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Chinese reform pushes R&D
into the market-place

20 May 1999 (See Nature Volume 399 page 191)

[BEIJING] In a major reform of its public sector research system, the Chinese government has decided to convert into self-supporting enterprises 242 research institutes that currently operate under ten government agencies.

The institutes "will go to market," says an official from the Ministry of Science and Technology. "They will have to change from being government institutions." He adds that the government's goal is to push the institutes closer to industry, in the belief that this will increase the flexibility and vigour of public research and development (R&D), and speed up the application of research results in industry.

The institutes will be free to choose their own research and commercial strategies, according to a paper from the science ministry. But they will be strongly encouraged to become technological enterprises that can carry out R&D in addition to business activities.

The agencies involved include the bureaux of internal trade, of the coal industry, mechanics industry, metallurgical industry, petroleum and chemical industry, light industry, and textile industry. Many of these were formerly ministry-level government agencies. In future, they will all fall under the State Economic and Trade Commission, a powerful agency which reports direct to the State Council, China's central government.

The 242 research institutes currently have a payroll of 173,000 employees, including nearly 47,000 who have retired. The State Council has approved the reform plan, which was submitted by the science ministry and 11 other ministries.

The 10 bureaux had earlier been asked to submit action plans for their research institutes to the science ministry and the State Economic and Trade Commission. Action plans were due to be submitted to the State Council for approval by the beginning of this week (26 April).

The institutes will be expected to operate on the new basis from 1 July. During the transition period, the commission and the 10 national administration bureaux will be responsible for their routine management.

The science ministry spokesman denies that the government is taking this action because the institutes run inefficiently. Apart from "a few", he says, most of the institutes are efficient and productive. "They have long learned to survive in the market," he says. "Indeed, 90 per cent of their revenues come from the market. So, I don't think they will be greatly influenced."

But Sun Chuanyao, president of Beijing General Institute of Mining and Metallurgy (BGRIMM), a large research institute of the Bureau of the Non-ferrous Metal Industry has worries about the plan.

"After this reform, no one may be prepared to do work which is less lucrative, but which the state really needs," says Chuanyao. "Certain research activities will have to be cancelled, and some institutes may not be able to survive as research organizations."

Chuanyao says that, on becoming enterprises, the institutes may find it hard to maintain a balance between earning money and carrying out fundamental research. "China is not short of enterprises, but most of the state-owned enterprises are debt-ridden, and so-called 'technological enterprises' should avoid taking the path that they followed."

But he does not think that the reform threatens his own institute. "We have been market-based for a long time, and have been in close relations with industry; this is our difference from the Chinese Academy of Sciences."

BGRIMM has a strong record. Its emulsified explosives used in mining, and slurry electrolysis technology, are world famous. In 1997, the General Research Institute for Non-Ferrous Metals (GRINM) drew a 400-millimetre long mono-crystal silicon line, 300 millimetres in diameter. The United States, Japan and Germany are the only other countries to have mastered this technique. In collaboration with other institutes, GRINM also produced China's first high-temperature superconductor cable made of materials from the bismuth series.

The government now faces the task of ensuring that institutes such as BGRIMM and GRINM remain creative and productive. "The government hopes that industrial enterprises will play a major role in China's R&D efforts, but such enterprises are far from that goal," says a researcher from BGRIMM.

Although a few research institutes will be allowed to keep their government-supported status, they will have to operate like private companies. Administratively, they will be responsible to local government.

The research institutes involved in this reform will enjoy special privileges. They will continue to receive some operating funds from the government, although this is intended primarily to support those who have already retired. For the first five years they will be exempt from enterprise income tax, operating tax based on revenues from transferring technology, and property taxes on urban land used for R&D purposes.

The new bodies will have the same rights as remaining government research institutions when bidding for government financed research programmes. Research programmes already approved by the government will be conducted according to the original arrangements.

"This is only the first step," says the ministry official. "The second step will begin immediately after this, when 400 or more research institutes under different ministries will be involved."


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