RUSSIA AND CHINA IN THE GLOBAL
KNOWLEDGE ECONOMY
BOOK OUTLINE
• Puzzle: Why China, Not Russia?
• Existing Explanations
• Alternative: Quality of Integration With
Global Economy
• Focus On 4 INTERRELATED Topics:
–
–
–
–
Economic Regionalism
Leading Sectors
Corruption
Education, Science & Technology, Innovation
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Puzzle
• Why China and not Russia? NOT what
modernization theory would have predicted
• December 2004:
– Baikal Finanz buys Yuganskneftegaz
– Lenovo buys IBM PC Division
• Commodities vs. Industry
• Best (China) and Worst (Russia) G-20
performers in 2008-12 crisis
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OUTLINE FOR TODAY
• Russia and China in Global Knowledge Economy
• Education
• S&T Indicators/Cases/Innovation
–
–
–
–
Some Numbers
Autos
Nanotech
IT
• Changing Relationship
• Conclusion: Why China, Not Russia
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2 DISCLAIMERS
1. I derive no pleasure from this depiction of
the Russian case.
2. The China story describes how they got to
where they are; it is not a prediction of
where they will be in the future (Winners
problem. Pettis 2011).
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LIVANOV RIGHT ABOUT DECLINE
• Russia finally joined WTO
• Worst performance among emerging
markets in crisis.
• Lost decade; no diversification
• Medvedev claimed lessons from crisis
• But few concrete achievements
• Russia losing Education and S&T
capacity
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Output Growth (%)
Russia
2008
5.6
2009
-9.0
2010
3.6
2011
3.4
2012 (estimates) 3.5
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China
9.6
8.7
10.0
9.7
7.5
7
Growth in Research Output,
1999-2008
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Share of Global Publications, 2010
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NOT What Everyone Expected
• Modernization theory
– Literacy; higher education
– Urbanization; industrialization
– Media; communication
• Asian miracle
– Education necessary, not sufficient
• Cf 1950s predictions: Rangoon and Manila,
NOT Seoul.
• China got education and S&T systems from
USSR = similar challenge to adapt.
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Existing Explanations for
China’s Economic Performance
• Initial Conditions
• Policy
Will go fast; can come back in Q&A
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Initial Conditions I
• Abundant supply of low-cost labor not
covered by the welfare system
• Decision to begin reforms with agriculture
• Shorter duration of communist rule
• Fewer distortions
• Less complete Communist Party penetration
of society
• Qualitative differences in leadership (Stalin
vs. Mao)
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Initial Conditions II
• Communities of co-ethnics willing to
provide investment capital
• “Continuity hypothesis” (2 versions)
– Neo-Ming: restore position before the
18th century = world leader;
– Maoist: strong, sovereign state and
cohesive ruling party. (Putin’s favorite)
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Policy
• Gradual approach
• Stable environment
• Authoritarian leadership (Putin’s other
favorite)
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Gradualism?
•
•
•
•
USSR 30 years of reforms.
Hungary “goulash communism”
China Rapid de-collectivization
“Fevers” and intense competition resulting
from partial openings (Zweig).
• Real gradualism was gradual acceptance
of unintended private sector. Not
necessarily permanent.
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Stable?
• Democracy Wall 1979
• Anti-Spiritual Pollution 1983
• Bourgeois Liberalism 1987
• Tiananmen 1989
Each time, economic reforms resumed, due to
COALITIONS of winners, investors and
political leaders.
Zweig: Development coalitions
Pei: “Social takeover coalitions”
Howell: “Spiraling out”
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Authoritarian?
• Deng’s “Three No’s”
– No promotion of privatization
– No propaganda campaign
– No crackdown
• Competition
• Repeated pattern: success where state partially
lost control (Zweig, Nee and Opper)
• State priorities often not achieved, but (some)
regions develop
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Alternative Explanation
• Character of integration with the
international economy: “Thick” vs. “Thin”
• NOT simply open or closed (cf Japan)
• China’s Thick integration generated
coalitions of entrepreneurs, officials and
foreign investors = able to win (some)
battles: BOTTOM-UP DEVELOPMENT
• Nothing comparable in “ democratic”
Russia
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Chinese Elites Embrace
Globalization, Russians Not
• Bolshevik heritage?
• Time under communism?
• Timing of the opening?
– Cultural Revolutions
– Self-confidence of leaders
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Quality of Integration
• China Thick; Russia Thin
• Chinese see Globalization as their best
chance to catch up and surpass
• Russians view Globalization as
Americanization, designed to relegate them
to junior partner status or worse. Threatens
epistemic communities.
