China’s Transition to the Innovation- Driven Economy: Stepping Stones and Road- Blocks

Abstract

Besides its past outstanding accomplishments in terms of extensive development, China has also accumulated multiple distortions and structural imbalances and has reached a crossroads, where a major qualitative switch is a must. Its outdated export-oriented economic model has covered both the factor-driven and investment-driven stages of development and now China needs to more firmly advance towards the stage of innovation-led growth, transiting from cheaply processing and assembling foreign-designed goods, using foreign-designed technologies and supplying foreign markets, to producing high quality, services-and-knowledge-intensive products, using locally-devised technologies and meeting, primarily, its own domestic demand. This paper looks at the progress attained in recent years in the Chinese research, development and innovation system, sketching its landscape in terms of structure, endowment and goals, inputs and output improvement, significant shifts and trends paving the way to an innovation-driven economy, as well as to potential road-blocks on the way