phenomena, and processes due to their nanoscale size’ (NSTC 2000: 19-20). This is a comparable scale to the smallest virus, 80nm, and the diameter of human DNA, about 2.5nm (Martz 2009). Because of its far-reaching and diverse potential across industries, nanotechnology is argued to herald the next great technological revolution, one capable of solving many human problems while generating enormous economic returns (Roco et al. 1999: iii; Lieberman 2005: xi).2 The list of promised benefits is seemingly endless. To take but a few often-mentioned examples (Lane and Kalil 2005; NNI 2006):




  • low-cost hybrid solar cells that combine inorganic nanorods with conducting polymers, providing a new, low-cost source of energy

  • targeted drug delivery, achieved by constructing nanoscale particles that migrate and bond with specific types of cancer cells, which are then be selectively destroyed, thereby offering a non-invasive cure for cancer without the toxic side effects of radiation and chemotherapy

  • ‘lab-on-a-chip’, providing instant diagnosis of multiple diseases in remote field settings, greatly contributing to public health in poor countries where medical facilities are lacking

  • ultra high-speed computing, thanks to data storage devices based on nanoscale electronics that provide data densities over 100 times greater than those that of today’s highest density commercial devices

  • highly efficient nanoscale filtration at low costs, providing a solution for air pollution and water contamination

  • nano-electro-mechanical sensors that are capable of detecting and identifying a single molecule of a chemical warfare agent

  • nanocomposite energetic materials that create propellants and explosives with more than twice the energy output of typical high explosives

As a result of this promise, world governments were investing an estimated combined total of $6.5 billion in national nanotechnology efforts by 2007, while private investments was even greater ($7.3 billion). The United States is the world leader in this regard. Its NNI, launched in the closing days of the Clinton Administration, grew from approximately $422 million in its initial year of funding (2001), to a budget request for $1.8 billion in 2011, representing a total federal outlay since 2001 of more than $14 billion (NSTC 2010). This is one of the largest government investments in technology since the Apollo program (McCray 2009: 60). The Chinese government is currently investing an estimated $200 million annually in nanotechnology, which, when adjusted for purchasing power parity, makes it second only to the United States.


One question we are particularly concerned with is: to what extent does public investment in nanotechnology constitute an industrial policy? In the standard definition, industrial policy is said to involve ‘a concern with the structure of domestic industry and with promoting the structure that enhances the nation’s international competitiveness’ (Johnson 1982: 19), in order ‘to achieve goals of long-term growth and structural change’ (Chang 1994). Industrial policy usually calls for ‘support for educational infrastructure and for research and development’ (Woo-Cumings: 1999: 27). In the United States, the notion of industrial policy has long been politically unacceptable.

Neal Lane, the former head of the NSF, played a pivotal role in the creation of the US NNI as Special Assistant to the President during the Clinton administration. He described objections to industrial policy as follows:



