China’s High-Tech Industry and Its Trade with the U.S.

Jiyao BI, Ph.D.Institute for International Economic Research

(Beijing China)September 26, 2007

**The views expressed in this presentation are solely those of the presenter. It is The views expressed in this presentation are solely those of the presenter. It is not meant to represent in anyway the views of the governmental departments of not meant to represent in anyway the views of the governmental departments of

PRC or its individual officials.PRC or its individual officials.

I. R&D Activities in China’sHigh-Tech Industry

1. Development of China’s High-Tech Industry

China began to adopt encouraging policies in hi-tech industry in the 1980s, with an aim to promote technological progress and accelerate the development hi-tech industry.

From 1995 to 2005, the share of hi-tech sector in manufacturing output had increased from 8.5 to 15.8 percent.

The hi-tech product trade has also expanded significantly. In 2006 the export of hi-tech products accounted for 29 percent of China’s total export, while the import accounted for 31.2 percent.

Hi-tech product exports have become an important component of China’s exports, while hi-tech imports have become an important source of China’s technological advancement.

2. R&D Activity in China’s High-Tech Industry

Despite rapid quantity expansion, the innovation capability of China’s companies is still weak, with R&D input being relatively low.

According to China’s first national economic census in 2004, only 17,000 companies have conducted R&D activities among 270,000 ones above the scale with sales volume exceeding 5 million yuan or US$650,000 .

Only 3536 companies past the test that both R&D intensity and ratio of VAT to sales volume are higher than 4% and 2%, respectively, which includes 2930 Chinese enterprises and 606 foreign-funded ones.

In some universally acknowledged hi-tech sectors, China’s R&D intensity is lower than 1 percent.

The above situation indicates that most of Chinese companies rely on existing or import technologies in manufacturing, with less incentives for R&D due to various reasons.

3.Ratio of R&D Expenditure in Four Sectors

Sectors Numbers of Companies R&D Intensity (%)

Manufacture of electronic and telecommunication equipment电子及通信设备制造业

11768 0.38

Manufacture of medical and pharmaceutical products医药制造业

2009 0.23

Manufacture of Aircraft and Spacecraft and transport equipment航空航天业及交通运输设备制造业

20498 0.41

Manufacture of electrical machinery and equipment电气机械及器材制造业

10856 0.74

Sources: National Economic Census 2004. The enterprises’ sales are more than RMB5 million, about USD650 ,000.

4. Patents Applied by Some Sectors in China

Sources: China Statistics Yearbook on High Technology Industry 2006

5. Invention Patents Held by Some Sectors

Sources: China Statistics Yearbook on High Technology Industry 2006

6. Some Conclusions

The amount of patents in the electronic and communication equipment manufacturing sector has been significantly larger than the other hi-tech sectors, especially in recent years, while the amount of patents in aerospace manufacturing sector has been relatively stable. In addition, the amount of patents in medical and pharmaceutical products has begun to increase since 2001.

从图中我们可以发现电子及通信设备制造业拥有的发明专利数量明显高于其它几个高技术制造业，并且近些年来增量的变化非常显著；航空航天制造业拥有的发明专利一直比较稳定，波动不大；医药制造业和电子计算机及办公设备制造业自 2001 年开始不断增加。表中各制造业的专利申请的变动与其所拥有的发明专利数量的变动基本一致。

II. Features of China’s High-Tech Product Exports

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2001 2002 2003 2004 2005

Exports Growth Rate in ATPs

Total Exports Growth Rate

1. Exports of China’s Hi-Tech Products

Since 2000 the export growth in hi-tech industry has been much faster than that of total exports except in 2005.

2000 年以来，除了 2005 年以外，高科技行业的出口增长率要远远快于总出口增长率。

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%

100.00%

1995 2001 2003 2005

the ratio of ATP exports by jointventures

Foreign-funded enterprises have accounted for more than 80 percent of China’s hi-tech product exports since 2000, with an increase of 10 percent compared with 1995.

图形显示统计的高技术产品的出口中，外资企业出口占了所有出口比重的 80%以上，比 1995 年提高了将近 10 个百分点。

ATP exports by foreign invested enterprises

2. China-US Trade in Hi-Tech Products

The U.S. turned into deficit in APT trade from 2000, and its imports from China have become an important driving force.

