China still has a long way to go toward its goal of becoming an "innovation-oriented economy" by 2020, and what it wants most is a better return on its fast-growing investments on research and development, the Organization for Economic Cooperation and Development (OECD) said in a report yesterday.

In its first review of China's innovation system, which was prepared in collaboration with the Ministry of Science and Technology, the 30-member group of developed economies said China has enjoyed a spectacular rise in its hi-tech exports in recent years, but these exports mainly originate from foreign-owned enterprises.

The share of hi-tech in China's total exports increased from 5 percent in the early 1990s to more than 30 percent in 2005, and these exports are heavily concentrated in office machinery, TV, radio and communication equipment. Being relatively weak are exports such as pharmaceuticals.

Products from foreign-owned companies account for 88 percent of the hi-tech exports. China's hi-tech industries, notably manufacturing related to information and communication, are primarily under foreign control, the OECD said.

"To date, China has largely relied on the supply of foreign technology," the report said.

But it also applauded the fact that China is boosting investment in science and technology and has taken steps toward building a high-performing "enterprise-based innovation system".

China has ranked second in the world after the United States and ahead of Japan in number of researchers since 2000, and its R&D spending has increased at an annual rate of almost 19 percent since 1995 and was $30 billion in 2005, the sixth largest worldwide, the OECD said.

The country's R&D/GDP ratio has more than doubled in a decade and was 1.43 percent in 2005 compared to only 0.6 percent in 1995.

"This is a spectacular achievement but does not mean that the innovation capabilities of the Chinese economy are already on a par with those of OECD members which have a similar R&D intensity of production," the OECD said.

On the other hand, only 6 percent of the gross domestic expenditure on R&D is devoted to basic research, less than 20 percent goes to applied research, and more than 70 percent corresponds to experimental development. "The lack of basic and applied research implies that little research is likely to lead to patentable inventions," it said.

The OECD forecast China could also face a shortage of skilled workers in science and technology in the future, despite currently having more researchers than any country except the United States.

The reason is that undergraduate degrees in science have fallen "even in absolute terms" in recent years, the report said.

On the report's release, Li Xueyong, vice-minister of science and technology, said the report is "an example of China's increasing international collaboration in the field of science".

(China Daily August 28, 2007)