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Full transcript of the State Council policy briefing on April 1

Updated: Apr 1,2016 6:38 PM     english.gov.cn

Xi Yanchun:

Ladies and gentlemen, good morning. Promoting innovation development is important to China’s economy. At the State Council executive meeting on March 30, it was decided that some state-level innovation demonstration areas would be set up. Moreover, a new mode will be used to accelerate Shanghai’s construction of a science and technology innovation center.

To help you better understand the situation, we are happy to invite Yin Hejun, vice-minister for Science and Technology, and Zhou Bo, deputy mayor of Shanghai. They will introduce related situations and answer your questions. Now let’s hear from Mr Yin for an introduction.

Yin Hejun:

Friends from the press, good morning. The State Council executive meeting on March 30 decided to set up another three state-level innovation demonstration areas, adding to the current 11.

The construction of state-level innovation demonstration areas mainly relies on the trial of system and policy innovation. They are supposed to play a leading role in innovation-driven, science and technology system reform, mass entrepreneurship and innovation, and be a gathering place for new industries.

The construction of state-level innovation areas is an important measure for promoting mass entrepreneurship and innovation. It can also arouse the enthusiasm of different regions, encouraging them to compete to innovate effective development measures. In this way, it can create new development forces and relieve the downward economic pressure.

Related ministries and local governments strongly support the development of these demonstration areas. Approved by the State Council, the 16 policies tried at Zhongguancun have been promoted in other demonstration areas and then promoted nationwide. Provinces and cities that have demonstration areas have also announced nearly 4,500 innovative policies.

Currently, the demonstration areas have a good development trend and a stronger radiant power in regional economy development and industry transformation and upgrading.

Now, for questions.

Zhou Bo:

Thank you, Mrs. Gong! Good afternoon, ladies and gentlemen!

First, I will make a brief introduction on a document that calls for a comprehensive innovation reform plan that will be implemented in China’s financial hub of Shanghai within three years, and answer your questions. Following is the brief introduction.

In May, 2015, Shanghai put forward a guideline to speed up building a technological innovation center geared for global influence, according to President Xi Jinping’s instructions. Then the city drafted a plan to guide the building details with the help of the National Development and Reform Commission (NDRC) and the Ministry of Science and Technology. The State Council approved the plan at an executive meeting on March 30, signaling that the plan has started to be put into practice.

The general outline to implement the plan is as follows:

The aim is to promote innovation reform tests systematically in three years, achieve many big innovation reform results in technological and financial innovation, attract talents, transfer technological findings, intellectual property rights, reform of State-owned assets and enterprises and openness and innovation, gain reform and innovation experiences that can be copied and promoted, and overcome system obstacles that constrain innovation. By 2020, the general framework for Shanghai as an influential technological innovation center will be set up, laying a solid foundation to build China as an innovation-driven country. By 2030, Shanghai will possess the ability to be a global technological innovation center and the city’s innovation ability will be ahead of other regions in China and the world.

There are four major tasks to be implemented for Shanghai:

The first is to build a comprehensive national science center. Based on the abundant science facilities at Zhanjiang high-tech park, it will be built into a region with intensified major technological infrastructures and first-rate research-oriented universities. More world-class research institutions and teams will be introduced here and a free environment that is in accordance with scientific laws also will be set up in Zhanjiang.

Second is to build a platform to research and transfer generic technology. Building a research platform for key focuses, such as information technology, biology and high-end equipment and transferring platforms.

Third is to set up large strategic projects and infrastructure that could lead the development of industries. Combined with the national strategic development, Shanghai will build a batch of key projects, develop key technologies and promote the development of new, emerging industries based on its own advantages.

Fourth is to promote the building of the Zhangjiang National Innovation Demonstration Zone. The region is to set up a platform for innovation and entrepreneurship, improve services and build a innovation center. It will feature innovative elements and characteristics, outstanding innovative functions, a good environment for innovation and entrepreneurship and strong driving forces.

