This is the second revision from the previous version of 2007, and will come into force shortly on 1 January 2022.

This second revision has many high level statements covering various aspects of promoting the progress of science and technology in China, including basic research, applied research transformation, motivating scientific and technical personnel, and so on. This second revision has 117 articles, and some interesting ones, in my view, are as below:

Article 32 - For projects funded by the PRC government, the PRC government could use the resulting achievements with no compensation to the owner

The above no compensation clause is triggered by the following:

  • The achievement is not practiced within a reasonable time limit without proper reason; OR
  • For national security, national interest, and major social public interest.

While the above seems reasonable (the project is funded by the PRC government at the end of the day), companies may have to be careful about the involvement of such projects funded by the PRC government, including co-development, if they do not wish their work products to be used by the PRC government for free, in particular everything under the sun could be related to national security in China.

Many policies to encourage scientific research

These include the below:

  • Article 41 - Tax incentives, including tax deduction, and reach equipment can be depreciated at an accelerated rate (for greater tax reduction).
  • Article 46 - Motivating state-owned enterprises, including factoring in innovation-related parameters at evaluation of the person in charge of such enterprises.
  • Article 86 - Increasing science and technology funding. Specifically, the rate of increase in such funding for science and technology from the state should be higher than the rate of increase in regular revenues. Further, the proportion of such funding with respect to GDP should be gradually increased.
  • Article 91 - Preference to use domestic developed products at government procurement.
  • Article 92 - Encourage IP mortgage

It appears that the PRC government is planning to put a lot of resources in science and technology research. My only concern is that people will always want to, and could, game the system for their own personal benefits without actual contribution.

For Article 91, I am not sure whether this is in accordance with the WTO rules, and will be grateful for comments from experts in this area.

For Article 92, China has been a pioneer (I have an article on this. If you are interested please ask me for a copy), which however could be gamed easily by personal connections.

In any event, it is clear that China will be spending much more in scientific research in the near future, including on fundamental researches. The issue is, whether such spending could be turned into actual results.

Originally Published by the China National People's Congress on 24 December 2021

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