The appropriate role of the federal government in anything having to do with private industry is a politically contentious matter in our free market system. There are people who believe that the most important thing government can do to assure that US companies are competitive in the global marketplace is to get out of the way, cut taxes, and reduce regulations (Lane 2008: 259).
Nonetheless, Block (2008) has argued that even where industrial policy is explicitly rejected, a ‘stealth’ industrial policy – what he calls the ‘hidden developmental state’ – often can be found. In Block’s words, ‘leaders in the legislative and executive branches who were concerned about U.S. competitiveness took initiatives that helped the U.S. to develop its own highly decentralized form of industrial policy that takes advantage of U.S. global leadership in scientific and engineering research’. As we argue elsewhere (Motoyama et al. 2009), the US NNI offers an important example of a ‘hidden’ industrial policy, one through which the USA has sought to become the major world player in an emerging technology – one where market-driven returns are likely to be years in the future. Yet we also show that almost all US public investment has been at the research end of the product cycle, rather than in providing direct support for commercialization.
We argue that China’s approach to fostering nanotechnology, and indeed high-technology development in general, has been similar to that of the United States: providing substantial public support research and development. China differs from the United States, however, both in that its efforts are overt (China has no ideological need to hide an industrial policy), and in that it has targeted resources not only for research and development, but also for commercialization.
Indigenous innovation and leapfrogging: China’s high road to technology-led development
China has invested substantially in the creation of a national innovation system that will result in the building up of an indigenous innovation (zizhu chuangxin) capability in leading-edge areas of science and technology, now seen as a key to national prosperity (NIBC 2006: 14). Both the 11th and 12th Five-Year Plans (2006-2010, 2011-2015) view innovation as the centrepiece of China’s economic strategy, the means to address the country’s significant social, environmental, global competitive, and national security challenges. China has called for ‘leapfrogging development’ – moving directly into high-impact emerging technologies, rather than merely building on its successes with low-wage, and low to intermediate-technology exports, thereby bypassing the more traditional step-by-step movement up the value chain. Technological leapfrogging requires state investment in areas where firms are unable or unwilling to invest. Investment in nanotechnology, where financial payoff will likely take years to become commercially viable, is one such effort.
While China’s leadership did not want to abandon its export-led industrial growth, it came to regard this strategy as insufficient by itself: not only did the largest profits remain with the multinationals that were producing in China, but the degree of technology transfer – especially with the most advanced technologies – was limited. China’s development strategy has thus become a three-pronged approach: continue to foster its export sector (a major source of employment, and one in which wages are slowly rising); develop its domestic market, a potentially profitable source for its burgeoning domestic industries; and foster the growth of high-technology development, drawing on its rapidly-expanding talent pool of low-cost (relative to other advanced industrial countries) scientists and engineers, while creating infrastructure (highways, ports, logistics, and communications), and investing in universities and science parks.
Given the urgency of innovation in China’s next-step economic growth, the Chinese Communist Party (CCP) leadership adopted a strategy of ‘strengthening the nation through science, technology, and education’ (kejiao xingguo) in the mid-1990s and most recently called for China to become an ‘innovation-oriented society’ by 2020 and a world leader in science and technology by 2050. Moreover, the strategy has been accompanied by enormous investment into areas, including nanotechnology, that have the potential to contribute significantly to China’s leapfrog.
Many question whether this bold approach can succeed. Will such ‘techno-nationalism’ (Reich 1987; Serger and Breidne 2007) undermine the export-led growth that has been the key (or pivotal) to China’s success, effectively killing the goose that laid the golden egg? Will a government-led push into targeted areas fail in the face of bureaucratic rivalries and inertia (Suttmeier et al. 2006b)? Will the relative absence of clear market signals result in unwise – and ultimately wasteful – public decisions (Lardy 2006)? And will nanotechnology become another case in which advances in R&D have difficulty turning out competitive products? While these concerns are certainly real, we believe that the evidence to date suggests that China will ultimately emerge from this effort as a major world player in high-technology development. What is less clear is whether nanotechnology will occupy a central role in this effort.
China’s nanotechnology policy: a mixed approach to industrial policy
The support of China’s political leadership for nanotechnology was bolstered by a push from leading scientists both inside and outside of China. In fact, China did not fully embrace nanotechnology until countries such as the United States had formulated national nanotechnology initiatives – efforts that made it easier for Chinese scientists to make their case to China’s political leadership. According to Xie Sishen (2007a, interview), one of China’s leading nanoscientists,
