Remarks by Angel Gurría, OECD Secretary-General, delivered at the China Development Forum Beijing,March 18th, 2012

(As prepared for delivery)

 

Dear Minister Wan, Vice President Han, Ladies and Gentlemen,

It is a great pleasure to join you and exchange views on a key policy objective the OECD shares with China: promoting innovation. 

In these times of unusual global economic uncertainty, innovation can play a key role in identifying new sources of growth, in rebooting our economies, increasing our welfare and addressing our environmental concerns.

I am pleased to see that innovation is a central element of China’s reform agenda. Chinese innovations have benefited the world throughout history. Today, with the right policy mix, China could continue to inspire new scientific and technological advances, helping to revitalize the global economy. Let me just start with a few words on China’s innovation efforts.

Innovation is at the core of China’s new development strategy.

Since the late 1990s, China has been pursuing a strategic transformation: from an economy founded on low-cost labour towards one built on knowledge and innovation. Your “Science and Technology Development Plan to 2020” gives a central role to innovation to boost national capacity, to reduce dependency on foreign technology, and to move the Chinese economy from sustained high growth to a sustainable growth path.

Your efforts are bearing fruit. According to your national statistics, China's spending on R&D surged nearly 22 percent last year to 1.8% of GDP, making China the second country in the world by total R&D spending. Our latest statistics show that China was the fourth largest filer of patent applications to the World Intellectual Property Organization, with the fastest increase in ICT-related patent filings during the last decade. It also shows the Guangdong province emerging as a top regional innovation hotspot in the world.

Just as impressive, China is now an industry leader in green energy technology. The country boasts the largest production of solar cells, energy-saving light bulbs and solar water heaters, and is home to the largest installed wind-power capacity in the world.

But innovation should go beyond science and technology. It needs to rely on a “whole-of-government” strategy, aligning Ministries, policies and reforms into a coherent nation-wide effort. As such, new perspectives are needed to achieve China’s goal of becoming an “innovation society by 2020”. At the OECD, we have deepened our understanding of how governments can do this, building on fifty years of evidence-based policy analysis.

The OECD Innovation Strategy aims to help governments build coherent and far reaching innovation policies.

The Strategy goes beyond R&D to describe the broader context in which innovation occurs.  Let me briefly share with you some of its insights:

First, innovation is about extracting value from existing, traditional or emerging technologies to develop new services and business models. For example, the emergence of information and communications technologies (ICT) – like cloud computing - holds the promise of productivity gains. They help companies avoid heavy, upfront investments in IT infrastructure and staff in exchange for a sustainable, pay-as-you-go model, which can enable them to grow faster.

Second, knowledge assets - research, design, marketing, networks, software, data analytics - will increasingly drive growth and competitiveness. Today, companies often invest more in software alone than in machinery and equipment. According to sources in the car industry, these knowledge assets make up the majority of development costs for a new Volvo truck.

Other “intangible” elements, like design, branding and marketing, can also account for a huge share of a product’s value-added. These are some of the reasons why the world buys Apple phones, Ikea furniture or Nespresso coffee. Smart companies know that, when they invest in intangibles, they can better capture value from global trade.

Third, innovation is a key pillar of green growth. It helps to decouple growth from natural capital depletion. It addresses knowledge gaps and fosters new technologies that can help the transition towards greener growth. It is absolutely central in enabling green and growth to go hand-in-hand.

Last, but not least, innovation depends on people: on their knowledge, creativity and skills. Your recently-launched human resources strategy acknowledges that a better educated workforce is critical to move up the global value chain, and to ensure a more inclusive economic and social progress for China’s citizens.

At the OECD, we are working on a new Skills Strategy to help governments empower people to innovate. It aims to develop a blueprint for policies that make the most of each country’s human capital, by improving the quality of education and training systems, by facilitating the transferability of skills, and by easing access to the skills markets.

China and the OECD need to work even more closely together to harness innovation for sustainable and inclusive growth.

From the 10-year anniversary of China’s first observership in the OECD Committee for Scientific and Technological Policy, to recent initiatives agreed with the Ministry of Science and Technology, we have a strong base to build on.

As the global economy is struggling to rebound from the crisis, co-operation and openness are more important than ever to reap the full potential of innovation as a new source of growth and jobs. Let me just highlight three areas that require greater coordination:

First, China can gain from continued openness towards international collaboration in research facilities and universities, and to foreign firms. A greater exchange of students, experts, data, best practices and policy experiences is of mutual benefit to China and to OECD member countries.

Second, new developments in the areas of intellectual property and technology standards pose common policy challenges to our knowledge-based economies, especially in the area of ICT. To address these challenges effectively, we need to work together to improve our institutions, rules and regulations, in order to reward and protect proprietary inventions and to foster innovation.

Third, the competitiveness of our economies increasingly depends on our capacity to capture gains from global value chains. The OECD is developing new ways to measure trade by reflecting the value that individual countries add at each stage of production of the goods that they export. This analysis helps clarify the interdependencies in our global economy, contributes to fairer international competition, and provides a better picture of the integration and position of countries in global value chains.

Ladies and Gentlemen,
We must not forget that addressing global challenges like climate change, population ageing, energy consumption and food security is beyond the reach of any single country. The co-operation between the OECD and China needs to develop in the context of a truly global effort towards sharing knowledge and exchanging good practices in science, technology and innovation.

In the words of Benjamin Franklin, “an investment in knowledge always pays the best interest”. We, at the OECD, stand ready to work closely with China so that, together, we can develop better innovation policies for better lives.
Thank you.