OECD Issues Report On Innovation In China

The Paris-based Organization for Economic Cooperation & Development predicts in a new report that innovation will play a central role in solving many of China's most pressing problems, but only if China adopts new policies to make this happen.

Although pollution has been a top problem for China as its economy has developed, innovation could enable the country to foster a more sustainable development, OECD says. Regional inequalities are another top issue. A more equitable allocation of R&D resources throughout the country would help reduce income disparities between the rich cities of the coast and China's poor interior.

China still depends mostly on low wages to spur its exports, but its technological capabilities are improving rapidly, the report says. About 30% of China's exports in 2005 consisted of high-technology products, compared with 5% in 1990. Longer term, China is likely to experience shortages of certain types of skilled workers, even though it now employs the second-largest number of researchers after the U.S.

To better promote innovation, China's authorities should improve protection of intellectual property rights, the OECD report recommends. Such a policy would encourage closer cooperation between Chinese and foreign firms. China should also modify its financial system, the report says, so it's easier for new R&D-based companies to get funding. The report also says government officials should stop promoting the sectors they believe are high technology and instead let market forces determine where innovation will develop.??????