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China is bent on taking the lead in technology, with the nation pressing ahead in its quest for technological dominance, as highlighted in its fourth session of the 13th National People’s Congress (NPC) held over two days in early March.

During the session, which spelt out the central government’s economic priorities and roadmap for development, China would be ramping up on annual research and development spending by more than 7 percent every year over the next five years. In 2021, expenditure on research will grow by 6 percent. Having emerged from COVID-19 stronger than most economies, China plans to build up self-reliance through national policies and R&D.

Local tech firms to spearhead innovation and growth

As some countries are alienating Chinese tech firms, China is boosting its R&D efforts as part of a national development strategy to achieve self-reliance in science and technology, particularly in the high-tech sector. During the NPC, officials cited the implementation of “major national sci-tech projects in frontier fields of artificial intelligence, quantum information, integrated circuits, life and health, brain science, gene technologies and clinical medicine.”

This means establishing more national laboratories to research on these key areas. Support will also be extended to local tech companies to be listed. Shanghai’s STAR Market, for instance, is a popular stock exchange for Chinese tech firms to raise capital.

As part of the plan, the country will roll out a “dual circulation” development strategy to boost the domestic market, while ensuring that the country is self-efficient. To step up on innovation, Beijing, Shanghai, Shenzhen and Hefei are designated to become national innovation hubs to drive technological breakthroughs.

Tech companies will converge in these key cities to create synergistic growth opportunities. Major Chinese tech companies such as ZTE, Huawei and Tencent are already based in Shenzhen. China also plans to leverage Shanghai and Shenzhen’s position as capital hubs to fuel tech investments. Earlier this month, for instance, Huawei, AsiaInfo, China Mobile, China Unicom, China Telecom and other tech companies have jointly launched the first 5G slicing open innovation laboratory.

Increased foreign investments

In 2020, China surpassed the US with the largest foreign direct investment (FDI). Compared to $134 billion attracted by the US, China had a record high influx of investments totaling $163 billion. This is a 4.5 percent increment from the previous year. While FDI plunged globally, China experienced a hike in investments and is the only country to report economic growth after successfully tackling COVID-19. In the first two months this year, China’s commerce ministry reported that the country took in $27.28 billion in foreign investments, representing a 31.5 percent increment from a year ago. Of which, the European Union, ASEAN, and countries along the Belt and Road Initiative accounted for 31.5 percent, 28.1 percent and 26.2 percent of foreign investments, respectively.

While it is not clear how much poured into the tech sector, these encouraging figures signal confidence amongst foreign investors despite underlying geopolitical tensions. To continue as one of the forerunners in technological innovations, the country aims to grow dominance in high-tech industries by courting more foreign investors.

As part of the country’s 5-year plan, the Chinese government will reduce the negative lists for foreign investment access and support foreign-funded companies to set up R&D facilities in the country. Foreign investments that transform industries and advance manufacturing will be strongly encouraged.

In the tech sector, for instance, Siemens and NCS launched their first innovation centre in Shenzhen, China in January – to benefit from growth in the Greater Bay Area. While the southern and Greater Bay Area have been hotspots for investments, China will also be encouraging foreign investment in the central and western regions.

Growth in 5G, blockchain and agri-tech

China already holds one of the leadership positions in 5G deployments in the world. According to the Ministry of Industry and Information Technology, China currently has more than 718,000 5G base stations, with 5G network available in all cities at prefectural level or above. Over the next five years, China aims to grow 5G penetration to 56 percent to maintain its stronghold in 5G and integrate 5G into industrial networks to boost the nation’s industrial capacity.

In addition to 5G, China has earmarked blockchain for the first time as a technology to focus on as the nation progresses as a digital economy, alongside cloud computing, AI and the Internet of Things (IoT). Even though cryptocurrencies cannot be traded, Beijing recognises the role of blockchain in advancing technologies and industries and has established both a central bank digital currency and framework for developing enterprise blockchain products. According to IDC, China is forecast to grow blockchain expenditure by an annual rate of about 52% to reach $2.3 billion by 2024.

In the aftermath of the COVID-19 outbreak, China has pledged to bolster national security in the areas of finance, energy and food security. Food security for instance, is China’s key agricultural agenda. The country will be ensuring 120 million hectares of cultivable land to keep up with the demands of its population.

Understanding that advanced agriculture is critical to the industry, China is looking towards smart agriculture, relying on sensors, AI and robotics to bring agricultural activities up to speed. In the next five years, the country will embrace more agri-tech innovations to secure safer, as well as more land and energy-efficient agricultural supplies. Demonstrating venture capitalists outlook of China’s agri-tech prospects, Guangzhou agri-tech firm XAG secured $46 million in a Series C++ round, just four months after closing its Series C+ round with 1.2 billion yuan.

On the other hand, fintech – an area that has garnered much attention in China following Ant’s failure to list – will be subject to more financial reforms and further regulations. China maintains that fintech activities will be closely supervised while not stifling innovation in the nation’s burgeoning fintech sector.

Even though the past year has been fraught with curbs for Chinese tech firms, China’s 5-year plan shows that there is much growth for Chinese tech firms domestically. For overseas tech companies, this presents an opportune window to grow presence in the most populous country in the world.

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