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BOOK OUTLINE:
FOUR INTERRELATED TOPICS
DEMONSTRATING
QUALITY OF INTEGRATION
1.
2.
3.
4.
REGIONALISMS (Sub, Trans, Multi-National)
SECTORAL POLICY
CORRUPTION
EDUCATION, SCIENCE, TECHNOLOGY,
INNOVATION
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4) Education, Science & Technology,
Innovation
• Stunning reversal of positions
• Russian Universities in decline
• China now the fastest-growing R&D
community, changing innovation model.
• Russia less integrated with global S&T =
increasingly less important.
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INTERRELATED
• Regions become financial supporters of
education, R&D, innovation. Competition.
• Growing industrial sectors create demand
for R&D and innovation, & provide jobs.
• Less damaging forms of corruption = less
severely distort merit-based decisions, less
inhibit competition
• Knowledge economy more likely to
promote merit and competition.
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Global Education Competition:
(human & financial resources, status)
• For students (both bodies and brains)
• For faculty (teachers and researchers; stars)
• For managers (education, research,
development)
• For status = RATINGS GAME
• For financial support (state and private)
CIRCULATION KEY = INCREASES
COMPETITION
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Higher Education
• Rapid expansion in both sysems = quality
problems: students AND faculty
• Both emphasizing elite institutions
– China 211 (106; 9 top priority)
– Russia National Research (29) and Federal (8 +
2) Universities
• Chinese internationalizing; Russians losing the
best graduates, weak linkages
• China far greater success in attracting SOME
returnees
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Increased Enrollments
Russia:
China:
1990 2,824,500 (2%)
2008 7,513,000 (5%)
1997
2006
1,000,000
5,500,000
(China target of 30,000,000 by 2010)
Neither increasing faculty to keep up
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Doctoral Degrees: Science & Eng.
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Foreign Student Enrollment 2009
Russia: 90,000
- 20% Kazakhstan
- 20% Other CIS
- 40% Asia (majority
from China)
Nov. 30, 2012
China: >300,000
Top 5 Sources:
- South Korea
- Japan
- United States
- Vietnam
- Thailand
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Students Abroad
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The Education Ratings Game
•
•
•
•
•
•
•
U.S. News & World Report
Times Higher Education Supplement
Jiao Tong U. Shanghai
Spanish Web-based
Russian system
Grande École des Mines Paris Tech
2011 Iranian “Islamic Universities”
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Times Top 200, 2009
• Hong Kong: ( 5) #s 24, 35, 46, 124, 195
• China: (6) #s 49, 52, 103, 153, 154, 168
• Russia (2):
– 155 Moscow Lomonosov
– 168 St. Petersburg State (Mendeleev)
2012 Russia drops out of top 200
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Shanghai Jiao Tong Top 100
• 77: Moscow State (Lomonosov)
• No Chinese or Hong Kong Universities in
the top 100
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Russian Version of Rankings
TOP 10 (Global universities ranking)
1 Massachusetts Institute of Technology, USA
2 California Institute of Technology, USA
3 University of Tokyo, Japan
4 Columbia University, USA
5 Lomonosov Moscow State University, Russia
6 Harvard University, USA
7 Stanford University, USA
8 University of Cambridge, UK
9 Johns Hopkins University, USA
10 University of Chicago, USA
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Results of Russian Ranking
•
•
•
•
•
•
2 in Top 100 (Moscow & St. Petersburg)
No Chinese or HK in Top 100
U. of MN # 26; U. of MD # 28
Second 100: 2 Russia; 2 China; 2 HK
Third 100: 3 Russia; 2 China
301-430: 45 Russian
52 of 430 = 12%
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Real Life: ШПАРГАЛКИ
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Real Life: внедрение
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Russian Mass Tertiary Education
= Growing Burden on Students
•
•
•
•
•
2/3 at State institutions pay tuition
No price competition (yet)
Cost rising, tied to budget students
Corruption/Fraud
Demographic situation makes this
unsustainable
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Perspective:
Russia enrolls more students into higher education
than graduate from secondary school.
China has a goal of enrolling 25% of secondary
school graduates in all forms of advanced
education by 2010.
BUT China appears to be getting a higher return on
its investment.
- Better ratings
- PISA scores (Shanghai)
- Returnees
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Emigration a Problem for Both
• China now losing entrepreneurs
• Russia losing creative class.
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Migration & Creative Class
• quality of life and community
• even more pronounced for S&T.