governments around the world and delegations from other countries, especially those from advanced countries, frequently mentioned nanotechnology….[Their] exchanges and collaborations…provided information continuously, which made the Government realize its importance from pure basic research to application to impacts on economy and society.
Therefore, in mid-2000, a group of Chinese experts jointly proposed to the CCP Central Committee and the State Council that China ‘should accelerate the industrialization of the nanotechnology and occupy this world-wide frontier area as soon as possible’. This was quickly taken up as a priority research area by members of the CCP Central Committee (NIBC 2006). The following year, addressing an international forum on nanomaterials, the General Secretary of the CCP Central Committee and Chinese President Jiang Zemin stated explicitly that
… the development of nanotechnology and new materials should be regarded as an important task of the development and innovation in S&T. The development and application of nanomaterials and nanotechnology is of strategic significance to the development of high technology and national economy in China (NIBC 2006).
Pressure for developing a national nanotechnology policy began in China’s science-based government agencies. The Ministry of Science and Technology (MOST), the State Planning Commission, the Ministry of Education (MOE), the National Natural Science Foundation of China (NSFC), and the Chinese Academy of Sciences (CAS) jointly analyzed the strengths and limitations, the opportunities and threats, posed by the development of nanotechnology. A national steering committee on nanotechnology, chaired by the Minister of Science and Technology and its chief scientist, Bai Chunli,3 was created in 2001 to coordinate the efforts and determine priority areas for support. One result was a Roadmap for National Nanoscience and Technology Development (2001-2010). The other, was the establishment of a national nanotechnology centre by combining resources at three of China’s premium institutions of learning – the CAS, the Tsinghua and Peking Universities. The expenditure into nanotechnology R&D also has been rising.
The MLP called for major public investment in four key science areas to foster scientific breakthroughs, nanotechnology was one of them.. It is understandable, given the country’s limited resources, that China should ‘do what it needs and attempt nothing where it does not’ (you suo wei, you suo bu wei),4 concentrating its public investments where a high payoff is deemed most likely. Nevertheless, such a policy – targeting government funding for research and development efforts believed to have the largest long-term commercial payoff potential – was not universally accepted by Chinese scientists, especially those working overseas, who were critical of this approach of picking champions. MOST – which would play a major role in implementing the MLP – was singled out for criticism, since its past achievements were viewed as incommensurate with the amount of investments that had been made. Of special concern was the way in which MOST had organized the State High-Tech Research and Development Program (also known as the 863 Program) and the State Key Basic Research and Development Program (also known as the 973 Program). The 863 Program was seen as a key vehicle for improving China’s high-tech competitiveness, ‘attach[ing] importance to developing nano-material and other new materials, along with related technologies for the development of aviation, the maglev train, information storage and access, in order to meet major demands of national security and economic development by utilizing China’s characteristic resources, environment, and technical strength’ (MOST 863 2005). The 973 Program sought ‘to strengthen the original innovations and to address the important scientific issues concerning the national economic and social development at a deeper level and in a wider scope, so as to improve China’s capabilities of independent innovations and to provide scientific support for the future development of the country’ (MOST 973 2004). Ultimately, however, opinions of overseas scientists were not taken seriously in the final deliberation (Cao et al. 2006). Nevertheless, the fact that MOST controls only about 15 per cent of R&D funds means that it has to persuade other agencies to endorse its priorities. The ongoing conversation among officials at different agencies provides a kind of check on the risks that MOST might be wasting its resources on a technological dead end.5
Supposedly, China’s funding through the MLP into nanotechnology is focused on scientific research, with major players such as MOST and NFSC providing funding and institutes of the CAS and universities being the performers. During the first four years of MLP implementation, 32 institutions were selected to lead 54 projects, including 15 CAS institutes or affiliates, with the rest being key (zhongdian) universities. Beijing, Shanghai, Jiangsu, and Anhui stand out for having the leading Centres of nanotechnology and well-known nanotech scientists. Projects include nanomaterials, devices and electronics, biology and medicine, and characterization and structure. Although under the MLP, the projects are supposed to be oriented to basic research, some also deal with applied nanotechnology. Input from physicists and chemists who have long worked in such areas as carbon nanotubes and nanopowders6 is also important, as is that from the applied scientists and engineers who are seeking to transform nanomaterials into commercial products. There is also a small group of entrepreneurs and venture capitalists who are concerned about bringing new nano-enabled products to the market emerging (Xu et al. 2006 interview).
