Chinese authorities have identified ICT industry as a key sector for future development and allocating significant resources to spur innovation; the plan is for national R&D expenditures to reach 2.5 percent of GDP 2020. The Chinese State Council’s official policy clearly states long term goals for Chinese ICT development and a direct goal to reduce foreign dependency.

China’s State Council’s incentive policies encouraging scientific and technological innovation include several measures.

As a measure of promoting domestic innovation the Chinese government offers knowledge-based enterprises favorable taxation policies. By allowing companies to deduct R&D expenditures from annual tax returns at a rate of 150 percent, the authorities aim to stimulate scientific and technological innovation.

The central government also encourages state and local authorities to set up venture capital firms. The purpose is to finance the start up of innovation oriented companies and provide financial incentives for technological development. This encouragement is also directed towards private sector investors.

Public procurement policy prioritizes domestic hi-tech companies over foreign companies. This government tilt is to ensure the progress of domestic firms and Chinese developed technology. Also, Chinese-foreign mergers of hi-tech enterprises are closely observed by a special committee to protect the Chinese interests and prevent domestic firms being side-lined.

The Chinese State Council has several short-, medium- and long-run plans for development of the ICT industry. As a long-term goal for 2020, the State Council’s aim is for science and technology to contribute at least 60 percent to the country’s development. Also by that time, China’s reliance on foreign technology will be below 30 percent. It is clear the ultimate goal is for China to be world leading in innovating technology and issuing patents.