• Best scientists go where the best work
is being done = Technology clusters
• Focus on brain drain often ignores
.
brain gain, and brain circulation
• Putin willing to let creative people
leave if they are potential opposition.
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Chinese Understanding of Issue
• Initial Drain. Deng said necessary &
unavoidable. He underestimated by 50%.
• Learned to compete to attract SOME OF
them back
• Competition between regions and
institutions = INCENTIVES
• Returnees in general better than those who
stayed home (self-selection.?)
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Russian Ambivalence
• Resentment of those who left
• Housing issue
• Subject to all problems of managing
research in Russian environment.
• Do not recognize foreign degrees
• Do not permit back-and-forth (beginning to
change).
• Official Programs vs. epistemic
communities & corruption.
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Growth in Research Output,
1999-2008
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Publications Growth, 1990-2008
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Numbers of Researchers
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Change in # of Researchers
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PATENT APPLICATIONS
TOP FIVE OFFICES, 1995 & 2010
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PATENT GRANTS
TOP FIVE OFFICES, 1995 & 2010
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PATENT GRANTS, 2010
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UTILITY MODEL GRANTS, 2010
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INDUSTRIAL DESIGN
APPLICATION/REGISTRATION
TRENDS
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PROBLEMS IN THE
RUSSIAN SYSTEM
• Science “a system for generating knowledge”
• “Science policy” does not include technology or
innovation
• Low financing, almost entirely from State
budget: 29th in world in share of GDP.
– (OECD 2/3 private funding; Russia just 27%)
• Cadres
• Bureaucracy and Corruption
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CHINA PROBLEMS
• Corruption and Falsification, including by
returnees
• Overly rigid incentives/criteria
• Nobel mania
• Time Horizon
• Lack of new product innovation
• Competition sometimes excessive
• Quality
• Growing role of SOEs deprives SMEs of
talent and financing.
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AUTO & TRUCK
PRODUCTION, 2011
• Russia 2 of top 50 Producers (24 & 46)
• China 16 of top 50 producers (17, 19, 20,
23, 25, 26, 27, 30, 31, 32, 35 37, 40, 42, 43,
47, 48)
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BMW 7 vs BYD F6
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Logos
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SETTING PRIORITIES
Overcoming the resource curse works
when the resource sector becomes the
Knowledge-based sector
• Russia buying foreign technology for oil and gas
• Russian priority sectors (to 2020) are:
Information & Telecom
Nanotechnology
Life Sciences
Biotechnology
Transport & Space
Clean Energy
Security & Counter-terror Advanced Weapons
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Nanotechnology
• THE Russian program for Putin
– Not clear why: not a strength
– Too small to see?
• Dwarfed by U.S. spending
• China major program with little fanfare
World Nanotechnology Patents 2004-06:
USA
43%
China
1% (13th)
Russia
0.4% (22nd)
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Home Country: Nanotech Patents
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Skolkovo: The Innovation Center
• Chosen over Tomsk, Novosibirsk, & St.
Petersburg, March 19, 2010.
• Intend to develop as rapidly as possible
• Dvorkovich and Surkov describing different
planets.
• System change or Enclave?
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Zhongguancun
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Zhongguancun
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Skolkovo Site 2009
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Skolkovo, 2009
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Skolkovo, 2010
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Skolkovo Hypercube, 2012
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Explaining Zhongguancun Success
• Beijing government liberal approach to networks;
some funding. (Good Mother-In-Law, Segal 2003)
• Nonhierarchical relationships: Lacked power to
control SOEs or spin-offs
• Ownership restructured = shareholders
(Market provides capital, undermines hierarchy)
• Outperformed Shanghai, Xi’an & Guangzhou
• Indigenous companies learn from MNCs but focus
on domestic market. (Zhou 2008)
• Key role of returnees.
• Red Queen innovation model.
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INNOVATION
• No Russian Global Manufacturing Brands
• China gets bad press on innovation
– Just imitate (cf Japan 1950s)
– Do take risks; innovation happening
– Lenovo, Heier, Baidu, Tencent
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Value Added Computers, etc.
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Value Added in High-Tech
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Value-Added in Business/Financial
Services and Communic. (3 to 7%)
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Solving the Puzzle
• Why has Russia not maintained its lead in
Education and S&T?
• China higher rankings, more spending
• China growing value-added
• China leading in “clean” technology,
nanotech and IT.
