Download Comparative Analysis on R & ... Province with Main Developed Countries

Comparative Analysis on R & D Funding Resources in Shandong
Province with Main Developed Countries
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LIU Ai-qin
1. School of Management, Tianjin University, P.R.China, 300072
School of Statistics and mathematics,Shandong University of Finance, P.R.China, 250014
Abstract: The input level of R&D funds is the main index to evaluate not only the technological
potential of a nation or a region but also the level of their technological development and potential. By
structure analysis, this paper compares the current situation of R&D resource in Shandong province with
that of other provinces and cities, that of China and the main developed countries and then proposes the
strategies and suggestions for the investment in R&D of Shandong province.
Keywords: R&D; technology investment; investment strength
1. Introduction
Research and Development (R&D) resource is a common index to evaluate the national or local
technological investment, technological activity scale and strength. The world countries and main
international organizations have commonly adopted it. At present, science and technology have been the
primary factors to determine the economic development level and competition of a country or a region.
And R&D, as a determining factor of scientific and technological development, is a significant
reflection and symbol of a country’s level of science and technology and scientific research ability.
Therefore, we should keep a close watch on the situation of R&D resource. Since the reform and
opening, Shandong province has carried out actively the strategy of developing the province by relying
on science and technology and increased the investment in R&D each year. From a nationwide view, in
the year 2005, there are seven areas (Beijing, Jiangsu, Guangdong, Shanghai, Shandong, Zhejiang, and
Liaoning) whose financial outlay of R&D exceeds 10 billions. The amount of the outlay of these seven
provinces and cities is 158.72 billions that composes 64.8% of the national expenditure and among
which Shandong province ranks the fifth. With the increasing of research funds, scientific and
technological development contributes more to the economic increasing, which has greatly promoted the
sustainable, fast and healthy development of economy of the province. However, there also exist a few
problems in the operational condition of R&D resource in Shandong province.
This paper makes a contrastive analysis of the situation of R&D resource in Shandong province and
that of other provinces and cities, that of China and the main developed countries from the point of view
such as the investment strength, source structure, distribution pattern, expense structure and district
distribution of R&D resource, from which it finds out the problems of R&D in Shandong province.
Judging from the analysis result, it proposes a few strategies and suggestions for the operating condition
of R&D resource including investment and assignment, which is of great significance for Shandong to
strengthen scientific and technological innovations and improve high-tech industrial level and to
optimize the industrial structure.
2.Comparative Analysis of the Situation of R&D Resource in Shandong
2.1 The Investment Strength of R&D funds
The investment strength of R&D funds refers to the proportion of R&D investment in GDP, which
reflects the quantified relationship between scientific and technological innovation capability and
economic and technological progress in terms of scale. The investment strength of R&D funds in
developed countries is generally between 2% and 3%. For example, during the years of 1996 to 2004,
the investment strength of R&D funds in America remained generally between 2.6% and 2.8% and
2.68% in the year 2004. In recent years, OECD countries also remain stable above 2.3%. As to Japan, it
was 2.76% in 1996, 2.8% in 1997, 2.99% in 1998, 3.12% in 1999, and 3.13% in 2004.
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In recent years, the R&D investment of Shandong province continues to show an upward tendency
each year but its proportion in GDP is still small. The R&D investment strength of Shandong in 2005 is
1.05%, which is much lower than 2% to 3% of developed countries and lower than our country’s
average level 1.34%. And there is a big gap between Shandong’s and that of other key provinces and
cities. For instance, in 2005, the strength in Beijing is 5.55%, Shanghai 2.28%, and Jiangsu 1.47%. The
fact is greatly not in accordance with Shandong’s identity as an economic province, and to some extent,
it explains why the economic development of Shandong is a kind of extension but not a kind of
connotative growth. It is because the rapid development of economy still does not rely on progress in
science or technology or improvement of the labor’s qualities.