In reality, the support for nanotechnology has been not only fostering breakthroughs in basic research but also in commercialization, and therefore, blending the efforts of not only science-related organizations but technology-focused ones as well, ultimately representing a significant departure from the original goal of the MLP in singling out nanotechnology. For one thing, different levels of government play differing roles as well: as one moves from central to provincial to local levels of government funding, the time horizon for return on investment becomes shorter, and there is a tendency to move from intangible (basic research) to tangible (commercial products) results. In particular, provincial governments are important not only in provinces containing the major cities (such as Beijing and Shanghai), but also in provinces such as Zhejiang, which neighbours Shanghai, that hope to promote their regional universities as major players by setting up collaborative university science Centres (Zhejiang, for example, has partnered with UCLA to set up the Zhejiang-California International Nanosystems Institute, although with mixed results). Local governments also frequently play a key role, particularly in major cities (examples include the Shanghai Nanotechnology Promotion Centre and the Suzhou Industrial Park). At the local level especially, government officials expect a quick turn-around in terms of technological development and market applications (Cheng 2007 interview). Both provincial and local governments can partner with foreign investors, as with the China-Singapore Suzhou Industrial Park Development Corporation. China’s investments in nanotechnology commercialization tend to focus on those nanomaterials and nanodevices that promise to have the most immediate payoff in addressing such immediate problems as air and water purification, materials with great tensile strength that can be used in a variety of industrial applications, as well as targeted drug delivery. China is already a world leader in the production of carbon nanotubes, for example (Fan 2007 interview).
While the Chinese effort relies on a variety of different programs, typically the national and local Development and Reform Commission provides funding for actual commercialization projects. However, usually the Commission only provides 15 per cent of the total funding needed to set up a company. The remainder must be raised by investors before the company has even been formed, often from provincial or local levels of government.
Thus far, the total amount of central government resources dedicated to nanotechnology have not been large, even when adjusted for the lower costs of doing research in China. Estimates vary widely ranging from as little as $230 million for the five-year period between 2000-2004 (Bai 2005: 63), to $160 million in 2005 alone (Bai and Wang 2007: 75), to $250 million in that same year (Holman et al. 2007: 25). Although even the highest figures are still considerably less than public investment in the USA (which was, as noted previously, $1.6 billion in 2010), China’s governmental spending on nanotechnology may not be far off when adjusted for differences in labor and infrastructure costs (nanotechwire.com 2005).
The role of private firms and individuals remains limited in China. While more than a thousand R&D centres have been established by foreign firms, few are engaged in basic research, and almost none in nanotechnology. International collaborations are more promising. These include institutional partnerships between universities and corporations, study abroad programs (especially post-graduate degrees earned by Chinese in the USA, Japan, and Europe), and efforts to capitalize on Chinese national pride and identification by recruiting overseas Chinese scientists and engineers to return to China. Informal personal ties are also important, as when American professors or business leaders mentor their former graduate students after they return to China. Universities are an especially important component of China’s nanotechnology initiative, which remains first and foremost research (rather than development) based.
China’s state-run firms – which still account for an estimated 43 per cent of GDP, despite China’s commitment to privatization7 – tend to be bureaucratic and conservative, shunning potentially risky investments in favour of short-term, more predictable returns. The emerging private sector, including many small and medium enterprises (SMEs), remains small, under-capitalized, and generally risk-averse. This poses a challenge for the Chinese government’s heightened emphasis on leapfrogging development through nanotechnology, whose major payoff remains deferred years into the future. Yet throughout our interviews, the most pervasive theme to emerge was that of the importance of government funding and support for nanotechnology, not only for basic research but also well into commercialization. One of our interviewees, Dr. Gao Congjie,8 who was working on a highly-promising project that employs nanotechnology for seawater filtration, told us that