Reform measures are primarily focused on six aspects:

First, to establish government management system conforming to innovative rules while improving supervisions during and after the reform. It’s also about using effective regulations to unleash restrictions on enterprise. Meanwhile, reduce the government’s administrative interference to innovative activities conducted by enterprises, to release innovative vigor and potential of the society.

Second, to establish market-oriented mechanism on transformation of scientific achievement, let the market play its decisive role in the distribution of innovative elements, and build an effective mechanism on the transaction of technological property rights and the application of intellectual property.

Third, to improve an innovative systems on income distribution, build systems which respect knowledge and innovation, enable the innovative subject to receive equity incentives and income distributions, and the rights to independently decide the use of research funds and transformation of research achievement.

Fourth, to improve the mechanism to facilitate enterprises subjects’ innovative input, take use of financial and fiscal policies to enable investment in science and technology innovation, to form an investment and financing system which avails to achieve technological innovation.

Fifth, to establish a flexible talent development system, forming a mechanism and policy environment which is favorable to cultivate and utilize talents.

Sixth, to form an inclusive and cooperative mechanism on cross-border integration, take advantage of the innovative edge of free trade zones, build a convenient environment that allows innovative elements achieve free flow cross borders.

Based on the above six aspects in reform, Shanghai will be authorized to conduct 10 reform trials which include:

1. Research and explore an inclusive tax system which encourage innovative entrepreneurship

2. Explore and roll out innovative models on financial services including the linkage of investment and loan

3. Reform market systems on equity managed trading centers

4. Extend the scope in identifying high and new tech enterprises

5. Improve equity incentive system

6. Explore the development of the research and development in new-type of industry technology

7. Launch pilot convenient service centers on permanent residence for overseas talents

8. Simplify overseas investment management

9. Reform system on medicine registration and manufacturing management

10. Build a National Science Center which conforms to scientific rules to operate management system

Shanghai will work on the implementation of the related work; Shanghai will strive for achievements in the near future.

Now, I’m willing to answer the questions raised by everyone.

Xi Yanchun:

Thank you Mr Zhou, we have noticed that the policy briefing of the State Council every Friday usually introduces policies and measures on the state level. Today, Mr Zhou has introduced the guideline, which is a major move. If in the future, everyone wants to communicate with the ministries on issues at the state level, we are also willing to provide opportunities. Today, let’s welcome Mr Yin and Mr Zhou to answer questions.

Now comes the question-raising part, as usual, please report which media outlet you are from before asking your question.

China Radio International:

Mr Yin, we know that independent innovation demonstration zones such as Zhongguancun are developing quickly, although the economy is still plagued by downward pressures. What progress has been made for these demonstration zones in recent years? What role did they play in economic upgrade and transformation?

Yin Hejun:

Ten more national demonstration zones have been established since the State Council approved building the Zhongguancun National Innovation Demonstration Zone in 2009. So far, these national demonstration zones have become important engines for innovation development and economic transformation, with new innovation resources and industries gaining momentum. It is manifested in the following aspects:

First, both the development speed and efficiency have increased, bolstering medium-high economic growth. In the new normal pattern, major economic indicators maintained two-digit growth at national innovation demonstration zones. The indicators increased about 30 percent in the national innovation demonstration zones of Donghu, Wuhan of Hubei province, Chang-Zhu-Tan, Hunan province, and Chengdu, Sichuan province for several consecutive years. Tax revenue at Shenzhen national innovation demonstration zone increased 25 percent year on year in the first three quarters of 2015. Meanwhile, these innovation zones made great contributions to regional economic growth. In the first three quarters of 2015, economic growth in seven zones contributed more than 20 percent of GDP growth in the local regions.

Second, mass entrepreneurship and innovation have been promoted further. In the first three quarters of 2015, the number of newly built technological enterprises surpassed 6,000 in Donghu, a year-on-year increase of 42 percent, and the number in Zhangjiang of Shanghai was nearly 10,000, an increase of 25 percent. The number of venture investment projects and investment capital accounted for more than 40 percent in Zhongguancun of Beijing.