2. 2The Source Structure of R&D Funds
From the angle of the collection of the funds into scientific and technological activities, the source of
R&D funds is composed of loans of the government, institutional units, enterprises, and financial
institutions and overseas capital, and other domestic funds. 81.3% of the R&D funds of Shandong
province are from the enterprises that are the main investor of R&D activities. This proportion exceeds
that of main developed countries such as America, England and Japan and is above our country’s
average level 67.1% and even is higher than that of key provinces and cities such as Beijing, Shanghai
and Jiangsu. This fact indicates that at present, in Shandong province, a socially multi-channel input
pattern for science and technology projects that mainly depends on enterprise investment is gradually
being formed. However, we should notice that the R&D funds from the government of Shandong
province is obviously less than that of the developed countries and it even does not reach 1/3 of China’s
average level and is much lower than that of some provinces and cities such as Beijing, Shanghai and
Jiangsu. This fact indicates that the amount of the financial input into science and technology from the
government is too low; therefore, the financial input into science and technology from the government
should be greatly increased.
2.3The Distribution structure of R&D Funds
The distribution structure of R&D funds is an important index reflecting whether the distribution
of the R&D funds is reasonable or not. It is mainly demonstrated by the ratio of using the funds in
governmental research institutions, enterprises and colleges and universities. It reflects the situation
about the funds input from the angle of executives.
From the perspective of the world, enterprise is the main part in R&D resource distribution. Most
of the principal developed countries in the world put about 70% of their R&D resource into the R&D
activities of enterprises. E.g. in 2004, the funds on the R&D activities of enterprises in U.S.A accounts
70.1%, Japan 75.2%, Germany 70.4%, Korea 76.7%, and that of governmental research institutions
accounts about 10%.
From the perspective of our country, a significant change has taken place on the distribution
structure of R&D funds. The proportion of R&D funds distributing to governmental research institutions
has decreased from 50.1% in 1990 to 28.8% in 2000 and to 20.9% in 2005. At the same time that of
R&D funds distributing to enterprises has increased from 27.4% in 1990 to 68.3% in 2005, indicating
that the distribution structure in our country gradually tends to be reasonable and enterprises have
become the principal participant and executive in the R&D activities.
In Shandong province, the proportion of R&D funds distributing to enterprises in 2005 is 77.3%.
Such a distribution structure can help reinforce the R&D activities of enterprises and form a good
circular system for profit feedback and thus can to some extent solve the problem of the unbalance of
the source structure of R&D funds. However, the proportion of R&D funds distributing to governmental
research institutions is 3.3%, only 1/7 of the national average level, and is much lower than that in
Beijing, shanghai and Jiangsu. Of course it’s related to the source of R&D funds. The R&D funds from
enterprises in Shandong are obviously more than that in Beijing, shanghai and Jiangsu, thus the
proportion of R&D funds distributing to enterprises is relatively higher.
2.4The Expense Structure of R&D Funds
The R&D activities are the central part of scientific and technological activities, including three
types of activities: fundamental research, applied research and experimental development. Obviously,
the three types of activities are indispensable in the process of economic development. Only if they
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coordinate with each other can they provide continuous impetus to economic development. Therefore,
the R&D funds should be distributed reasonably to these activities. Generally the proportion of R&D
funds on fundamental research is smaller than that on applied research, which in turn is smaller than that
on experimental development. In the principal developed countries in the world, the funds on
fundamental research and applied research respectively account above 10% and 20% of their R&D
funds. Contrastively speaking, the level of funds on fundamental research in china is too low, only 5.4%
in 2005. As for Shandong province, not only the level of funds on fundamental research is extremely
low, but also that of applied research is extremely low. The funds on fundamental research and applied
research respectively account 1.7% and 11.5% in Shandong in 2005. But the funds on experimental
development account 86.8%, reflecting the shortsighted strategy of relative governmental sections that
they emphasize experimental development to develop the economy but ignore the fundamental research.
Such a strategy has a quick effect in the short term; but in the long term, if not adjusted in time, it will
inevitably influence the whole coordination of scientific and technological development and abate the
supportive effect scientific researches have on technological originality and finally lead to the lack of
strong technological support for economic development, influencing the aftereffect of Shandong’s
economic development in the period of knowledge and economy.
2.5The Investment of R&D Funds in Shandong’s Central Cities
The investment of R&D funds in the districts is unbalanced. Above 50% of R&D funds are
invested in Jinan and Qingdao in 2005. The level of Qingdao is the highest, about 6.581 billions Yuan,
accounting 32.03%. And the second is Jinan, about 4.477 billions Yuan, accounting 21.79%. The lowest
is Heze, only 39 millions Yuan, accounting 0.19%. The strength of investment is also similar; Qingdao is
the highest, 2.44%. And the second is Jinan, 2.39%. The lowest is Heze, only 0.09%.