… it is a little hard to estimate the timeframe for industrializing the new process. China Water Tech is currently working on optimizing the process. And speed for it to move to industrialization will depend on government funding and industrial interest. Government funding is usually not at all enough to industrialize a technological process, industrial involvement is crucial. However, larger scale demonstration of this process needs to be done (likely via government funding) before industry would become interested (Gao 2006 interview).
At the local level, through various forms of incubation, the government plays the role of a quasi venture capitalist. For the Beijing region, the Nanotechnology Industrialization Base of China Entrepreneurship Investment Co. (NIBC) – located 100 km from Beijing, in the Tianjin Economic and Technological Development Area – serves this role. NIBC was established by MOST in December 2000, in conjunction with the CAS, universities, and private enterprises. Its distinguishing feature is that it is essentially ‘a government organization run by market forces’, reflecting the belief that
… pure state ownership does not work well for technology innovation or management… What the NIBC does is to take results from universities and institutes, and help scientists to commercialize the results. It takes a systematic approach that goes to the end of the commercialization pipeline (NIBC 2006).
NIBC is the vehicle for incubating new companies, acquiring existing companies, and preparing initial public offerings. In 2005, the Chinese National Academy of Nanoscience and Engineering (CNANE) was established under the same administration as NIBC with a primary focus on R&D rather than commercialization. It is unclear to us how large a role these institutions actually play; during our visit in 2006, the principal operation we observed was the manufacturing of non-nano pharmaceuticals, as a form of income generation for the facility.
Shanghai has its own incubator in the form of the Shanghai Nanotechnology Promotion Centre (SNPC), which is funded largely by government initiative, particularly the Shanghai municipal government as well as the NDRC, although local enterprises have also contributed.9 It was founded in July 2000, with the Centre’s formal activities starting in 2001. SNPC is subordinate to the Science and Technology Commission, which is the lead government agency in Shanghai concerned with advancing the city’s high-technology profile. The SNPC provides training for scientists and engineers on the specialized instruments used in nanoscale research, and has several university-affiliated ‘industrialization bases’ for the purpose of transferring research on nanomaterials and nanoparticles to the estimated 100-200 SMEs reportedly engaged in nano-related R&D in the Shanghai area. Roughly a third of its 25 person staff are science and engineering professionals.
The Centre’s main focus is to promote commercialization. This is achieved in various ways: by funding basic application research,10 through a research platform designed to help with the commercialization process, through the provision of nano materials testing, through the hosting of workshops and international conferences on nanotechnology, and through education (including a certificate program) and outreach to raise public awareness about nanotechnology. As an incubator,11 the SNPC provides services for start-ups before and as they enter the market –services that include legal advice for establishing a company, a variety of technology-related services, and help with marketing products. The Centre also lends out lab and office space as well as a testing centre that provides the costly equipment required for nanomaterials characterization – equipment that most start-ups could not afford. It currently supports some 70-80 companies, of which perhaps half are nano-related, with grants ranging from 50,000 RMB for smaller projects to one million RMB for large ones. While there is some private industry investment in nanotechnology (local examples include limited investments by Baosteel and Shanghai Electronics), it is clear that local government funding plays a key role in China. During our visit to the SNPC, we saw a number of examples of such support – private firms housed within the Centre’s complex that receive public funding as well as access to Centre support and services.
Shanghai’s municipal government also supports the ‘Climbing Mountain’ (Dengshan) Action Plan, which provides dedicated funding for joint projects that must be led by companies in collaboration with an academic partner. Within the plan, most work is contracted between university researchers and engineers/business partners from companies. The Plan specifically earmarks funding for nanotechnology, with projects divided between basic and applied research intended for nanotechnology commercialization (Jia 2006 interview). In Shanghai, as is typical of funding at the local level, the government provides funding both for local players and local collaboration with foreign companies such as Unilever (Li and Wang 2006 interview). It seems clear that at the provincial and local levels, government funding is trying to make up for the weakness of funding from private capital (Li et al. 2006 interview).
Nanotechnology in China: what is the payoff?
A large number of studies have attempted to understand the relationship between science, technology, and innovation in China by analyzing the rise of Chinese publications and citations in scientifically indexed journals. These studies, typically derived from the Journal Citation Reports of the Science Citation Index, have found China to be a rising star in terms of publications, and reported that in nanotechnology, China’s output is now roughly equal to that of the USA, although the impact of articles (as measured by citations) is considerably lower (see e.g. Zhou and Leydesdorff 2006; Kostoff et al. 2006).

