The government should kick off large-scale R&D efforts to develop China's own core technologies as soon as possible, and pump heavy investments into such projects.

Compared with multinationals, Chinese enterprises are less competitive in original innovations. It would be wise for them to begin indigenous innovations with knowledge-intensive and less time- and capital-demanding technologies.

Moreover, large numbers of highly competent scientists and engineers are needed to guarantee the success of the national innovation campaign. Enterprises have to closely cooperate with research institutes, particularly at the initial stage of indigenous innovation, because researchers have always worked in institutes and universities in China and a majority of Chinese enterprises don't have competent enough teams for independent technological innovations.

Chinese companies also face certain obstacles as the newcomers to the innovation scene. Even if they make breakthroughs in developing core technologies, it's usually very difficult for Chinese brands to market their technologies or products in markets already dominated by multinationals. It's a general phenomenon that consumer goods and industrial product markets favor established multinational corporations against newcomers.

What are the most pressing issues facing China in the development of innovation?

There are three major barriers hindering the development of China's indigenous innovation.

First, there is a general lack of awareness in the country about the urgency of indigenous innovation. Some people still believe Chinese companies are not yet capable of developing their own technologies, which can be costly and risky to pursue. They insist that technology imports are safer and Chinese companies should continue with low-cost production to compete with foreign rivals. Some even believe that there is no need for indigenous innovation since foreign companies can generate tax revenues and boost local employment as well.

Second, many people have little confidence in indigenous innovation. They tend to overestimate the technological advantages and market dominance of foreign companies and have doubts about whether Chinese enterprises can successfully complete research projects. Some people even think indigenous innovation must be started with technology introduction from abroad. In fact, many Chinese enterprises—joint ventures, in particular—still rely on their overseas partners to improve their technology prowess.

Third, Chinese companies lack effective measures and strategies of how to proceed with indigenous innovation and seldom take the initiative to strengthen R&D.

How should China coordinate indigenous innovation and technology transfers?

Promoting indigenous innovation does not mean China has to completely give up technology imports. Instead, it would remain an important channel for China to acquire advanced technologies from overseas.

Of course, the country has a reason to properly arrange the two aspects. There are three principles to follow given different circumstances:

When multinationals find it difficult to turn their technological strengths into real competitive advantages in the Chinese market and Chinese companies have opportunities to attain technological resources and improve their technological capacities, Chinese companies can either acquire overseas technologies or build up their own innovation capabilities.

Or, if difficulties for multinationals remain the same and Chinese companies face shortfalls in attaining technological resources or improving their technological capacities, Chinese companies should count more on acquired technologies rather than on indigenous innovation.

But when multinationals face few barriers in turning their technological strengths into real competitive advantages in the Chinese market, and Chinese have opportunities to attain technological resources and improve their technological capacities, Chinese enterprises should develop their own innovation capabilities.