Third, new industries have continued to develop, and industrial structure continued to be optimized. In 2014, total revenue in the modern tertiary industry at Zhongguancun of Beijing accounted for more than two-thirds of that in Haidian district. The total revenue of advantageous and potential industrial clusters such as Next-Generation Internet and high-end equipment accounted for 70 percent in Haidian district. International market share of optical fiber cable and optical devices at Donghu reached 25 percent and 12 percent, respectively. The industrial output of circulated circuit in Zhangjiang accounted for one-third of the whole country.

Fourth, research results have been efficiently put to use in industrial productions. The amount in agreements made in national technological contracts reached 983.5 billion yuan, an increase of 15 percent year on year, of which 87.5 billion yuan was made at universities and research institutions. For example, at the Shanghai Institute of Materia Medica of the Chinese Academy of Sciences, a total of 800 million yuan was made with new drug research results transferred in 2015.

In terms of development efficiency, national innovation demonstration zones have played an important role in promoting medium-high economic growth in China.

China Business News:

Mr Zhou, just now Mr Yin mentioned the national innovation zone Zhanjiang High-tech Park. My question is, what are the functional orientation and construction thoughts at Zhangjiang on building a comprehensive national science center? In the past two to three years, innovation and entrepreneurship were the top concerns for both the government and the general public. In the past year, what changes occurred in Shanghai’s entrepreneurship and innovation in the process of building its scientific and technological center? And what arrangements will be further carried out in the future?

Zhou Bo:

The first question. The National Development and Reform Commission and the Ministry of Science and Technology gave an official response to building the Zhangjiang comprehensive national science center in Shanghai. Our target is to build a comprehensive and open national science center in accordance with national requirements.

On the basis of the original success, we will gather more large scientific facilities, attract more top-ranking science and research teams and institutions, build platforms for common technology’s research, development and transformation and set up first-rate research universities. Zhangjiang already has some facilities, such as synchrotron radiation light source, protein facilities and the super computer center. As we stated in the opinions on stimulating the construction of a science and technology innovation center with a global influence, which was also agreed to by the central government, more large scientific facilities, such as the second phase of synchrotron radiation light source, super and ultra short laser, X-ray free electron, seafloor observatory and translational medicine, will be built in a larger field, including life sciences, information technology and high-end equipment in efforts to form a large science facility cluster.

Meanwhile, common technology’s research, development and transformation platforms will be further developed. Take the IMEC in Belgium as an example. Although Belgium doesn’t have a manufacturing industry in semiconductor integrated circuit, its research and development technology in this respect is recognized as the highest level in the world. Therefore, we will also set up Shanghai Micro-technology Research Institute to explore this field by following the latest model and make full use of Eastern China’s technology transfer platform, which has the support of the Ministry of Science and Technology, to promote commercialization of research findings.

Moreover, we will promote the application, protection and transfer of intellectual property rights and develop more professional institutions through various models, including governmental purchases and PPP (public-private partnership). In regard to the construction of a first-rate research university, the Shanghai government and Chinese Academy of Sciences will co-build the Shanghai Science and Technology University, start high-end research in some key sectors attracting a research team led by a Nobel Prize winner, and carry out some institutional mechanism, such as consolidated budget management and tenured professor system. The consolidated budget management broke the former rigid and inflexible system and gives full autonomy to the university, which can turn its attention to professional, market-orientated and international scientific research.

Entrepreneurship and innovation are common concerns for the whole society. Shanghai released a guidance on developing space for mass innovation and promoting entrepreneurship, after publishing the opinions on stimulating the construction of a science and technology innovation center with a global influence. In the past one to two years, remarkable changes have occurred in the three aspects, but of course it still needs the long-term process.

