Respected Advisors and Observers, Ladies and Gentlemen,
I would like to make a speech on the incentive mechanism for innovation－a very important part of building the innovation-oriented Guangdong Province.
Innovation, which is generally associated with risks and successes, is characterized by spending and cost. Accordingly it is of vital importance to give incentive to those who are innovative in their work.
At present, Guangdong has formulated and pushed ahead with the market-oriented incentive policies for any innovative work, in which enterprises play the leading role, competent personnel are put first and government actively promotes the momentum.
Firstly, the market incentive mechanism, featured with competitive mechanism and pricing mechanism, has played so remarkable a role that enterprises have taken the principal position of innovation. Guangdong's market environment has been the driving force for social innovative work. Innovation is critical for the further development of enterprises. The enterprises have constantly been upgrading technologies for their lower production costs and innovating their products for the growing demands of society. Up to now Guangdong's enterprises have established over 330 national- and provincial-level research and development centers for engineering technology and technological centers for enterprises. Seven-tenths of Guangdong's scientific and technological institutions are installed with enterprises, which have taken the dominant role in developing almost seven-tenths of their new- and high-tech product. Eight-tenths of its scientific and technological personnel are concentrated in enterprises, which in turn provide over eight-tenths of the expenditure for the scientific and technological research. Hence a batch of independently innovative enterprises, including Huawei, ZTE, CIMC and BYD auto, has come to the fore.
Secondly, we have constantly improved the incentive mechanism for enterprises, through which competent personnel and knowledge are fully respected and utilized. Enterprises have set up the systems of salary and welfare for innovative personnel, who can also share the returns on the investment of their patents, inventions, technologies and management in stocks.
Thirdly, the government has taken the incentive measures through planning, public finance and taxation to provide timely guidance and support for innovation. With the promulgation of the official documents like Decisions on Improving Independent Innovation for the More Competitive Industries and Policies on the Promotion of Independent Innovation as well as the implementation of Designated Eleventh Five-year Plan for Independent Innovation of Industrial Technology, Guangdong Province has earmarked its government budget expenditure for science and technology from 4.077 billion yuan in 2001 to 10.4 billion yuan in 2006, which accounts for 4.08% of its government budget expenditure. By focusing on core technologies of key areas and promoting the cooperation among enterprises, universities and research institutes, Guangdong Province has, by the end of 2006, put into practice 155 scientific and technological projects resulting from the joint efforts of enterprises, universities and research institutes at provincial- and ministerial-level and has facilitated the cooperation between 93 China's prestigious universities and its 600 local enterprises, thus leading its enterprises to make an investment of 1.5 billion yuan in areas of research and development. The awards for outstanding contributions in science and technology have also been set up.
The incentive mechanism for innovation in Guangdong Province, however, needs to be improved when confronted with the pressing tasks from the pattern of economic growth and the enormous market demands for innovation. Intellectual property rights are to be well protected and cases of unfair competition happen from time to time. Most of the small companies are simply engaged in processing industries, which is insufficient on the innovative capacity of research and development. In 2006 the proportion of scientific and technological activities in Guangdong's large- and medium-sized industrial enterprises is 25.3%, lower than those of Zhejiang, Jiangsu and Shanghai. Venture capital operates on a small scale and capital market provides inadequate support for innovation.
In order to improve the incentive mechanism, we must do a good job of coordinating "two hands" for the construction of an innovation-oriented Guangdong. We should bring into full play invisible hand to establish a fair and just market and formulate the transactions of intellectual property rights and their protective rules, thus further playing the underlying role of the market in innovation. On the other hand, we should make use of the visible hand of the government to provide guidance and support to enterprises for technological renovation and innovation by practicing a combination of economic means like public finance and tax with administrative means like industrial planning and market access. We will actively carry out the following tasks:
Firstly, improve the rules and regulations for the protection of intellectual property rights and effectively safeguard the market interests of innovation. We will step up efforts to protect intellectual property rights and supervise the market by improving the local rules and regulations for intellectual property rights, standardizing local official documents, and establishing the early-warning and monitoring system for the protection of intellectual property rights. We will encourage enterprises in different regions to set up the protective league for and create a protective network for intellectual property rights, crack down on unfair competitions and fake products, protect the market opportunities for the enterprises' innovation and further stimulate competent personnel to innovation.
Secondly, bring into full play the incentive role of the market mechanism. We will build up a just, fair, open and orderly market where fair competition is encouraged and the monopoly of industries removed. We will improve the government procurement system and help companies to explore markets for products of independent innovation. We will deepen the market-oriented reform of the prices for the resource products like electricity, oil, natural gas, water and land. We will charge the disposal of sewage and waste water in an all-round way and gradually raise their charging standards. We will make a reasonable use of the desulphurization and denitration expenditures on the part of sets of electricity-generating machines so as to promote the enterprises' technological renovations for more energy and less emission.
Thirdly, improve the management of the market access for industrial development to make more space for innovation and industries upgrading. We will standardize the market access for energy, environmental protection, land, salary and technology, strictly enforce the access requirements for high energy waste industries and keep the technological standards for the newly-launched projects in line with the advanced standards at home or abroad. We will consistently implement the policies of encouraging bigger projects and discouraging the smaller ones in the electricity-, iron- and steel- and cement-related industries in order to substitute the advanced productivity for the backward one.
Fourthly, improve the input system through which enterprises are guided and encouraged to invest more in innovation. We will improve the fund-raising mechanism for risk investment, credit banking and IPO. We will make sure the growth of appropriation in technology should be in pace with the local economic and revenue growth. By 2010, the input in technology shall exceed 4.5% of the government expenditure and the input in R&D no less than 1.8% of GDP. We will improve the assessment mechanism for enterprises' scientific and technological inputs, heighten the proportion of enterprises' inputs into research and development in their previous year's marketing total volumes, which should be more than 5% especially for the Province's leading industrial enterprises groups, research and development centers for engineering technology, new- and high-tech enterprises as well as technologically innovative enterprises.
Advisors, observers and distinguished guests, it is known to us all that in terms of improving incentive mechanism for innovation and policy systems, the advanced countries have gained much successful experience and the companies on the part of all consultants have also adopted many effective approaches. Therefore all of you are welcome to make suggestions on developing the incentive mechanism for innovation-oriented Guangdong.
(Full text of the remarks by Huang Longyun, Executive Vice Governor of Gaungdong Province at the "2007 International Consultative Conference on the Future Economic Development of Guangdong Province" on November 15, 2007, as transcribed)