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Optimizing Layout of Innovation Factors for the Promotion of Regional Economic Growth

By Shi Guang & Ma Mingjie 2015-07-23

By Shi Guang & Ma Mingjie, Research Team on "Middle and Long Term Growth" of DRC

Research Report, No. 75, 2014 (Total 4574)

Since the start of reform and opening-up, the focus of the innovation factors' layout has shifted from China's inland to coastal areas. The shift means the geographic reshuffle of many factors which in fact, cover not only labor and capital factors but also innovation factors. This paper, in the form of innovation maps, analyzed the trend of changes in innovation factors' inter-provincial1 distribution over the past two decades; sequenced the provinces by the concentration level of innovation factors; and discussed the interrelation between the concentration level and regional economic growth.

I. The Trend of Changes in Innovation Factors' Regional Distribution

In this paper, the changes in innovation factors' inter-provincial distribution in the past two decades were evaluated from three aspects: innovation investment, innovation output and industrialization of innovation achievements. Innovation investment consisted of the amount of R&D funds and the number of researchers, universities/colleges, and research institutes; innovation output was evaluated by invention patent grants; industrialization of innovation achievements included such indicators as the volume of technology trade, the number of hi-tech enterprises, and the amount of venture capital.

Viewing from either a nationwide or a provincial perspective, most of the innovation factors have been on rapid rise but with sharp regional differences. Geographically speaking, some regions have concentrated much more innovation factors over a comparatively long period than other regions where innovations factors are insufficient or even draining. Changes in the inter-provincial layout of innovation factors can be clearly seen from five time nodes in the past two decades, namely 1991, 1996, 2001, 2006, and 2010.

1. R&D investment2

R&D investment in China has increased tremendously in the past two decades and reached RMB 1 trillion yuan in 2012, ten times higher over 2001. Most of the R&D funds have been invested in the eastern coastal areas, while R&D investment in the northeast and western provinces has been declining drastically.

The overall R&D spending in Beijing Municipality, Guangdong and Jiangsu provinces surpassed RMB 80 billion yuan in 2010. The level of R&D investment in Guangdong, Shandong, and Zhejiang used to be at the national middle level in the 1990s but now is taking the top level. Beijing and Jiangsu Province were leading the county during the period of 1991-2010; Shaanxi and Hubei provinces rose sharply in 2001 and 2006, but were surpassed again by coastal provinces in 2010; Sichuan and Liaoning provinces, as old industrial bases with abundant technological resources, once led the country in 1991, but are now left far behind by coastal provinces.

2. R&D Personnel3

The number of scientists and engineers in China has doubled in the past 20 years, reaching 2.5 million to date. The trend of changes in R&D personnel distribution is similar to that in R&D investment distribution.

Firstly, the Yangtze River Delta and Guangdong have become the main concentration areas of R&D personnel: Guangdong, Jiangsu, and Zhejiang boasted the most R&D personnel in 2010, with 340 thousand, 320 thousand, and 220 thousand FTEs (full-time equivalent) separately. Secondly, Beijing, Shanghai, Jiangsu, and Shandong have held the leading position in terms of the total quantity of R&D personnel in the past 20 years. Thirdly, northeast, central and western regions have gradually lost their advantages in scientific talents. Sichuan, Liaoning, Shaanxi and Hubei, in particular, used to have a comparative advantage in scientific talents in the 1990s, but now they are significantly behind coastal provinces.

3. Research institutes4

Along with the transformation of research institutes into enterprises since 1999, the number of institutes reduced from 5,463 in 1991 to 3,696 in 2010. Their geographic distribution has been basically stable in the past two decades: most of them are located in the eastern region (Beijing, Shandong, Guangdong, and Jiangsu) and the northeastern region (Heilongjiang and Liaoning); a few in the central and western regions (Sichuan, Hubei, and Shanxi)5.

4.Universities and colleges6

Since the 21st century, the number of universities and colleges has increased at a rapid pace: 806 in 1991 and 3,321 in 2010.

Changes in their geographic distribution show three characteristics. Firstly, most of the universities and colleges are in the eastern region (Beijing, Shanghai, Jiangsu, and Shandong) and the central region (Hunan, Hubei, and Anhui). Secondly, the number of universities and colleges in western provinces like Sichuan has dropped very fast: in 1991, Sichuan held the national 2nd place in terms of the number of higher education institutions, but ranked the 11th place in 2010. Thirdly, the number of universities and colleges in Anhui, Guangdong, and Zhejiang has been on a quick rise. Anhui had 207 higher education institutions in 2010, ranking first in the country; in Guangdong the number increased from 34 in 1991 to 173 in 2010; and in Zhejiang from 25 to 132.

5. Invention patent

It was not until the year of 2000 that China experienced a rapid growth in the number of granted invention patents. From 1991-2001 the number of granted invention patents increased less than 4 times whereas from 2001-2010 the number saw an increase of 14 times, most of which was contributed by Guangdong, Beijing, Jiangsu, Shanghai, and Zhejiang, the “new five provinces”.

In 1991, Beijing, Liaoning, Shanghai, Sichuan, and Shandong held half of China's granted invention patents. Later, southeast coastal provinces experienced a rapid increase in the number of patents granted. In 2010, the above-mentioned five provinces took up a 57-percent share of China's patent grants. In the meantime, the central and western regions only witnessed a slight increase and the share of western and northeastern provinces dropped remarkably.

6. Technology trade

During the period of 1991-2010, technology trade grew vigorously in China. In 2010, the country's technology trade volume reached RMB 390.7 billion yuan (at current price), more than 40 times that of 1991.

On the one hand, technology trade in developed provinces is increasingly active, absorbing major technologies. Technology trade volume in Shanghai, Jiangsu, Guangdong, and Tianjin grew so fast as to rank the national top places by 2010. On the other hand, Beijing's position as a national-level technology trade and transfer center was strengthened. Technology trade volume in Beijing accounted for 40% of the national total in 2010, compared with a mere 24% in 1991. Thirdly, technology trade in Shaanxi and Hubei is becoming more and more vibrant. In contrast, Liaoning and Sichuan suffered a dramatic decline in this regard: their technology trade volume accounted for 18% of the national total in 1991 but only 4.7% in 2010. During this period, Sichuan lost its pride as a sub-center of domestic technology trade.

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1It covers 22 provinces, 4 municipalities, and 5 autonomous regions in the Chinese mainland, all of which are referred to as "provinces" in this paper.

2The overall R&D budgets refer to the actual expenditures on R&D activities (basic and applied researches, and research development) spent by the surveyed units in the reported year. It includes direct expenditures on R&D projects as well as the related cost of management, services, basic construction, and subcontracts. Due to changes in the statistical indicator system, before 2000 there were no such statistical indicators, and back in 1991 and 1996, the expenditures of S&T funds were used as substitution variables.

3The scientists and engineers here refer to the scientific staff with at least undergraduate diplomas or intermediate technical titles (positions) who are working with universities, research institutes, or enterprises.

4Statistically speaking, the research institutes in this report refer to the research and development institutions with an independent accounting system, excluding those institutions to be transformed into enterprises.

52001 statistical data are unavailable.

6Since the end of the 1990s, Chinese universities and colleges have been adjusted or consolidated. But the overall quantity has been on the rise in the past 20 some years.