Scientific publications do not, however, necessarily result in commercialization. A more direct measure of the commercial impact of China’s investment in nanotechnology can be found in patent applications, bearing in mind that China’s intellectual property system is still in its infancy. The State Patent Office, the predecessor of the State Intellectual Property Office (SIPO) was established only in 1980, and China enacted its first Patent Law on 1 April 1985. This law has been subsequently revised several times to harmonize with international norms and most recently to facilitate the MLP implementation. Almost at the same time of the establishment of the State Patent Office, China applied and soon was accepted into the World Intellectual Property Organization (WIPO), and subsequently joined other major IPR related international organizations and conventions, having been established in 1985. In 2008, reflecting its WTO commitments, China established The National Intellectual Property Strategy, whose goal is to foster increased innovative capacity. China’s domestic patents – in nanotechnology as well as more generally – increased rapidly after China joined the WTO.


Our analysis of all nanotechnology patents filed with SIPO during the period 1991-2006 found that 89 per cent of nanotechnology patents filed in China were invention patents, in comparison with only 33 per cent of all patents, suggesting that patenting in this area has been strongly concerned with product innovation.12 Domestic (Chinese) firm and individual nanotechnology patenting has greatly outstripped foreign patenting in China in recent years, with the gap growing markedly in recent years. Foreign patents made up 39 per cent of the yearly nanotech-related applications from 1991 to 2000, but only 20 per cent from 2001 to 2006. Nor is such increased patenting limited to SIPO: other studies report that China has increased its nanotechnology patent output in the USPTO (Liu et al. 2009) and the EPO (Li et al. 2006; Leydesdorff 2008) although its handful of nanotechnology patents in the EPO are mostly recent. During the period 1991-2006, foreign firms and individuals have also applied for nanotechnology patents through SIPO, although not in large numbers: approximately 77 per cent of all nanotechnology patent applications in the SIPO database are from China, with the top countries submitting nanotechnology patent applications to SIPO being the United States (seven per cent), Japan (four per cent), and Korea (three per cent).
Of the nanotechnology-related patent applications originating in China, the majority (63 per cent) are from either Chinese universities or from the Chinese Academy of Sciences. Of the top five most frequent nanotechnology patent applicants, all but one are academic institutions representing China’s most elite universities. The one company to make the top five in terms of numbers of patent applications is the Hongfujin Precision Industry Co., Ltd., a subsidiary of Taiwan-based Hon Hai Precision Industry Co. Ltd that specializes in manufacturing, assembling, and marketing consumer electronic products.13 Interestingly, Hongfujin is owned by Foxconn, which is a benefactor of the 300 million RMB Tsinghua-Foxconn Nanotechnology Centre, and it is unclear how much the Tsinghua Centre has contributed to the Hongfujin patenting activities, as the Centre has in-house patent attorneys from Foxconn actively searching for patentable technology (Fan 2007 interview). This strongly suggests that the large majority of nanotechnology patents in China remain closer to basic research than to development, with relatively few pertaining to marketable consumer products.
Even patents may not be good indicators of innovation as they are more firm- and product-specific and do not necessarily represent innovation in a sector or a country. Companies such as Huawei and ZTE in the telecommunications industry are exceptional as they not only lead China as well as the industry as a whole in patenting, but also compete fiercely with and win over Cisco, Motorola, Nokia, and others both inside and outside China. Still, most innovation activities in Chinese companies are incremental, which unfortunately explains why they are at the lower end of the global production network and there are products made in China but not created there. In industries such as oil and petrochemicals, steel, and mining, monopoly rather than innovation still carries the day. With the domination of MNCs, directly or through their subsidies, in the Chinese market of airplanes, automobiles, and pharmaceuticals, Chinese products are more likely to be imitation or ‘me-too’ types, therefore downplaying the role of innovation (Nolan 2001). China has been the largest producer and supplier of nanopowders and nanotubes, which have been used in sophisticated products other than clothing, paints, and tennis rackets. These are the raw materials of nano-enabled products. They are at the bottom end of the product value chain, and therefore are the least profitable. Lux research, which monitors global developments in nanotechnology, estimates that the price of multi-walled carbon nanotubes has dropped from $1,000 per gram in 2000 to only 10 cents a gram in 2010 (Bradley 2010 personal communication). Moreover, while the laboratory and workplace toxicity associated with nanotechnology remains understudied and poorly understood, basic nano particles (such as carbon nanotubes) are likely the most toxic form. The degree of regulation in Chinese laboratories is difficult to ascertain.
