R&D support + Financing innovative SMEs + Government procurement

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

MIIT strengthens support for R&D in core industrial technologies
Beijing steps up financing for innovative SMEs
State Council once again promises fair access to government procurement
Greening is back on the agenda: China to establish control system for emissions
In with the new: Subsidies to boost demand for new energy city buses

1. MIIT strengthens support for R&D in core industrial technologies

At a glance: The Ministry of Industry and Information Technology (MIIT) announced new research funding rounds, paid for by the central government through the National Key Research & Development Projects (NKP) program. The notice covers 16 categories such as smart sensors, industrial software and rare earth new materials, and has attachments detailing dozens of additional research tasks for each category. Scientific research institutes, universities and enterprises are encouraged to apply to contribute to specific research and development (R&D) tasks and are expected to contribute a share of the costs. The policy highlights four project management measures:

Create more opportunities for young researchers to organize and implement major R&D tasks through the Young Scientist Program
Coordinate the investment and management of officials at the ministerial, provincial, and city level to advance high priority projects
Leverage the “unveil the list” research model, combining R&D funding and government procurement, to strengthen the commercialization of outputs and to clarify end users
Develop technology readiness frameworks to enhance the output of results

MERICS comment: The NKP program is China’s main state funded research program for the applied sciences. It serves a key role in advancing the government’s industrial goals, as shown by the project categories’ strong concentration on technologies linked to advanced manufacturing. Of the 16 areas, 15 relate to industrial materials, inputs or equipment. Electric vehicles (EVs) are the only consumer product listed.

The management measures reflect the eagerness of China’s leaders to turn investments in R&D into tangible commercial results. The rise of China’s EV industry is a prominent successful example, as it has been facilitated by NKP funding since 2016. Medical robotics is another sector where years of investment in NKP projects has supported the growth of home-grown firms. Policymakers in Beijing hope to replicate this success, particularly in core technologies that can be applied across different sectors.

If successful, these R&D projects will advance China’s industrial competitiveness and its ambitions to localize core technologies. Foreign firms should pay attention to which specific technologies are being developed, especially if they match their own core business, and should monitor the progress of the actors involved.

Article: Notice on the National Key R&D Program 2024 Annual Project Application Guidelines for “High-performance Manufacturing Technology and Major Equipment” and 16 other Key Special Projects (工业和信息化部关于发布国家重点研发计划“高性能制造技术与重大装备”等16个重点专项2024年度项目申报指南的通知) (Link)
Issuing body: MIIT
Date: August 9, 2024

2. Beijing steps up financing for innovative SMEs

At a glance: The Ministry of Finance (MOF) and three other agencies issued measures to improve access to financing for innovative small and medium-sized enterprises (SMEs). They focus on the national financing guarantee fund, which is intended to encourage banks to grant more loans to SMEs, by providing surety for a share of the loan amount. Key goals of the notice include:

Raise the risk-sharing ratio of the national financing guarantee fund from 20 percent to a maximum of 40 percent
Adjust the guarantee fund’s maximum risk-sharing ratio by type of company, varying from 40 percent for Little Giant companies to 30 percent for science and technology based and innovative SMEs
Increase the upper limit of the insured amount for a single SME in the science and technology innovation category from CNY 10 million to CNY 30 million