China
Chinese tech dominance more myth than reality
Author: Marina Yue Zhang, UTS
The Australian Strategic Policy Institute (ASPI) recently released a report asserting China’s dominance in ‘critical technologies’. The report claimed that much of China’s progress has come from elaborate high-level design and long-term policy planning. It also claimed that Western democracies are losing out in global technological competition and urged them to invest more in research and form closer collaborations to curb China’s dominant positions in those technologies.
Before action is taken, it is essential to make sense of China’s rise in critical technologies and separate fact from fiction.
Claiming that China’s lead in research outputs indicates its dominance in ‘critical technologies’ is a case of equivocation. Research output does not necessarily reflect technological innovation capability. China has undeniably made significant progress in research output over the past two decades, mainly due to substantial funding from the central government for leading universities and research institutes based on a ranking-driven model.
But this model has prompted researchers to prioritise short-term incentives over long-term knowledge inquiry, which is driven by academic curiosity but accompanied by high uncertainty and risk. China has pursued the path of Western technological forerunners by imitating, assimilating and replicating existing scientific research. Once Chinese scientists reach the technological frontier, they must adjust their strategy to engage in cutting-edge and future-defining research.
When it comes to research outputs, the scale of inputs plays a significant role. In 2022, China’s total number of research and development (R&D) personnel surpassed five million person-years, creating the world’s largest scientific and technological talent pool. When accounting for purchasing power, Chinese researchers, except for top scientists, are generally less expensive than the OECD average. China has nearly double the number of full-time researchers, equivalent to the combined total of the United States and the European Union. It is not surprising to see China making strides in research output.
Yet research quantity does not always equate to quality. ASPI’s technology tracking offers aggregate comparisons across countries and technological fields, but it doesn’t capture accurate measurements of research quality. This is because its rankings of a country’s position in a specific technological field are based on publication citations. Although ASPI’s report asserts that self-citations are legitimate, citation-based indicators give large organisations a noticeable advantage in publication impacts when self-citations are included.
Another limitation of ASPI’s rankings is the insufficient weighting of journal and author influences in research, which could downplay those who conduct groundbreaking and future-defining research. When using bibliometric analytical methods such as co-citation and co-occurrence analyses, the United States outpaces China by a significant margin in many scientific fields.
Building technological innovation is a gradual and cumulative process driven by industrial R&D. China has a relatively short history of industrial innovation, which is path-dependent. For this reason, China has few advantages in established industries such as semiconductors and pharmaceuticals, where Western incumbents hold ‘patent thickets’ that curb China’s catch-up. While China contributed 27.5 per cent to total global R&D expenditures in 2022 against the United States’ 35.6 per cent, US technology giants still dominate research and innovation in critical technologies such as artificial intelligence.
Unlike the United States, China’s research and innovation progress occurs on different tracks. A conundrum has raised concerns among policymakers — while the research community celebrates breakthroughs in publication quantity, industries face many ‘chokepoints’ in critical technology supply chains.
Less than four per cent of China’s research outputs from universities have been translated into industrial innovation capabilities — much lower than in most industrial countries. Building a bridge between China’s research and innovation has become a policy priority.
Finally, the notion that China’s industrial policy plays a critical role in its research and innovation is a myth. China does not have a single industrial policy — instead, it has numerous policies that lead to intra-governmental competition, resulting in duplicated…
China
China Provides Tax Incentives on Special Equipment for Green and Digital Development
China has introduced a new tax incentive for companies investing in digital and smart upgrades of special equipment to encourage environmental protection and safe production. Companies can enjoy a 10 percent deduction from their corporate income tax payable. Eligibility and requirements are outlined by the Ministry of Finance and State Tax Administration.
A new China tax incentive aims to encourage companies to invest in digital and smart upgrades of special equipment. Companies upgrading certain equipment that aids environmental protection and safe production can enjoy a deduction of the investment at a rate of 10 percent from their corporate income tax payable. We explain the requirements of the new tax incentive.
China’s Ministry of Finance (MOF) and State Tax Administration (STA) have issued a new preferential corporate income tax (CIT) incentive for companies investing in digital and intelligent transformations of certain types of equipment. To be eligible for the incentive, companies must invest in the digital and intelligent transformation of equipment related to energy and water conservation, environmental protection, and safe production.
The new tax incentive aligns with a State Council Action Plan, released in March 2024, which aims to accelerate the renewal of large-scale equipment and consumer goods, promoting high-quality development and driving investment and consumption for long-term benefits.
If the annual CIT payable is insufficient for the offset, it can be carried forward to future years for up to five years.
The CIT payable refers to the balance after multiplying the annual taxable income by the applicable tax rate and deducting the tax reductions and exemptions according to China’s CIT Law and relevant preferential policies.
