Analysis of Technological Innovation Capability of Equipment Manufacturing
Industry in the Early Days of the Development Drive of Western China
Yang Yang1, De-gang Yi2,Chang-hui Xu3
2
1,3
Chaint Robotics Co., Ltd, Changsha, China
Institute of History for Science and Technology at the Inner Mongolia Normal University
(yangedward@139.com, yidegang@yahoo.com.cn, 13488700261@139.com)
Abstract - The development drive of western China
opens a new picture for western development. But compared
with eastern and central-eastern China, its development of
the equipment manufacturing industry lags behind after the
inception of reform and opening up due to its economic
background and slow absorption and digestion of advanced
overseas technologies. The thesis expounds the technological
innovation capability of equipment manufacturing industry
in western China from the perspective of historical
development and reaches the conclusion that the only right
way to improve development of technology innovation
capability of western equipment manufacturing industry
which focuses on national defense science and technology
industry and major technological equipment is
implementing the introduction and upgrading of technology
under the general principle of sticking to independent
innovation and reducing unnecessary administrative
intervention.
Keywords - Technological innovation capability,
equipment
manufacturing,
“exchange
market
for
technology”, western China
I. INTRODUCTION
The development drive of western China is an
important policy of the central government with a purpose
of “utilizing surplus economic development capacity in
the eastern coastal regions in improving economic and
social development level of the western regions and
consolidating national defense”. In January 2000, the
State Council established a leadership team for western
region development. As the core component of
manufacturing industry, equipment manufacturing
industry is the foundation of national economic
development especially industrial development. The
western regions are important traditional industrial bases,
which have made significant contribution to the
development of western regions and national defense and
security with their equipment manufacturing industry.
Prior to the 1970s, the western regions were emerging
equipment manufacturing bases in
Founding: 1.China Soft Science: 2011GXQ4D036, Compare to
Inner Mongolia Emerging Industry Competitiveness, 2011.92014,9
2.Inner Mongolia Soft Science: 113306, Study on Technology
Innovation of Inner Mongolia Enterprise Basing on CTI and
Roadmapping. 2011.10-2012.1
China with apparent advantages such as high starting
point of technology, rapid development speed and
uniqueness. However, after the reform and opening-up
from 1978, with advantages in aspects such as location,
idea and management, the coastal regions pioneered in
getting in line with international practice, with their
equipment manufacturing industry growing rapidly on a
higher starting point.
Comparatively, the development of equipment
manufacturing industry of western China is slow and its
original superiority has been weakening gradually.
Thanks to long-term national support, the equipment
manufacturing industry of western China is gaining solid
foundation and strong technical force. Therefore, it is
urgent to make research on the issues as to what its
technological innovation capability lies and how to bring
this capability into more effective play to achieve better
development.
II. FINDINGS
A. Economic background for the development of the
equipment manufacturing industry of western China after
the inception of reform and opening up
Since the inception of reform and opening up, the
focus of national investment has shifted and the market
economy has developed, leading to increasingly
prominent contradictions in the traditional organization
and structure of the equipment manufacturing industry of
western China, as reflected in problems such as a low
level of marketization, inadequate business vitality of
companies, excessively high proportion of state-owned
economy, gradual ageing of some sectors, products,
equipment and technology, brain drain, high liabilities of
companies, heavy social burdens and great pressure of
social security. As the mainstay of the equipment
manufacturing industry of western China, the defense
science and technology industry is restrained by soft and
hard factors, e.g. the industrial structure and policy
environment as well as other factors, including weak
awareness of companies for technological innovations. 1 In
the meantime, since 1970s, microelectronic technology
represented by large-scale integrated circuit and
1 Duan Yanmou, DEA-based Evaluation of the Technological
Innovation Performance of Enterprises in the Defense Science
and Technology Industry. Study of Military Economy, 5th
Issue of 2007, p. 31
microelectronic computers has grown by leaps and
bounds so that it has found rapid application in the
equipment manufacturing industry, thereby facilitating the
mutual promotion and tight coupling between mechanical
industry and electronic industry. The international
equipment manufacturing industry has begun to enter the
development stage characterized by reorganization and
structural upgrading through continuous technological
innovation. Compared with the eastern regions, the
western regions of China are obviously backward.