First of all, the awareness of innovation and entrepreneurship among the public is further strengthened. Shanghai was regarded as a city that follows all rules and regulations and unwilling to accept innovation and entrepreneurship, but innovation awareness has been further strengthened after implementing the national strategy and our opinions and guidance, especially for State-owned enterprises, which account for 48% of Shanghai’s GDP and have over 30 trillion yuan in assets. It is hard to promote innovation in the whole society if State-owned enterprises operate without innovation vitality. We have carried out reforms in State-owned enterprises and encouraged them to perform more innovation in business operation. After the implementation of those measures, their innovation awareness has been greatly increased.

According to one of our policies, State-owned enterprises’ investments in research and development, innovation and transfer, and mergers and acquisitions of micro- and small-sized companies are all regarded as profits and will be amortized in three to five years. It prevents business owners suffering from worries about operating losses because a great number of investments in innovation failed. After the implementation of this measure, State-owned enterprises’ enthusiasm for innovation and entrepreneurship was greatly improved. Last year, over 100 projects at 24 companies, valued at 12 billion yuan, benefited from it. In addition, Shanghai’s State-owned enterprises have 58 CVC (corporate venture capital) projects, including setting up ventures in Silicon Valley, to deal with the emerging, transforming, innovative and entrepreneurship transfer from business incubator to angel fund and from business incubator to industrial fund. Innovation will be encouraged and promoted with a focus on this market and industrial chain.

Shanghai is featured with its characteristic opening up and transparency. The city hosts 396 of China’s foreign invested research and development centers, about one fourth of country’s total.

A total of 120 multinational companies on the Fortune 500 list have established R&D and innovation centers in Shanghai, about one-third of the country’s total.

In addition, we are also open to foreign investors.

We have adopted necessary measures in terms of government procurement and project transparency to loop them in the construction of the city’s science and innovation center as well as in the work of mass entrepreneurship and innovation.

But as Minister Yin had it, private companies and small- and micro-sized enterprises also mushroomed in the city.

The number of newly established tech SMEs in Zhangjiang, Shanghai’s high-tech zone, surpassed 10,000 last year, up 20 percent year-on-year. The city as a whole also enjoyed a 20 percent increase in this regard.

Shanghai boasts the atmosphere to nourish innovation, and the people here are increasingly tolerant to innovation.

Enterprises are the trailblazers of innovation, whereas entrepreneurs are the keys to it all.

Traditionally, Chinese people are resentful to failure, but now people are more tolerant to failures, as well as entrepreneurs’ unique personalities.

The local people’s congress also issued certain documents to encourage innovation and reform.

Many companies have made fault-tolerance mechanism part of their charters.

Previous surveys show that college students used to be reluctant to start up their own business. However, their willingness in this regard is advancing at 100 percent in recent years.

Secondly, incubators for entrepreneurship and innovation are sprouting in Shanghai. There are 450 incubators of various kinds, 90 percent of which are private-owned. State-owned enterprises, foreign-invested companies, as well as social organizations also play their part in the process.

Two of these incubators become the first of its kind to go public on the New Third Board, an over-the-counter market for growth enterprises.

Moreover, venture capital (VC) funds and angel funds are booming in Shanghai. The municipal government launched a VC fund as early as six years ago.

The fund is operated in accordance to market rules, and is managed by VC firms and industry associations. It has invited bids from home and abroad to set up arms that cater to different industries.

We have offered three rounds of bid invitations so far, and have set up more than 40 sub-funds. We have achieved progress thanks to the support from the government and the guidance from the National Development and Reform Commission and Ministry of Science and Technology.

About two years ago, the municipal government established an entrepreneurship fund that was run by the Shanghai Technology Entrepreneurship Foundation for Graduates. Now, it operates 16 angel funds, and is inviting bids from the society.

Third, more and more excellent teams full of innovative ideas are attracted to Shanghai. Competitions that encourage entrepreneurship and innovation are held there every year. We saw 3,000 participants last year, three times more than past years, this made for an obvious changes and a good trend.

