China‘s innovation system must become more open – this also applies to Germany in part

April 08, 2019

The 2018 openness indicator, which was compiled by Fraunhofer ISI together with the ZEW as part of the 2018 Innovation Indicator, assesses the openness of 35 national economies. China is only ranked 35th; Germany ends up in 21st place. China’s lack of openness is also a key topic at the EU-China Summit on 9 April.

The EU-China Summit on 9 April addresses the Chinese economy’s lack of openness and how to improve joint economic and scientific cooperation. The Chinese government is making efforts to open its own innovation system, but these do not go far enough for the representatives of Western governments and businesses. This view is confirmed by key statistics of the openness indicator, which was realized by the Fraunhofer Institute for Systems and Innovation Research ISI and the Centre for European Economic Research (ZEW), and commissioned by the Federation of German Industries (BDI).

According to the openness ranking, which compares 35 national economies based on aspects such as knowledge acquisition, knowledge exchange, cooperation and international orientation, Switzerland (68 points), Ireland (67 points) and the Netherlands (63) are the leaders in openness, followed by Austria (62), Singapore (59), Sweden (58) and Great Britain (56). Since smaller economies have to be more specialized and cannot cover all the knowledge and innovation fields themselves unlike larger economies, they are more or less forced to be more open and are therefore ranked higher. China is ranked last with only 14 points. Germany (34 points, 21st place), the US (31 points, 24th place) and Japan (17 points, 31st place) perform better in a direct comparison of the four largest economies.

The declining degree of China’s openness over time applies to science, the economy and society. The country’s economic development in the 2000s was strongly shaped by foreign direct investment, joint ventures and intensive trade relations – by importing knowledge and goods and through international exchange and cooperation. The opening of the country to the outside world and the reforms aimed at more openness were not able to keep pace with the growth in gross domestic product. The demands for reforms and openness, which top the agenda at the EU-China Summit, are therefore not only politically justified, but can also be underpinned statistically.

In spite of its poor performance under the openness indicator, it remains undisputed that China is already a strong competitor in diverse technologies and in many sectors and is currently undergoing a transition from low-cost to high-tech supplier. This is underlined by the ambitious “Made in China 2025” strategy, which aims to give the country a leading role in ten strategically important economic sectors such as automotive engineering, robotics and aviation. At present, however, Chinese businesses are often internationally competitive only on the domestic market and only in a few sectors and technology fields with innovative products and services. Large parts of China’s economic success are not yet based on innovation, but rather on price leadership and infrastructure investments.

Dr. Rainer Frietsch, who coordinated the work on the openness indicator at Fraunhofer ISI, emphasizes: “If China wishes to be accepted permanently as a market economy and as an equal partner on the international stage, adapting to global changes in the exchange of knowledge and ideas is unavoidable. The Chinese government would do well to use its policies to increase networking and enable unrestricted knowledge flows - as would the governments in all other innovation-based economies, above all Japan, the US and Germany.” Germany, just like China, now performs worse than in the benchmark year of 2007: For example, the German science system is lagging behind internationally because the shares of international co-publications (55.2% at present), foreign investment (40.4% of GDP) and investor protection have declined significantly. The German economy, in contrast, appears to be comparatively open, as shown by the high import ratio (39.7% of GDP), among other things.

About the innovation indicator

The innovation indicator is a regular, comparative study of innovative strength and was published for the first time in 2000. The 2018 version included an openness indicator, which captures how open economies are in an international comparison. The innovation indicator records the conditions for innovation in Germany and compares them with globally leading industrial countries and emerging economies worldwide in a ranking in the areas of industry, science, education, governance and society as well as using an overall indicator. This creates a foundation for innovation policy decisions. The innovation indicator is compiled on behalf of the Federation of German Industries (BDI). The study is conducted by the Fraunhofer Institute for Systems and Innovation Research ISI together with the Centre for European Economic Research (ZEW). The Innovation Indicator was initiated by the BDI in cooperation with the Deutsche Telekom Stiftung.

Download the publication here:

The Fraunhofer Institute for Systems and Innovation Research ISI analyzes the origins and impacts of innovations. We research the short- and long-term developments of innovation processes and the impacts of new technologies and services on society. On this basis, we are able to provide our clients from industry, politics and science with recommendations for action and perspectives for key decisions. Our expertise is founded on our scientific competence as well as an interdisciplinary and systemic research approach.