B. Technology introduction and absorption by the
equipment manufacturing industry of western China:
comparison with central-eastern China and analysis
In modern times, China has relied primarily on
technology
introduction
for
its
technological
development. In the first decade after its founding, the
New China quickly laid its own industrial foundation
mainly by introducing the technology of the Soviet
Union, achieving marked results; in 1960s, the effects of
domestic political environment caused a nosedive of both
quantity and quality of the projects using introduced
technology in New China; in 1970s, China gradually
opened the door to the outside world, leading to a leapfrog
development of technology introduction efforts; 1980s
was the peak time of technology introduction in China. 2
Therefore, Zhang Baichun and other scholars noted that
“The development journey of modern technology in
China is a progress history of localized foreign
technology rather than an invention history.” 3 This
conclusion is even more appropriate if reviewed from the
perspective of the development journey of the equipment
manufacturing industry of western China.
At the beginning of reform and opening up, the
manufacturing industry in the western regions, as opposed
to its eastern counterpart, was plagued by a variety of
problems, such as lower industrial aggregate, low level of
technological development and low labor productivity.
According to statistics, in 1981, China had a total of
381,500 industrial enterprises, with 43% of them being
distributed in the 7 provinces and municipalities in coastal
regions and merely 11.1% in the 9 frontier provinces
(autonomous regions). Additionally, if the average overall
labor productivity of national industrial enterprises in
1981 was 100, then it was the highest in Shanghai,
reaching 228.3, compared with Tibet, Guizhou, Qinghai,
Ningxia and Inner Mongolia, which were 46.9, 54.2, 55.9,
56.1 and 56.3, respectively. 4 The existence of the above
differences has decided that, after the inception of reform
2 Yi Degang, Journey of Technology Introduction by New China
and Analysis of Effect, Study of Scientific Management, 4th
Issue of 2007, 12-14
3 Zhang Baichun, Transfer of Soviet Technology to China (19491966), Shandong Education Press, 2004, p. 1
4 Luo Kai, Initial Exploration of Technology Introduction Mode
in the Development Drive of Western China, Development
Research, 5th Issue of 1986, p. 10
and opening up, special attention should be paid to
technology introduction in the development of western
China. By comparing the western regions with the eastern
and central regions in terms of the spending on the
digestion and absorption of technology, technology
introduction and technology transformation in 1999—
2004 (Figures 6─8), the researcher can see that the
western regions fell far behind the eastern regions and
were basically on a par with the central regions. It also
reflects that the eastern regions are far ahead of the central
and western regions in terms of the introduction,
transformation, digestion and absorption of high
technologies.
Fig. 6 Region-specific Comparison of Spending on
Technology Introduction in Major Years
Fig. 7 Region-specific Comparison of Spending on
Technology Transformation in Major Years
Fig 8 Region-specific Comparison of Spending on
Technology Digestion & Absorption in Major Years
Source of data: Statistical Yearbook of High-tech Industry
of China (2005)5
C. Evaluation of the technological innovation capability
of the equipment manufacturing industry in western
provinces
Regional innovation capability is a key factor that
decides the competitiveness of a country or region. There
is a need to evaluate the technological innovation
capability of the equipment manufacturing industry in the
western provinces (autonomous regions).,While the
measurement of technological innovation capability is
particularly important for the sustainable development of
an innovative organization, for such organization knows
better about its own advantages, disadvantages and
competition status through correct and appropriate
measurement so as to secure a favorable competition
status by formulating or adjusting the relevant strategy.6
Therefore, the establishment of a good system of
evaluation indexes is conducive to the measurement of
technological innovation capability.
Since the equipment manufacturing industry is the
principal part of the industry in western China, its
technological innovation capability represents to a great
extent the industrial technological innovation capability of
western China. Out of the considerations given to the
selection of data, the index system for evaluation of the
innovation capability of the equipment manufacturing
industry in western China has been based on an analysis
of the connotations and structure of regional industrial
technological innovation capability. The technological
innovation capability is divided into l0 indexes, including:
R&D investment intensity (x1), proportion of R&D
personnel (x2), proportion of scientists and engineers
(x3), R&D funds (x4), investment intensity of funds for
science and technology (x5), number of patents owned
(x6), number of R&D institutions (x7), sales proportion of
5 Ma Jingkui, Statistical Yearbook of High-tech Industry of
China (2005), China Statistical Press, 2005
6 Liu Yulin, Economics of Technological Innovation [M], China
Economics Publishing House, 1993
new products (x8), output value rate of new products (x9),
labor productivity of new products (xl0), which is based
on the investment capability, R&D capability and output
capability of industrial innovation activities, according to
the principle of operability and data accessibility and the
established evaluation system at home and abroad, and
with a reference to the existing evaluation system
worldwide.
According to the data included in the Statistical
Yearbook of Science & Technology of China (2006) and
Statistical Yearbook of China (2006) and the data
officially released by the Ministry of Science and
Technology, the technological innovation capability of the
equipment manufacturing industry in the western
provinces has been preliminarily measured, calculated and
then evaluated. Since the data of Tibet were unavailable,
only the data of the other 11 provinces were involved.