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Misleading Answers
•
•
•
•
•
•
•
Soviet system overrated
Money
Resource curse
Flawed privatization
Flawed policy advice
“Mentalitet”
State programs by authoritarian regime
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More Promising Answers
•
•
•
•
Incentive structures & Competition
Epistemic communities
Institutions (including corruption)
This is good news: problems can
be mitigated through incentives
and competition
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AVOID IDEALIZING CHINA
• Not yet product innovation (though rapid
manufacturing changes; Red Queen)
• Much assembly of foreign components
• Competition also produces fraud and angst
• BUT:
–
–
–
–
Enormous domestic market for small steps
Far higher value-added than would predict (3 times)
Avoid first mover costs, for now
Investment in Education and S&T could pay off in
next decade
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The Lessons from China
• Student has become the model
• Embracing Globalization reflects/creates economic
and social interests.
• Domestic market and global production allow Red
Queen Run (Breznitz & Murphree)
• Self-interested actors allied with supporters of
reform fight retrenchment. Battle ongoing.
• KEY IS PARTIAL LOSS OF CONTROL.
• COMPETITION/EPISTEMIC COMMUNITIES
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THANKS FOR STAYING AWAKE
QUESTIONS?
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Trade Restrictions 2008-09
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1) Economic Regionalism:
Within, Across and Among States
• Both lost control over regions in 1980s
– In China, this produced rapid growth in some areas
– In Russia, “Involution”
• Russia-China border weakest integration in East
Asia.
• Asian region dynamic; CIS moribund; Eurasian
Union not promising
• Chinese regions support education & innovation
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2) Leading Sectors
• Perhaps overdetermined:
Resources vs. Industry
• BUT not clear in 1991, especially given
inherited human capital & oil prices at time
• China commerce and manufacturing,
increasingly value-added (3x expected);
new varieties of innovation
• Russia low productivity outside energy
sector; diversification a slogan, not practice.
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3) BRIC CORRUPTION 2009
Transparency International: Corruption
Perceptions Index:
• India 74
• China 79
• Brazil 84
• Russia 146
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DOING BUSINESS 2009
• CHINA # 20
• RUSSIA # 21
• EXTENT vs. QUALITY of Corruption
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BRIC GLOBAL BRANDS
• CHINA: Lenovo, Huawei, Haier
• INDIA: Tata, Infosys, Wipro
Synonomous with offshore IT
• BRAZIL: Embrarer; BioTech
Leader in Synfuels and Agribusiness
• RUSSIA: Gazprom; Lukoil
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G-20 Science, 1996-2008
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Industrial Design Applications, 2007
(different scales)
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PROBLEMS IN THE
RUSSIAN SYSTEM
• Science “a system for generating knowledge”
• “Science policy” does not include technology or
innovation
• Low financing, almost entirely from State
budget: 29th in world in share of GDP.
– (OECD 2/3 private funding; Russia just 27%)
• Cadres
• Bureaucracy and Corruption
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CADRES
• Large Brain Drain, Internal & External
• No Brain Gain, Little Circulation
• Ageing
– Age 40-59 HALF of proportion in U.S.
– Over 60 3 times share in U.S.
• Programs to attract talent from abroad
modest and insulated.
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Bureaucratic Obstacles
•
•
•
•
Grants small; funds often late
Ambiguous legal status
Federal Programs not transparent; criteria vague
Regulations often limit awards:
– Cost and length rather than quality
– Specific budget categories
• Resist competition
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CORRUPTION
• Customs barriers
• No competitive bidding on equipment
• Cost effectiveness about 10-15% of
what is realized abroad
• Officials emphasize infrastructure
projects
• Travel and large equipment purchases
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Russia and Global Knowledge Econ.
• Russia Similar in what it confronts:
– Mass Tertiary Education
– Demands of Knowledge Economy
– Resource Constraints
• Russia outlier in:
– Demographic crisis
– Academy of Sciences Role
– Bureaucratic obstacles
– Not confronting fraud and corruption
– Resistance to internationalization
(epistemic communities)
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Institutional Expansion
Number of VUZy in Russian Republic/Federation at beginning of
academic year:
YEAR
1940/41
1945/46
1950/51
1960/61
1970/71
1975/76
1980/81
1985/86
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
TOTAL
STATE
PRIVATE
481
456
516
430
457
483
494
502
514
519
535
626
710
762
817
880
914
939
965
1008
1039
1044
1071
1068
1090
1108
548
553
569
573
578
580
590
607
621
655
652
662
655
660
658
78
157
193
244
302
334
349
358
387
384
392
409
413
430
450
[Rossiiskii statisticheskii ezhegodnik, 2002, p. 227; 2004; 2008]
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State vs. Private
• Russian Private VUZy:
42% of institutions
17% of the students
• Full-Time Study:
State: >50%
Private: <25%
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VUZ Faculty Resources
YEAR
STATE
PRIVATE
1993/94
239,800
3,800
1995/96
240,200
13,000
2000/01
265,200
42,200
2005/06
322,100
65,200
2007/08
340,400
78,800
2008/09
341,100
63,400
2009/10
342,700
54,800
(Students increase 165%; Faculty 66%; includes
sovmetitelstvo.)