3. Strategies and Suggestions
After the analysis on financial progress of R&D in Shandong Province and their comparative study
between domestic and international, we can infer some suggestions and strategies about the investment
on R&D in Shandong.
First, Government should fully play the guiding role to guide and promote the whole society to
increase the investment on R&D. Currently, there is only a little R&D investment in Shandong Province,
only about 1.05%. The government should continue to increase investment in science and technology,
and at the same time, to take active measures to guide enterprises to increase the investments on R&D,
in order to enhance the level of the whole society. The government has played an irreplaceable leading
role in 3 aspects: one is the R&D for commonweal, such as ensuring social security, public interest and
sustainable development; the second is the R&D for core technology in the forefront. The third is to
support research in key technology areas. The government should further strengthen the role of science
and technology investment in the whole society, through appropriate financial Policy, such as tax
preferential policy, interest discount policies to create a good system and policy environment for R&D
activities in enterprises. Moreover, strengthen internal capital accumulation and form a benign form of
promoting the interests of enterprises in technological innovation-driven mechanism. While increasing
investment in science and technology, we must pay attention to the inter-regional balance, and exert the
balance effects on local fiscal expenditures. we should exert preferential policies for backward areas in
order to improve the level of technological progress of the whole province.
Second, we should improve the expense structure of R & D funds. According to relevant
information, the rational allocation of R & D funds in fundamental research, applied research and
experimental development accounted for 10%, 25%, and 60% respectively. The investment proportion
on fundamental and applied research activities is so low that it directly resulted in a bad situation for
enterprises, that is, they regard the introduction of technology as the first and foremost task, putting
creativity on the secondary position. This will ultimately lead to insufficient technological development
of economic development, influencing the sustained development of our economy and comprehensive
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competitiveness. Modern history of mankind has proven that every breakthrough in fundamental
research will create inestimable role in the innovation in science and technology, the formation of
high-tech industries and the progress in economy and culture. The government should work out effective
planning and layout, to grasp the areas of resource input and provide adequate protection through
macro-control. And in the micro-projects, in the competition for staffs and funds, and in research and
development mechanism, we should adopt the mode of localization, socialization and marketization.
Third, we should develop venture investment. Venture Investment appeared in the United States 60
years ago. Generally, it is set up by individual or an enterprise; they organized a venture investment
company, with a lot of pension funds, social insurances and other venture investment funds, they invest
for small and medium-sized enterprises with potentials, so as to form a new venture enterprise by means
of equity participation. Venture investment plays a very important role in promoting innovation; we
should create a good interior policy environment, and encourage the development of venture investment
organizations and their investment in science and technology. When we encourage and attract more
social forces to establish a venture capital fund we should also actively absorb capital investment from
home and abroad, and establish venture investment companies and gradually form venture capital
market on the basis of legislation. Before the formation of technological venture investment mechanism,
experimental unit should be the first step; the funds are from government, non-bank financial
institutions and enterprises, operated according to the modern enterprise system. We should support
technological venture capital firms through multiple channels. Meanwhile, we can establish the funds of
scientific and technological achievements for the loan interest, equity investment and financing security
of the high-tech transformation projects. According to the mode of market practice, to pick out the best
reproduction technological transformation projects. We can use a certain proportion of the profits for
new product development, and encourage enterprises to carry out technological innovation activities.
References
[1]National Bureau of Statistics. Ministry of National Science and Technology. Chinese Statistics Yearbook of
Science and Technology (2006) [R]. Beijing: Chinese Statistic Press, 2006.
[2]National Bureau of Statistics. Ministry of National Science and Technology. Ministry of Finance. 2005 The
Statistic Communiqué of National Financial Investment of Science and Technology. 2006. 9.14.
[3]Organizations of Economic Cooperation and Development (OECD). Principal Scientific and Technological
Index2006/1 [R].
[4]Shandong Bureau of Statistics. Shandong Bureau of Science and Technology. Shandong Statistics Yearbook of
Science and Technology (2006) [R]. Jinan, 2006.
[5]Shandong Bureau of Statistics. Shandong Investigating General Crew of National Bureau of Statistics. Shandong
statistics yearbook (2006) [R]. Beijing: Chinese Statistics Press, 2006.
The author can be contacted from e-mail : [email protected]
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