Firstly, SPSS13.0 7 was used for standardized
processing of the primary data to eliminate the influence
of different dimensions. As can be learned from the
matrixes created by the software, there is a strong
correlation between the indexes, which permits factor
analysis. Then, principal component analysis (PCA)
method is used for analysis under the principle that the
characteristic value is greater than 1. Based on an
accumulative contribution rate above 85%, two factors
have been extracted.
The first principal component Zl, which is called the
input-output factor, is correlated with the indexes of xl,
x2, x4, x5, x6, x7, x8 and x9. The second principal
component Z2, which is called the human resources
factor, is correlated with the indexes of x3 and xl0. As the
above information does not support judgment of the
innovation advantages and disadvantages of the western
provinces in their industrial development, it is necessary
to compute the scores obtained by the provinces in terms
of the first and second principal components and the
comprehensive innovation capability. The coefficient
matrix of common factor scores generated by the
SPSS10.0 software was used to compute the factors and
the comprehensive scores. The results have been shown
in Table 10:
TABLE I
Ranking of Comprehensive Innovation Capability of
Western Provinces
Province
(Autonomous
Region)
7
Ranking
of InputOutput
Factor
Ranking
of Human
Resources
Factor
Ranking of
Comprehensive
Innovation
Capability
SPSS is the abbreviation of Statistical Package for the Social
Science, which is an application software developed by SPSS
Inc. for integrated computer data processing. After some 30
years of development, it has become one of the most popular
statistical software packages in the world now. Used in the
evaluation of regional comprehensive strength, SPSS has
improved the efficiency and accuracy of evaluation to a great
extent.
Sichuan
Chongqing
Shaanxi
Guangxi
Inner
Mongolia
Guizhou
Gansu
Ningxia
Yunnan
Qinghai
Xinjiang
1
2
3
4
6
11
1
9
3
4
Factor
1
2
3
4
5
5
7
8
9
10
11
7
5
6
10
8
2
6
7
8
9
10
11
From the above computed results, it can be seen that,
in terms of input and output, Sichuan, Chongqing and
Shaanxi are on the upper end of the scale, while Qinghai
and Xinjiang on the lower end, with other provinces in the
middle. In terms of human resources, Chongqing remains
on the top and is followed immediately by Xinjiang and
Guangxi, which have achieved marked results in the
development of human resources. The ranking of Shaanxi
Province under this factor was affected by factors such as
the low level of industrialization and urbanization, the
concentration of scientific and technological personnel in
central cities led by Xi’an, the weak scientific and
technological foundation in the broad rural areas and
insufficient investment in technical personnel. Because of
the great weight of the input-output factor, the ranking of
the comprehensive innovation capability factor for these
provinces was close to that of input-output factor. As can
be seen, in these regions, the comprehensive input-output
situation of high technology is the most important index
that influences comprehensive innovation capability. The
innovation capability (including potentials) of the
equipment manufacturing industry of Sichuan, Chongqing
and Shaanxi is the strongest in the western provinces.
This dovetails with the construction investment made by
the government in these provinces for the development of
the equipment manufacturing industry in different
historical periods.
D. Rethinking the policy of “exchange market for
technology”
At the end of 1970s, in order to cope with the
“double-shortage model” characterized by lack of capital
and technology in domestic economy, China opened the
door to foreign countries and started to utilize foreign
capital. At the beginning of the policy of foreign capital
absorption, the companies in China focused on capital
injection in the form of fund. However, it was difficult to
narrow the gap between China and developed countries in
industrial technologies by only relying on attracting
foreign capital. Thus factors led to the foreign companies
contributed capital and technology, while the Chinese
party became a shareholder mainly by converting plants
into cash, which was the major form of capital injection
for both JV parties at that time.
Affected by this, introduction of foreign capital of
Chinese companies gradually switched from demand of
capital to demand of technology, and positioned
fundamental starting points at introducing advanced
technologies and management methods of foreign
countries. Following this thought, in National Industry
Policy Guideline in the 1990s, it is clearly pointed out
that, it is allowed to open up part of domestic market
conditionally. Its main purpose is to enhance internal
content of national economy with foreign capital, i.e., to
expand market opening continuously, attract more foreign
merchants to invest in China and introduce more
advanced technologies. This was the background of the
strategy of “exchange market for technology”. 8 The
purpose was to exchange for the leap of overall
technology level of China through market opening and
technology introduction. After that, the growth of total
economic output and continuous expansion of foreign
trade in China verified the effectiveness of this strategy to
some extent. However, it should be seen that, the negative
impact of the policy of “exchange market for technology”
is also apparent.9
Firstly, China takes no initiative in market or
technology whatsoever. It can be seen from practices of
these years that, all Sino-foreign JV companies on which
China government placed large hope have given up R&D
institutions in China, only regarding Chinese party as a
manufacturing and production base and a bridge to
communicate with the government, which have made the
hope of enhancing technology level of Chinese party
vague. Investment of foreign merchants in China did not
bring positive impact at all, although substantial selfowned brands have been given up to open up domestic
market. The technology transfer of foreign companies is a
kind of marginal technological diffusion, which means
foreign companies can force the Chinese companies to
quit through establishing a JV company first and then
incurring losses.