However, problems do exist. For the next phase we’ll build a friendly environment on property right protection, credit system and resources integration, by further transforming government functions and reducing interventions. Also, we’ll do our best to attract more talents and make enterprises and market play a bigger role. Thank you.

Xi Yanchun:

Thank you, Mr Zhou. Next question, please.

China Central Television:

I’d like to ask Mr Yin a question concerning the three new national innovation demonstration zones. Will there be any new measures in setting up these zones, and how will you make full use of expertise in the old zones?

Yin Hejun:

The overall strategy of the construction of national innovation demonstration zones is to promote innovation driven development, press ahead innovative reforms, especially the supply side reforms, so as to provide strong support for middle and high level economic growth.

The Ministry of Science and Technology will do this work in three fields:

First, regional strategy will be further optimized with the development of new innovation zones. For example, upgrading the eastern areas will help release potential demand for middle and western areas, and in some cases, an innovation zone could take the lead in promoting coordinated development of the whole region.

Second, strengthen national-level policy trials. Efforts should be made to strengthen policy trials in tackling problems during development of national innovation demonstration zones, encouraging enthusiasm of scientific personnel, breaking institutional barriers for industrialization of scientific innovation and achievements, and creating new systems and mechanisms for innovation-driven development. Incentives regarding stock rights and income distribution should be improved and implemented to enable innovators, such as universities and scientific institutions, to have more authority to decide on the use of scientific research funds and achievement transformation. Efforts should also be made to enhance reviews and appraisals of policy trials, which will be advocated across the nation after further improvement.

Third, support system and policy innovation at all national innovation demonstration zones. As conditions at each national innovation demonstration zone is different, policy trials based on local features are also encouraged. On the basis of national policies toward national innovation demonstration zones, policies with local features should be implemented to motivate scientific personnel and promote innovation.

I think the policy briefing today is a very good move as the Ministry of Science and Technology and National Development and Reform Commission carry out policies and exploit local potential, creating better platforms and environment for innovation and entrepreneurship. In terms of innovation and entrepreneurship services, Zhangjiang Hi-Tech Park in Shanghai has been doing a good and convincing job.

China News Service:

You have just talked about the various pillars that guarantee the implementation of a scientific and technological innovation policy in Shanghai. We are clear about the four tasks. Will you please tell us more about these pillars? And which of the 10 detailed trial plans have been put into practice?

Zhou Bo:

Actually, these pillars refer to the comprehensive national center, R&D of universal technology and technology transformation platform, a series of important strategic projects and the innovation and entrepreneurship spaces.

The reform measures you said have already been approved by the State Council. Now NDRC is working with other related departments, including the Ministry of Science and Technology, on these measures, and we are implementing them in practice. Some of the 10 aspects I have just mentioned have been carried out in Zhongguancun, such as stockholders’ rights drive. Our country practice deferred tax liability. But the tax has to be paid within three to five years. But according to international practices, only when one get his dividends will he pay the tax. Zhongguancun is now following the international practice. We hope Shanghai will also be allowed to do so.

Second, I have just said that the state is quite supportive of our innovative exploration, such as our share transfer system serving scientific and technological innovation enterprises on the Shanghai Equity Exchange, which is small in scale and is the first batch. We will give full play to their advantages, such as giving them more autonomy. With the help and guidance of related departments, Shanghai is willing to try new things and stick to standard rules. So I ask related ministries to let us take the lead to conduct more tests.

Xi Yanchun:

If you have no other questions, today’s policy briefing is near the end. I want to say one more thing. Through attending today’s policy briefing, I have some thoughts. I believe innovation is not just about conception, planning, policies and measures, but also about the fresh stories and cases of thousands who engage in innovation. We welcome media friends to keep focusing on China’s innovative development. You can also raise interview requirements. We would like to offer you more stories to help you better understand innovative development. That’s the end of today’s policy briefing. Thank you all.