The PLA at Home and Abroad - Strategic Studies Institute - U.S. Army

foreign technology rather than undertake the slow,
hard work of true technology innovation. 133 Since importing
technology has quicker payoffs for productivity
increases, R&D money is often misspent. China’s
large high-tech import expenditure also masks the
fact that almost 80 percent is actually purchases by enterprises
wholly foreign-owned (63 percent) or jointinvested
companies (16 percent) rather than Chinese
firms, which make up just 19 percent. 134
While the number of China’s engineering and
science graduates looks impressive at face value, it
disguises the problems for indigenous S&T development.
The level of education for a sizable percentage
of China’s 1.34 million “engineering students” is significantly
lower than their western counterparts. 135
Furthermore, China’s professional community is very
young, often deficient in practical training and lacking
the requisite experience, particularly for more senior
leadership positions in the R&D system. There is also
a serious brain drain challenge where multinationals
operating in China compete (favorably due to higher
wages and better opportunities) with domestic firms
for the “best and the brightest,” which could in the
future lead to a talent war and affect foreign direct investment
(FDI) and China’s own S&T development.
China’s S&T system suffers from a number of
other failings such as an imperfect Intellectual Property
Rights regime. While on paper, regulations and
legal protection for patents appear robust, enforcement,
particularly at the local level is often impossible.
China will need to generate its own IPRs to cultivate
sustainable indigenous innovation.
There is a deficit of institutional support that may
hinder not only financial incentives but innovationoriented
ways of thinking. Similar to the way in which
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