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Lv Wei

Enterprise technological innovation is, by relying on present enterprises and technological progress and through relevant investment, to improve the existing production and management and boost the enterprise's operation efficiency. Featuring low investment, small consumption, quick effect and good returns, technological innovation is one of the important means for upgrading and innovating of the traditional industries. China has become a major world manufacturer, but not a competitive one, as reflected by the stagnant industrial value-added rate, the very few world-famous brands and enterprises and unsustainable environment and resource consumption due to the excessive capacity and the extensive growth mode of some industries, despite the high rank of most Chinese industries in terms of scale and turnout. China is at a critical juncture of pursuing innovation-driven development and transforming the development mode, so we can't afford to continue with the extensive development mode by launching new projects, but should adopt the intensive and connotative development mode. Under the new circumstances, technological innovation will play an increasingly important role in innovating, upgrading and restructuring the traditional industries.

I. New Situation Facing China's Enterprise Technological Innovation since the Start of 11th Five-Year-Plan period

1. Basic facts about technological innovation since the 11th Five-Year-Plan period

It is urgent to transform the economic development mode of the traditional industries since the development based on low cost and resource consumption is unsustainable due to the increasing factor price and the mounting pressure upon energy and environment. It has been proposed to step up transformation of the economic development mode in the 11th Five-Year Plan for national economic and social development. Chinese enterprises have entered a new stage of technological innovation, with the following characteristics：

(1) Industrial enterprises make increasing investment in technological innovation which involves a growing ratio of investment for industrial fixed assets.

According to the National Bureau of Statistics of China, during the 11th Five-Year Plan period, industrial enterprises above designated scale across the country made a total investment of around 1.4 trillion yuan for technological innovation including project expansion and renovation, accounting for 42% of the investment in fixed assets of industrial enterprises, up by 2 percentage points over the 10th Five-Year Plan period.

Ratio of Technological Innovation Investment to Urban Fixed Assets Investment during 11th Five-Year Plan Period (%)

		2006	2007	2008	2009	2010
Whole Society	Renovation	11.86	12.03	12.87	15.63	13.82
	Expansion	17.95	16.78	16.39	14.01	13.96
Manufacturing	Renovation	17.3	17.6	18.8	21.7	21.22
	Expansion	23.8	23.0	22.4	20	20.15
Electricity, Gas, Water Supply	Renovation	11.63	12.11	12.9	13	13.36
	Expansion	25.6	23.38	21.57	20	17.82
Transportation	Renovation	14.17	12.61	12.45	11	11.02
	Expansion	17.12	14.29	13.24	13	11.29
Information Transmission, Computer and Software Service	Renovation	21.4	21.74	20.97	23	24.26
	Expansion	49.11	45.97	44.77	36	29.14

Source: Based on the data from China Statistical Yearbook

(2) Enterprise technological innovation mounts up to a new high with increasingly diverse functions

Technological innovation is no longer simply equipment upgrading, but is forming more diverse functions through better combination with technological progress, energy conservation, emission cut, consumption reduction and industrial transformation. First, technological innovation can be integrated into innovating on and developing new industries. In this case, the enterprises can set up the research and development center based on technological innovation, launch demonstration projects for the industrialization of scientific research achievements and develop new industries. Second, technological innovation can be incorporated into energy conservation, emission cut and consumption reduction. The high energy-consuming industries make investment in projects of energy conservation, water conservation, environmental protection, as well as clean and safety production to eliminate outdated capacity. Third, high and new technologies can be applied to reform traditional industries and realize industrial upgrading. The enterprises may uplift the product quality, develop new industries of strategic significance and conduct diversified operations through technological innovation. Fourth, technological innovation can be applied to optimize industrial organizations. Competent enterprises with notable strengths in capital, technology and brand conduct cross-regional and cross-industrial merging and restructuring, or outsource processing to integrate the industrial chain. Fifth, technological innovation can play a role in optimizing the regional industrial pattern and promote the development of industrial clusters. Some local governments encourage enterprises to relocate from cities to industrial parks for cluster development. Sixth, it could provide technical service for small and medium-sized enterprises by supporting generic technological platforms rather than support individual enterprises' renovation projects.

(3) Local governments render sustained support for technological innovation With a view of developing local economies, local governments at all levels offer unceasing support for technological innovation.

Governments of most provinces and municipalities directly under the central government have promulgated and adjusted their technological innovation policies according to their respective requirement for development. Especially to cope with the world financial crisis, local governments have reinforced support in this regard. Among 37 provinces, autonomous regions, municipalities and cities specifically designated in the state plan as well as Xinjiang Production and Construction Corps, 24 regions have formulated and released guiding plans on key technological innovation projects to channel the investment into technological innovation. According to incomplete statistics, in recent years up to a hundred technological innovation-supporting policies on taxation, finance and land use have been promulgated by local governments. The earmarked fund for technological innovation allocated by the provincial finance including that of the cities specifically designated in the state plan exceeded 10 billion yuan in 2010. For example, between 2009 and 2010, Shandong Province deducted 34.2 billion yuan of input tax for equipment investment, greatly cutting down the cost for enterprise upgrading. During the 11th Five-Year Plan period, Jiangsu Province allocated 650 million yuan exclusively for technological innovation in forms of equipment subsidy, loan discount and incentives for 878 key technological innovation projects.

(4) The central government strengthened support to technological innovation to cope with the financial crisis

The central government has promulgated adjustment and renovation planning upon ten key industries since 2008, further underscoring the significance of enterprise technological innovation in accelerating industrial restructuring. The National Development and Reform Commission and the Ministry of Industry and Information Technology jointly formulated Measures on Special Investment Management for Key Industries' Rejuvenation and Technological Innovation, released the guideline on technological innovation investment, and organized the implementation of a batch of key projects for technological innovation. In 2009 and 2010, the central government earmarked around 40 billion yuan for technological innovation upon 8,966 projects, attracting a total investment of 1,021 billion yuan. The share of renovation investment in urban fixed assets investment increased from 12.87% in 2008 to 15.6% in 2009 and 13.8% in 2010. The share of the renovation investment in the manufacturing industry in the fixed assets investment increased from 18.8% in 2008 to 21.7% in 2009 and 21.22% in 2010.

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