In the beginning years of 21st Century, there has been
a trend of being acquired or controlled by foreign
companies in the top companies of western equipment
manufacturing industry with continuous entering of
foreign capital., as Ningxia Xibei Bearing Co., Ltd had
cooperated in 2001 then had been delivered the remaining
49% of stock ownership to the German company for the
sake of the capital introduction interest of government.
Secondly, there are inherent logical flaws in the
concept of “exchange market for technology”. The key
flaw lies in the following fact: technology is a dynamic
8
State Council. Notice on printing and distributing National
Industrial Policy Development Guideline in the 1990s of the
State Council（1994）,promulgated and implemented on April
12, 1994
9 Li Jianmin. Technology diffusion, monopoly and
transformation of technology strategy in China. China Science
and Technology Forum, Period 2, 2006,1-2
concept, which means that grasping a technology is not
equal to having technology development capability, and
new technology today is not equal to new technology
tomorrow. In the light of residual claim of technology,
both the technology owned by transnational companies
and the technology owned by local companies have huge
impact on the national welfare of a country. Without
consideration of the issue of residual claim and from the
static point of view to regard the concept of “exchange
market for technology”, the entry of transnational
companies will bring new technology undoubtedly.
However, if the issue of technology innovation is taken
into account, there will be a logical fault in terms of stock
technology and technology innovation, i.e., the strategy of
“exchange market for technology” is expected to
exchange for improvement of technology innovation
capability of local companies through transferring market,
which proves this strategy is logically invalid.
Thirdly, technology of China is increasingly
depending on foreign countries. According to statistics, in
three-capital companies in China, the average R&D
expense only accounts for a proportion of 0.4% of sales
revenue, of which joint capital is 0.08%, foreign capital is
0.03%.10. Facts illustrate that, if the policy of “exchange
market for technology” continues, the gap of technology
level with developed countries would not be narrowed,
and the long-term increase of economic aggregate of
China cannot be realized even though there is short-term
increase of GDP, for the profits of many products with
brand of “Made in China” are taken away by foreign
companies.
Furthermore, if the strategy of “exchange market for
technology” is one-sidedly implemented, reduplicative
and blind introduction will be easily brought about due to
the absence of macro control. In the 1980s, for instance,
many companies in western provinces and cities,
including Jiangxi, Chongqing, Liuzhou etc., suffered
tremendous waste of finance and resources after
introducing automobile manufacturing technology from
Isuzu of Japan. According to historical experiences, only
by utilizing foreign investment as well as getting rid of
technology dependences on foreign countries, can
equipment manufacturing industry in western China
develop stably and rapidly. Real core technologies and
core equipments cannot be exchanged with “market”.
Western equipment manufacturing industry which focuses
on national defense science and technology and
significant technology equipments needs to have
continuous independent innovation capability even more
because it relates to the national safety.
III. SUMMARY
The last phase of 20th century was a period of
adjustment and reform for western equipment
10 Wang Jinfan. Function mechanism of FDI in growth of
economy of China. World economy, Period I of 2004, 3-10
manufacturing industry. In this period, western equipment
manufacturing companies adopted a development
approach of technological innovation with absorption of
foreign capital and technology in order to cope with the
situation of deficient capital and backward technology.
However, compared with the middle and eastern regions
of China, the western regions of China still lagged behind
a lot with respect to the strength of capital introduction
and achievement of technology introduction and
transformation. In particular, the adoption of the strategy
of “exchange market for technology” caused a series of
negative impacts, which affected the development of
industry and hampered independent innovation of western
equipment manufacturing industry.
Hence, it can be seen from the perspective of
historical development that, the only right way to improve
development of technology innovation capability of
western equipment manufacturing industry which focuses
on national defense science and technology industry and
major technological equipment is implementing the
introduction and upgrading of technology under the
general principle of sticking to independent innovation
and reducing unnecessary administrative intervention.
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