the workforce, on encouraging applied research in firms, and on further reforming SOEs, may be appropriate. In the second decade (2021-2030), China will have to rely more on indigenous innovations requiring not just the generation of ideas through cutting edge basic research with blue skies research supported by the state but also the harnessing of these ideas – – by dynamic Chinese multi-national private firms which are technology leaders in their own particular areas and engage in high levels of research. As we indicate earlier in the chapter, policies for the first stage necessarily overlap with second. The difference is in emphasis. The policies listed below are frontloaded because the building of the innovation ecosystem is concentrated in the balance of the decade with the government playing a lead role. In the second stage, the burden of success will rest on the business sector, which is why the creating of a competitive business sector is of the greatest importance. National technology and innovation policies will need to be complemented by urban policies that recognize the vital role of cities in advancing ideas and technologies. The roles of the various entities involved are further spelled out in Annex Tables 16. 1. A competitive market environment is necessary condition for steady improvement in productivity. This entails the opening of product markets, and the fair and effective enforcement of laws regulating competition and protecting intellectual property as well as consumer rights. It also extends to competition and ease of mobility in factor markets. Starting in the late 1980s, for example, market oriented reforms stimulated entry and competition in most manufacturing sub-sectors. Even in some or “strategic” “pillar” industries (for example, airlines and telecommunications) the breaking up and corporatization of incumbent providers in 1990s released additional competitive pressures. More recently, the phasing out of tax incentives which had favored foreign investors stimulated competition by leveling the playing field with domestically-owned firms. WTO accession in 2001 increased competition from imports and the large China’s volume of FDI has led to a further intensification of competitive pressures. Sustaining
the workforce, on encouraging applied research in firms, and on further reforming SOEs, may be appropriate. In the second decade (2021-2030), China will have to rely more on indigenous innovations requiring not just the generation of ideas through cutting edge basic research – with blue skies research supported by the state – but also the harnessing of these ideas by dynamic Chinese multi-national private firms which are technology leaders in their own particular areas and engage in high levels of research. As we indicate earlier in the chapter, policies for the first stage necessarily overlap with second. The difference is in emphasis. The policies listed below are frontloaded because the building of the innovation ecosystem is concentrated in the balance of the decade with the government playing a lead role. In the second stage, the burden of success will rest on the business sector, which is why the creating of a competitive business sector is of the greatest importance. National technology and innovation policies will need to be complemented by urban policies that recognize the vital role of cities in advancing ideas and technologies. The roles of the various entities involved are further spelled out in Annex Tables 16. 1. A competitive market environment is necessary condition for steady improvement in productivity. This entails the opening of product markets, and the fair and effective enforcement of laws regulating competition and protecting intellectual property as well as consumer rights. It also extends to competition and ease of mobility in factor markets. Starting in the late 1980s, for example, market oriented reforms stimulated entry and competition in most manufacturing sub-sectors. Even in some “strategic” or “pillar” industries (for example, airlines and telecommunications) the breaking up and corporatization of incumbent providers in 1990s released additional competitive pressures. More recently, the phasing out of tax incentives which had favored foreign investors stimulated competition by leveling the playing field with domestically-owned firms. China’s WTO accession in 2001 increased competition from imports and the large volume of FDI has led to a further intensification of competitive pressures. Sustaining
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