This implies that China has a long way to go to come up with innovation that is compatible with government investment and the accompanying expectation for nanotechnology. Moreover, there is also the possibility that nanotechnology may become another high-tech area in China, in which science cannot be effectively translated into innovation, so that the country may not leapfrog through nanotechnology but again be trapped in an insignificant position.
Conclusion: China’s developmental state
China’s dedication to high-technology growth is evident in its policies supporting efforts to leapfrog development through targeted megascience programs in nanotechnology, among others. As we have shown, China’s approach to nanotechnology is heavily state-centred, with public investment originating at all levels of government, and ranging from support for basic research, to funding intended to promote commercialization with the expectation of not only higher return to investment but also technological and industrial leapfrogging. Given China’s relative lack of private business funding for commercialization, government at various levels has sought to pick up the slack, providing funding to get technological breakthroughs into the marketplace.
The Chinese model represents a complex mixture of centralized and decentralized elements. For example, the Chinese Academy of Sciences’ Knowledge Innovation Program is typically treated as an example of decentralized influence of the scientific community, but it involves a significant amount of centralized targeting within the academy. The existence of multiple and overlapping funding sources introduces a significant element of decentralization where multiple agencies are reviewing the efforts of key scientists and institutes. Finally, we have seen that local and provincial governments and decentralized incubators play a central role in supporting the commercialization process.
Whether China’s efforts to achieve first-mover status in nanotechnology are successful remains to be seen. Whether there will be any large-scale pay off also remains an outstanding issue in the future development of nanotechnology-enabled market applications. But one thing seems to be clear: nanotechnology in China is still largely in the stage of basic research, as is the case with most nanotechnology research outside of China as well. However, China has clearly shown itself to be very committed to adding high-technology initiatives like nanotechnology to its top national priorities, thereby showing the dynamism of its contemporary developmental state. In the words of one of China’s leading nanoscientists, Xie Sishen (2007),
as a whole, China is in the rear of the first echelon or the front of the second echelon, ranking 5th or 6th in the world in nanotech. More but few: more SCI papers but few higher-citation papers; more original ideas but few original achievements; more patents but less tech transfer; more purchased advanced instruments but few indigenously made.
While China has made significant research advances in nanotechnology, in such areas as water filtration and targeted drug delivery, at the commercial end of the spectrum its greatest current strength appears to be in the production of raw nanomaterials. Once a scare resource commanding high prices, carbon nanotubes – a growing Chinese export – have become a low-cost commodity, useful in a wide range of products but hardly a driver of industrial innovation or a source of high value-added profits. Paradoxically, even as China invests in advanced technologies in hopes of moving away from its role as the world’s low-cost workhouse, at least with regard to nanotechnology – one of its high-tech areas singled out for considerable public investment – China appears to be reproducing its historic role. Rather than ‘leapfrogging development’ to assume a technology-driven leadership role in global production networks, Chinese nanotech firms remain low-cost suppliers to foreign multinationals. It remains to be seen whether China’s role will change – whether its emphasis on achieving indigenous innovation through investment in high-tech areas such as nanotechnology will eventually pay off.
Acknowledgement
This material is based upon work supported by the National Science Foundation under Grant No. SES 0531184. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author and do not necessarily reflect the views of the National Science Foundation. It was conducted under the auspices of the UCSB’s Center for Nanotechnology in Society (www.cns.ucsb.edu).
Notes

