By Shi Guang, General Office, DRC

Research report No.116, 2017 (Total 5191)2017-9-13

Abstract: Since the turn of the 21st century, China's hi-tech industry has witnessed a rapid growth and further integration with the global labor division system. In 2014, the added value of China's hi-tech industry accounted for nearly 30 percent of the world’s aggregate and its export volume was about 25 percent of the world’s total. Compared with the situation at the initial period of reform and opening up, the supporting capacity of the industry and the size of the market have become China’s new competitive advantages. Among all categories in China's hi-tech industry, the electronic information sector enjoys the most prominent advantages in terms of scale with tangibly enhanced value chain. But on the whole, China's hi-tech industry is still at the mid-to-low-end of the global value chain, bolstered by huge labor input. As a result, China’s labor productivity is only about 1/8 of that of the U.S. and its R&D intensity is less than 20 percent of the average level of the OECD member countries with less than 5 percent of net profit margin on sales. With China's economy shifting to the period of mid-to-high growth, it is expected that in the next 10 years, the hi-tech industry will maintain a high growth rate of about 10 percent. The key to industrial upgrading lies in strengthening indigenous innovation and the changing of scale and cost advantages into technological advantages at the core links of the value chain.

Key words: hi-tech industry, innovation, comparative advantage, value chain