A worker produces photovoltaic cells at an energy Company's cell production workshop in Hefei, East China's Anhui Province
MERICS China Industries
13 min read

Technology as a factor of production + Battery supply chain + SMEs

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

  1. MOST wants technology to be marketized as a factor of production
  2. Greater regulatory oversight to stabilize China’s battery supply chain 

  3. New measures strengthen intellectual property support for innovative SMEs

  4. MOST releases Five-Year Plan for High-Tech Development Zones 

  5. Virtual reality to boost manufacturing and other economic sectors

1. MOST wants technology to be marketized as a factor of production

At a glance: The Ministry of Science and Technology (MOST) released a special plan to stimulate the creation of an efficient technology market in China, part of a longstanding effort to improve the transfer and conversion of science and technology (S&T) achievements into commercial or practical applications. Key points include:

  • By 2025, increase the value of technology transfer and licensing contracts to 5 trillion CNY, almost twice the 2020 figure
  • Increase the participation of companies in national S&T and innovation funding programs and support SMEs to license their technology achievements
  • Encourage technology trading marketplaces (CTEX, Shanghai’s STEX, Shenzhen Stock Exchange) to establish new institutions and supporting services for trading intellectual property (IP) rights and S&T achievements
  • Promote the integration of technology and capital markets, including by reforming the National Guidance Fund for the Transformation of S&T Achievements and guiding venture capital to invest in early-stage technology companies

MERICS comment: Beijing regards technology as a factor of production along with land, capital, labor, and data. Creating a unified market for technology elements, such as S&T resources, research findings and IP, is a major objective of the national economic development and innovation strategies.

The plan restates familiar goals, such as improving IP protection and giving more autonomy to research institutions. This suggests a degree of dissatisfaction with the progress so far. More institutional reforms are needed to support the strategic goal of “S&T self-reliance” (科技自立自强). Technology research and development shall better serve strategic needs along critical industrial supply chains, and S&T projects will be evaluated based on whether they solve bottlenecks in “key and core technologies” (关键核心技术).

Beijing’s technology transfer policies seek to integrate and exploit IP, talent, and innovation resources not just within the country, but also across borders. Besides building new technology trading hubs in Beijing, Shanghai, and the Greater Bay Area, the plan talks about establishing new international S&T cooperation bases and technology transfer institutions in China. While European companies will welcome further reform of China’s patent and technology licensing system, they should remain acutely aware of IP risks.  

Article: “14th Five-Year” Special Plan for the Technology Factors Market (“十四五”技术要素市场专项规划) (Link)
Issuing body: MOST
Date: October 25, 2022

2. Greater regulatory oversight to stabilize China’s battery supply chain 

At a glance: The Ministry of Industry and Information Technology (MIIT) and State Administration for Market Regulation (SAMR) released a notice to reduce imbalances between supply and demand in China’s lithium-ion battery sector. Because lithium-ion batteries are the key component of electric vehicle (EV) batteries, maintaining stability in their pricing is key for a healthy EV sector. Local MIIT and SAMR departments are tasked to:

  • Prevent disorderly production capacity expansion of new battery projects
  • Improve coordination among different parts of the battery supply chain, from raw material mining over processing to battery production
  • Strengthen supply chain supervision to deal with hoarding, price gouging, unfair competition and quality issues
  • Promote monitoring and early warning systems through the comprehensive use of big data, statistics and industry surveys