1 One of the authors (Cong Cao) has done extensive previous research on the development of science and technology in China, for example, Cao (2004), Simon and Cao (2009), Suttmeier et al. (2006a,b), and Cao et al. (2006).

2 There have already been a number of Nobel Prize awards crucially related to nanotechnology. In Physics these include development of the space-time view of quantum electrodynamics by Richard Feynman (1965), the discovery of the quantized Hall effect by Klaus von Klitzing (1985), the design of the scanning tunnelling microscope by Gerd Binning and Heinrich Rohrer (1986), the discovery of a new form of quantum fluid with fractionally charged excitations by Robert Laughlin, Horst Stormer, and Daniel Tsui (1998), and the discovery of Giant Magnetoresistance by Albert Fert and Peter Grunberg (2007). In Chemistry these include the discovery of C60 (better known as fullerenes) by Robert Curl, Harold Kroto, and Richard Smalley (1996), and the discovery and development of conductive polymers by Alan Heeger, Alan MacDiarmid, and Hideki Shirakawa (2000) (Nobel Foundation 2009a, 2009b, and 2009c).

3 Bai, CAS Executive Vice President with the rank of a full minister, is a pioneer and champion of nanotechnology research in China; he has served as an alternate member of the CCP Central Committee since 1997.

4 This theme was taken from the then CCP Central Committee General Secretary Jiang Zemin’s report to the 15th CCP Congress in 1997, which reads, ‘We should formulate a long-term plan for the development of science from the needs of long-range development of the country, taking a panoramic view of the situation, emphasizing key points, doing what we need and attempting nothing where we do not, strengthening fundamental research, and accelerating the transformation of achievements from high-tech research into industrialization’ (emphasis added). This was in turn adapted from the May 1995 decision of the CCP and the State Council to push forward China’s S&T progress, although the wording was slight different—‘catching up what we need and attempting nothing where we do not’ (you suo gan, you suo bu gan).

5 In recent years, MOST has also been criticized for its inaction in handling misconduct in scientific research in China. The appointment of Wan Gang, a non-CCP member, as the minister of science and technology in April 2007, bypassing another non-CCP member high-ranking vice minister with the similar credential and experience, seems not only to signal the importance of non-CCP members in government but also to indicate that the government may not be satisfied with MOST leadership, and in turn the progress of Chinese science, in spite of tremendous money put into it. They may want someone with no previous relations with the ministry to bring in new ways of thinking and management.

6 Nanotubes are a form of carbon with unusual tensile strength that gives it potential for a variety of industrial uses. Nano powders are extremely fine forms of elements such as iron that are believed to have considerable potential as a catalytic agent in fuel cells.

7 OECD (1995). In 1997 President Jiang Zemin called for privatization (feigongyou, or ‘non-public ownership’) of state-owned enterprises (SOEs), a plan that was ratified by the 9th National People’s Congress the following year.

8 Dr. Gao Congjie is a member of the Chinese Academy of Engineering and Chairman of China’s Desalination and Water Reuse Society; his NSFC-funded project has yielded promising results in the laboratory. Gao is one of the founders for membrane technology in China. He is also the first one who introduced the term ‘nanofiltration’ to China in 1993.

9 Information was obtained in interviews at the SNPC with Li Xiaoli (Project Manager), SHI Liyi, and Min Guoquan (7 August 2006), and with Zhu Simon (SNPC Chinese Industry Association for Antimicrobial Materials & Products; Shanghai NML Nanotechnology Co., Ltd), Zhang Bo (Shanghai AJ Nano-Science Development Co., Ltd), and Fu Lefeng (Shanghai Sunrise Chemical Company) (3 August 2007).

10 As one prominent example, we were told that SNPC helped to fund and manage a project involving the use of atomic force microscope tips to locate DNA molecules that involved CAS and Shanghai Jiao Tong University, which was featured on the cover of Nano Letters.

11 The SNPC has three incubators, each associated with a university: one affiliated with Shanghai University, and two with the Hua Dong Science and Technology University (East China University of Science and Technology).

12 Among all patents, 37 per cent were also utility model patents, and 30 per cent design patents. Invention patents are much closer in legal terms to USPTO patents. Utility model patents do not have a good corollary in the USPTO patent terminology, but do offer many of the same protections that patent protection offers, but typically—and similar to design patents—are for a shorter period of time. Design patents are typically for ornamental designs of such things as jewellery or containers as well as computer icons. To assure comparability across countries, we limited our analysis to invention patents.

13 See Business Week, Hongfujin Precision Industry (Shenzhen) Co., Ltd. http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=5478657 last visited December 2009.



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