Note that companies enjoying the tax incentives must use the transformed equipment themselves. If the equipment is transferred or leased within five tax years after the transformation is completed, the incentives must stop from the month the equipment is no longer in use, and the previously offset CIT must be repaid.
The “special equipment” eligible for the preferential tax treatment covers equipment purchased and used by companies listed in the Catalog of Special Equipment for Safe Production for Corporate Income Tax Incentives (2018 Edition) and the Catalog of Special Equipment for Energy Saving, Water Conservation, and Environmental Protection for Corporate Income Tax Incentives (2017 Edition).
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
Revealing the Encouraged Industries of Hainan in 2024: Unlocking Opportunities
The 2024 Hainan Encouraged Catalogue, issued by the NDRC, MOF, and STA, aims to boost industries in the Hainan Free Trade Port. It prioritizes sectors like tourism, modern services, and high technologies, offering incentives for foreign investment and market access expansion since 2020. The Catalogue includes 176 entries across 14 categories, with 33 new additions focusing on cultural tourism, new energy, medicine and health, aviation, aerospace, and environmental protection.
The National Development and Reform Commission (NDRC), in collaboration with the Ministry of Finance (MOF) and the State Taxation Administration (STA), has issued the Catalogue of Industries Encouraged to Develop in Hainan Free Trade Port (2024 Version), hereinafter referred to as the “2024 Hainan Encouraged Catalogue.” The updated Catalogue took effect on March 1, 2024, replacing the previous 2020 Edition.
Beyond the industries already addressed in existing national catalogues, the new entries in the 2024 Hainan Encouraged Catalogue are based on practical implementation experiences and the specific needs within Hainan, prioritizing sectors such as tourism, modern services, and high technologies.
The Hainan FTP has been providing incentives to draw investors to invest and establish businesses in the region, especially foreign investment. Alongside a phased approach to opening the capital account and facilitating free capital movement, Hainan has significantly expanded market access for foreign enterprises since 2020, particularly in sectors such as telecommunications, tourism, and education.
The Hainan Encouraged Catalogue comprises two main sections:
Similar to the approach adopted by the western regions, foreign-invested enterprises (FIEs) should always implement their production or operations in accordance with the Catalogue of Encouraged Industries for Foreign Investment.
On top of the industries already addressed in existing national catalogues, the 2024 Hainan Encouraged Catalogue encompasses 14 distinct categories and a total of 176 entries especially encouraged in the region, including 33 new additions compared to the 2020 Edition. These new entries predominantly span cultural tourism, new energy, medicine and health, aviation and aerospace, and ecological and environmental protection, among others.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
Key Guidelines for Companies in Compliance Audits for Personal Information Protection Standards
China’s standards authority has released draft standards for personal information protection compliance audits, potentially making them mandatory for companies in 2023. The audits will require companies to undergo annual or biennial checks based on the number of people’s information they handle. The draft standards outline the audit process and requirements, seeking public feedback until September 11, 2024.
China’s standards authority has released draft standards for conducting personal information protection compliance audits. Regular compliance audits to ensure compliance with personal information protection regulations may become a requirement for companies in China under draft measures released in 2023. We explain the audit processes and requirements proposed in the draft standards.
The Standardization Administration of China (SAC) has released a set of draft standards for conducting personal information (PI) protection compliance audits. Under draft measures released by the Cyberspace Administration of China (CAC) in August 2023, companies that process the PI of people in China are required to undergo regular compliance audits.
Specifically, companies that process the PI of over one million people must undergo a compliance audit at least once a year, while companies that process the PI of under one million people must carry out an audit at least once every two years.
While the draft measures stipulate the obligations of the auditing body and the audit scope, the draft standards outline the specific audit process, including evidence management and permissions of the audit organization, as well as the professional and ethical requirements of auditors.
The Secretariat of the National Cybersecurity Standardization Technical Committee is soliciting public feedback on the draft standards until September 11, 2024. Public comment on the draft measures released in August last year closed on September 2, 2023, but no updated document has yet been released.
The draft standards outline five stages of the PI protection compliance audit: audit preparation, implementation, reporting, problem rectification, and archiving management.
Auditors are required to accurately document identified security issues in the audit working papers, ensuring that the records are comprehensive, clear, and conclusive, reflecting the audit plan and its execution, as well as all relevant findings and recommendations.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
- China Provides Tax Incentives on Special Equipment for Green and Digital Development
- Revealing the Encouraged Industries of Hainan in 2024: Unlocking Opportunities
- Key Guidelines for Companies in Compliance Audits for Personal Information Protection Standards
- A Comprehensive Guide to China’s Expanded 144-Hour Visa-Free Transit Policy at 37 Ports
- Regulatory Changes in China Aim to Boost Service Sector Growth in Six Cities
- Adhering to Updated Registered Capital Regulations in China’s Revised Company Law