从 2002 年开始，美国开始出现与世界其他国家高技术产品贸易逆差现象，其中，中国对美国高技术产品的出口是构成这一逆差的主要驱动力量。

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1996

1997

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U.S. trade balance with oher countries in ATP, U.S statisticsU.S. trade balance with China mainland and Hong Kong, U.S. tatisticsChina trade balace with U.S. in ATP, China statistics

Since 2002 China’s hi-tech product exports to U.S. has increased rapidly,

with foreign-invested enterprises accounting for a large share. In contrast, Chinese enterprises still suffer deficits with the US in hi-tech trade.

从 2002 年开始，中国出口美国高技术产品迅速上升，其中，外资企业占据主导地位，其次是合资企业；相比之下，中国国有企业、集体企业和民营企业并没有构成对美国高技术产品贸易的大幅顺差，相反还存在贸易逆差。

-10,000-5,000

05,000

10,000

15,00020,00025,000

30,00035,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

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SOEs Joint Venture EnterprieseForeign Investment Enterprises Collective-Owend EnterprisesPrivate Enterprises

Trade balance in ATP between China and U.S.

3. R&D activity Foreign-funded Enterprises

Despite lower export share, the ratio of R&D expenditure in Chinese enterprises has been consistently higher than foreign-funded ones, even in electronic and telecommunication equipment manufacturing sector, in which foreign-funded enterprises account for 83.5 percent of total sales

无论是总研发投入还是一些高科技领域，内资企业的研发投入要高于外资企业高，尤其是在电子及通信制造业这样一个外资占了全部行业销售值 83.5% 的行业，内资总研发投入还是要高于外资企业。

by domesti c

enterpri ses

by forei gn

i nvested

enterpri ses

所有产业 Total i ndustri es 72. 78% 27. 22%

电子及通信设备制造业 Manufacture of electronic and

telecommunication equipment 52. 15% 47. 85%

医药制造业 Manufacture of medical and

pharmaceutical products 74. 87% 25. 13%

航空航天业及交通运输设备制造业

Manufacture of Aircraft and

Spacecraft and transport equipment 67. 88% 32. 12%

电气机械及器材制造业 Manufacture of electrical machinery

and equipment 76. 11% 23. 89%

Sources: National Economic Census.

The enterprises’ sales are more than RMB500million, about USD600,000

R&D expenditure proportion between Chinese and foreign invested enterprises

Value added in some industries(Valued tax divided by sales ) Factor endowment determines that

China’s hi-tech industry is at the low-end of value chain, mainly concentrating in processing and assembling segments. The value added in some hi-tech sectors is similar to traditional industry such as textile. Considerable exports of foreign-funded enterprises are processing trade with low value added.

自然禀赋决定了中国的高技术行业的发展还是处于加工组装环节，一个重要的表现就是一些高技术行业的附加值比较低，其附加值和一些传统产业，例如纺织产业类似。外资企业的出口中，相当一部分是低附加值的加工贸易。

通用设备制造业 Manufacture of General Purpose Machinery

2.94%

专用设备制造业 Manufacture of Special Purpose Machinery

2.88%

交通运输设备制造业

Manufacture of Transport Equipment

2.74%

电气机械及器材制造业

Manufacture of Electrical Machinery and Equipment

2.26%

通信设备、计算机及其他电子设备制造业

Manufacture of Communication Equipment, Computers and Other Electronic Equipment

1.13%

仪器仪表及文化、办公用机械制造业

Manufacture of Measuring Instruments and Machinery for Cultural Activity and Office Work

2.35%

纺织业 Manufacture of Textile 2.36%

Sources: National Economic Census, 2004

4.What causes the contradiction?

Among the enterprises with R&D activities, the average ratio of R&D expenditure of the enterprises is 4.81%, lower than 5% criteria for the qualified new and high-tech enterprises. And the number of enterprises with R&D activities is much less than that of recognized new and high-tech enterprises.