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Russian Elite Universities
• 2006-08: 57 Innovative Universities
• 2009-2010: Research Universities
2 Pilot; 12 & 15 by competitions = 29
• Moscow and St. Petersburg
• Federal Universities (no competition)
2 Pilot; 6 by decree = 8 (could increase)
(Total of 39 with special status, of 660)
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Chinese “Key” Universities
• 1956
• 1978
• 1993
11
88
211 program goal of 100 by 2000
Currently 106
• 985 Program in 1998: 9 special funding
– About 30 early 2000s
– 2010 included 49
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U.S. News USA Top 20, 2011
1.
2
3
4
5
5
7
7
9
9
Harvard
Princeton
Yale
Columbia
Stanford
U. Pennsylvania
California Inst. Techno.
MIT
Dartmouth
Duke
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9 U. Chicago
12. Northwestern
13. Johns Hopkins
13. Washington U. (St. Louis)
15. Brown
15. Cornell
17. Rice
17 Vanderbilt
19 Notre Dame
20 Emory
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U.S. News #s 21-25, 2011
21 Georgetown
22 U. California Berkeley
23 Carnegie Mellon
23 U. of Southern California
25 UCLA
25 U. of Virginia
25 Wake Forest U.
[ONLY 3 of top 27 Not Private]
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Male Births
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Research Articles by Field
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LondonGeorgetown
Oct. 2010 U.
103
G-20 Science, 1996-2008
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Patent Per R&D $, 2001-10
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Chinese Policies for Returnees
• May choose where to work; Given decent housing
• Special grants, plus competition for national research
support
• Special schools for children with poor Chinese language
skills
• WTO Membership increased demand.
• 2002 “Diaspora Model:” Accepted that most/best would
not return permanently.
• 2003 Hu and Zeng “three talks:” Returnees Irreplaceable
• Focus on improving overall climate.
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Not Entirely Positive
• Conflicts between retuning “sea turtles” and
“land turtles” who did not go abroad.
• Some leave again; others go into business.
• Recourse to “swallows” who spend part of
year in China: only way to get the top
people.
• Fraud/including by those overseas
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Benefits Outweigh Costs
• Returnees more likely to import technology.
• Stronger global networks; more grants and
fellowships; publish more in international
journals.
• Market forces most important factor in
attracting people back: Incentives and
competition.
• Virtuous circle (Jonkers 2010): returnees
demand international standards
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Lada 2010
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Mass Automobile Production
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Top 4 Auto Producers, 2000-06
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Auto Manufacture in China, 2000-06
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Mercedes C vs. Geely Merrie 300
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Smart/Chinese Smart
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Lada C Concept Car
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Lada 2010
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IT: Skolkovo vs. Zhongguancun
• Unique phenomena
• Most Tech Corridors NOT in Capitals:
– Silicon Valley; Route 128, N. VA.
– Bangalore
– Grenoble
– Cambridge
– Milan
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Zhongguancun
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Skolkovo Architect Plans
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Medvedev’s 5 Priority Sectors,
November, 2011
•
•
•
•
•
Medical Technology
Energy and Energy Efficiency
Information Technology
Space & Space Science
Telecommunications
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CADRES
• Large Brain Drain, Internal & External
• No Brain Gain, Little Circulation
• Ageing
– Age 40-59 HALF of proportion in U.S.
– Over 60 3 times share in U.S.
• Programs to attract talent from abroad
modest and insulated.
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Bureaucratic Obstacles
•
•
•
•
Grants small; funds often late
Ambiguous legal status
Federal Programs not transparent; criteria vague
Regulations often limit awards:
– Cost and length rather than quality
– Specific budget categories
• Resist competition
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CORRUPTION
• Customs barriers
• No competitive bidding on equipment
• Cost effectiveness about 10-15% of
what is realized abroad
• Officials emphasize infrastructure
projects
• Travel and large equipment purchases
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