Public private R&D + Digital talent + Advanced manufacturing

In this issue of the MERICS China Industries Brief, we look at the following topics:

Procuring breakthroughs: Finance ministry promotes public private R&D
Digital talent: China moves to level up its labor force in emerging industries
Investment overdrive: Equipment upgrading plan aims to fast track advanced manufacturing
Modelling China’s AI law: Leading experts suggest eased compliance burden on developers
Better late than never: Pilot scheme allows full foreign ownership in value-added telco services

1. Procuring breakthroughs: Finance ministry promotes public private R&D

At a glance: The Ministry of Finance (MOF) released details of a new form of government procurement, called “cooperative innovative procurement” (CIP). Through this model, state buyers and corporate suppliers invest jointly in the R&D of a specific product. The buyer also commits to procure a certain amount of the new product if it meets agreed-upon standards. For a prospective product to qualify for the CIP arrangement, it must:

Be researched and developed in China
Align with national science and technology (S&T) and related industry development plans
Support the implementation of major national strategic goals and tasks
Result in a technological breakthrough, or form a new paradigm or solution which significantly improves performance

The regulations will come into effect on June 1, 2024.

MERICS comment: With these measures, the government has found another mechanism to concentrate public resources on its S&T goals. In theory, the CIP scheme will enable the government to extract more value out of its procurement spending and stimulate further innovation in the economy. In reality, such an approach will have its drawbacks. Government bodies may struggle to strike a balance between feasibility and efficiency when setting the R&D goals, budgets and deadlines for projects. But even if it is wasteful, Beijing could still consider it a success if it helps reduce reliance on foreign technology.

The policy stipulates that apart from projects involving national security and state secrets, domestic and foreign enterprises can equally participate in the scheme. In effect, the scheme seeks to coopt foreign firms into advancing the China’s S&T capabilities and the industrial development of Chinese firms. While there may be short term gains for foreign firms to participate in the scheme, such as gaining local authorities’ goodwill, they will also be aiding their current or future competitors.

A more important issue for foreign firms in China is equal treatment in government procurement generally. Although there are no legal barriers for foreign firms to put in a bid, they are often at a disadvantage due to regulatory barriers, local content requirements and so on.

Article: Interim Measures for the Administration of Cooperative Innovative Procurement Methods in Government Procurement (关于印发《政府采购合作创新采购方式管理暂行办法》的通知) (Link)
Issuing body: MOF
Date: April 26, 2024

2. Digital talent: China moves to level up its labor force in emerging industries

At a glance: The Ministry of Human Resources and eight other government agencies issued an action plan to foster talent in newly emerging industries such as big data, artificial intelligence, smart manufacturing, integrated circuits, and data security. The plan points out measures in education and professional training to support the development of Chinas digital economy. Targets for 2026 are:

Implement digital technology engineering programs, establish new majors at universities and expand national occupational standards
Create vocational training packages, teaching materials and courses for digital occupations
Carry out international exchanges for digital talents
Support digital talents to become entrepreneurs through training and exchange platforms