有研发活动的企业的平均研发强度（即研发支出占销售总额的比例）为 4.81% ，低于 5% 的对高新技术企业的认证标准。有研发行为的企业的数远远低于已经认定的高技术企业数。

Number

Enterprises with R&D activity 有研发活动的企业 17052

Enterprises with R&D strength higher than 5%

研发投入大于 5% 的企业 3987

Recognized new and high-tech enterprises

已经认定的高技术企业 About50000

Sources: National Census

US exports to China US imports from China

1996 34,213 3

2001 1,385 3

2006 2,147 12

Electronics unit value index of US exports to and imports from China

(current US dollars)

Source: joint working paper on US-China Trade in Advanced Technology Products

The unit value of electronic products of Sino-US trade reflects the backward situation of China in technological advancement to some extent. In 2006, the unit value of US exports to China is about 200 times of US imports from China.

中美之间进出口的电子产品的单位价值也在一定程度上说明了目前中国目前的科技发展情况。 2006 年，中国出口美国产品单位价值和从美国进口产品的单位价值相差了将近 200 倍。

5. Conclusion

The unit value difference of electronic products shows that China still remains in the processing and assembling stage and the level of assembled products is much lower than that of same products made in U.S.

从电子产品的价格差异说明中国目前不仅处在加工组装环节，而且所组装产品档次要远远低于美国同类产品。

Foreign-funded enterprises have much lower R&D expenditure than Chinese ones, but played a significant role in China’s hi-tech product exports, indicating their R&D activities are conducted abroad.

外资企业的研发要远远低于内资内资企业，但是在出口中扮演了重要的角色，这说明外资企业的出口产品的研发并不是在中国完成的。

With higher R&D expenditure than foreign-funded enterprises, the Chinese enterprises have not become the main force of hi-tech product exports, indicating that the R&D capability remains weak in Chinese enterprises and their hi-tech products are not competitive on international markets.

内资企业研发高于外资企业，但是并没有成为高技术产品出口主力，说明国内研发能力较弱，高科技产品并没有在国际市场形成竞争力。

III. Further Discussion

1.What causes China’s economic growth?

Despite its rapid economic growth in recent years, China has not shifted its growth from extensive to intensive pattern, with high energy consumption sector making a large contribution to the growth.

High energy consumption and mining sectors generally have low R&D input, but they perform better than downstream sectors, accounting for a large share in total industrial profits. 0

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1999 2000 2001 2003 2004 2005 2006

Mi ni ng I ndustri es,采掘业

Hi gh Consumpti n I ndustri es,高耗能产业

Ratio of mining industries and high energy consumption industries’ profit in total industries

采掘业和高耗能产业

Ratio of R&D expenditure in different industries(%,divided by sales)

行业分类 2005 2004

高耗能产业 High energy consumption industries

石油加工、炼焦及核燃料加工业 Processing of Petroleum, Coking, Processing of Nuclear Fuel

0.087 0.119

化学原料及化学制品制造业 Manufacture of Raw Chemical Materials and Chemical Products

0.524 0.565

非金属矿物制品业 Manufacture of Non-metallic Mineral Products

0.250 0.232

黑色金属冶炼及压延加工业 Smelting and Pressing of Ferrous Metals 0.588 0.557

有色金属冶炼及压延加工业 Smelting and Pressing of Non-ferrous Metals 0.456 0.370

下游产业 Downstream Industries

医药制造业 Manufacture of Medicines 0.994 0.877

通用设备制造业 Manufacture of General Purpose Machinery 0.675 0.685

专用设备制造业 Manufacture of Special Purpose Machinery 0.930 0.768

交通运输设备制造业 Manufacture of Transport Equipment 1.116 0.960

电气机械及器材制造业 Manufacture of Electrical Machinery and Equipment

0.883 0.929

通信设备、计算机及其他电子设备制造业Manufacture of Communication Equipment,

Computers and Other Electronic Equipment

1.031 1.054

2.China is still on the road of industrialization

According to our calculation, capital formation, labor input and technology advancement contributed 83.6%, 13.9% and 3%, respectively, to the growth of industrial value added from 2000 to 2005, implying that industrial growth has been propelled by factor input and technological advancement has not become a main driving force for economic growth.

根据外经所的计算表明，从 2000 年到 2005 年，工业增加值的增长量中，资本形成、劳动力投入和技术进步的贡献率分别是83.6%、 13.9%和 3% 。要素投入是工业增长的主要动力，技术进步并没有成为推动经济增长的主要动力。

In sum, China’s growth still remains extensive, and there is a long way to go for China to transform itself into a knowledge-based economy.

中国的增长还是粗放式的增长，中国要进入知识经济时代，还有很长的一段路要走。

Thank you for attention!