China's renewed focus on sci-tech innovation and its challenges
Dr. Qing LIU 刘庆, who recently lectured on state council study session, highlights China's innovation gap, with 90% of top PhD graduates in academia and less than 10% in the private sector.
Sci-tech innovation is now at the forefront of China's policy agenda, as the country confronts a new wave of U.S. technology controls, which is also a central issue in the recent London talks.
On June 10, the General Office of the CPC Central Committee (中办) and the General Office of the State Council (国办) jointly released the "Guidelines on Deepening Reform, Innovation, and Opening-Up in the Shenzhen Comprehensive Reform Pilot《关于深入推进深圳综合改革试点深化改革创新扩大开放的意见》." The policy also made front-page headlines in People's Daily on June 11.
It is worth noting that the document is dated on August 30, 2024, but only made public yesterday. While it's unclear whether this timing is (sort of) tied to the London talks, China's recent series of dynamics—including this policy and the State Council's study session on June 9—unmistakably signals the central government's renewed determination to advance sci-tech innovation and reduce its reliance on U.S. technology.
Shenzhen Comprehensive Reform Pilot
The June 10 document is structured around four major sections and 12 key points. Notably, the top priority is to "strengthen the role of enterprises as the principal drivers of sci-tech innovation."
I. Coordinated Reform of Education, Science & Technology, and Talent Systems
Promote high-efficiency collaboration and deeper integration between industry, academia, and research (with a particular focus on strengthening the role of enterprises as the principal drivers of sci-tech innovation and leveraging tech leading enterprises as "problem-setters" for the innovation agenda).
Advance reforms in education methods, school operation models, management structures, and support mechanisms.
Improve support systems for attracting and retaining overseas talent.
II. Empowering the Real Economy with Finance, Technology, and Data
Enhance incentive and accountability mechanisms in financial services for the real economy.
Innovate systems to support the development of emerging industries.
Deepen market-oriented reforms in data markets.
III. Building a Higher-Standard Open Economy
Upgrade and optimize goods trade.
Drive innovation and upgrades in services trade.
Improve mechanisms that facilitate the flow of people.
IV. Refining Governance with Sound, Detailed, and Law-Based Approaches
Improve services and safeguards for people's livelihoods.
Strengthen systems for the management of land and other natural resources.
Deepen reforms and exchanges in the judicial sector.
14th Study Session of the State Council
On June 9, Premier Li Qiang chaired the 14th study session of the State Council, titled "Deepening the Reform of the Sci-tech Achievements Transformation Mechanism and Promoting the Integration of Technological and Industrial Innovation." This follows the 13th study session held two months ago, which focused on "Stabilizing Expectations."
The English readout from Xinhua is available here, and below is my translation of Xinhua's Chinese readout (note that Xinhua's English readout is typically more concise than the Chinese original):
Premier Li Qiang Chairs the 14th Study Session of the State Council
On June 9, the State Council held its 14th study session, focusing on "Deepening the Reform of the Transformation of Sci-tech Achivements Mechanism and Promoting the Integration of Technological and Industrial Innovation." Premier Li Qiang, who chaired the session, emphasized the importance of thoroughly studying and implementing the important instructions of President Xi Jinping and the decisions of the CPC Central Committee. He called for coordinated efforts across various sectors to break through bottlenecks in the transformation of sci-tech achievements, and promote innovation-driven development.
Liu Qing, Director of the Director of the National Innovation Center par Excellence, gave a lecture at the session. Vice Premier Zhang Guoqing and Liu Guozhong also delivered remarks.
After listening to the lecture and remarks, Premier Li noted that the transformation of sci-tech achievements connects the innovation chain with the industrial chain. It is the "last mile" of technological innovation, helping to create new products, industries, and drivers of growth, ultimately forming new quality productive forces. He stressed the importance of further coordinating various innovation resources, deepening institutional and system reforms, and ensuring smooth supply-demand connections. This would enable greater effectiveness in the transformation of sci-tech achievements, thereby better advancing the integration of technological and industrial innovation.
Premier Li noted that the process of transforming sci-tech achievements involves many stages, including technological research and development, engineering validation, as well as industrialization and commercialization. Any blockage in these stages can affect the outcome. Therefore, it is critical to focus on addressing key obstacles in the transformation process. At the source of transformation, Li called for further optimization of the evaluation systems and mechanisms for technological R&D and industrial development, stressing the need to focus on the true value of technological achievements in serving economic and social development. This will increase the alignment between industrial demand and technological supply.
In terms of transformation matching, Li urged the strengthening of enterprises' leading role in innovation. He called for supporting enterprises to lead or participate in national scientific innovation projects, guiding closer cooperation between enterprises, universities, and research institutions, and focusing on the frontier of industries to jointly tackle scientific challenges and conduct joint research. For transformation applications, he stressed the need to leverage policies such as the first-set policy, promoting the continuous iteration and upgrading of self-developed technologies and products in large-scale applications.
Premier Li also emphasized that the transformation of technological achievements requires a supportive environment. He called for a combination of an efficient market and a facilitating government, perfecting supportive policies and market services to create an efficient, collaborative, and dynamic transformation system. Li advocated for improvements to incentive mechanisms, following the laws of technological achievement transformation, and pushing forward reforms to grant researchers corresponding rights over their scientific and technological outputs produced on the job and place these outputs under separate management. He called for increased financial support, broader thinking, and greater use of market forces to attract non-state capital and encourage financial institutions to innovate financial products and services. The development of multi-level capital markets and diversified financing channels was also highlighted. Li concluded by stressing the need to strengthen public services, support the development of a number of public science and technology service platforms, and provide comprehensive services for both supply and demand in the transformation of technological achievements.
The guest lecturer at this study session was Dr. Qing LIU (刘庆).
Dr. Liu served as the Director of the Institute of Metal Materials at Tsinghua University from 1999 to 2006. He currently holds the positions of Director of the National Innovation Center par Excellence, and the Director of the Key Laboratory for Light-weight Materials at Nanjing Tech University.
While the official readout does not disclose the specifics of his lecture, Dr. Liu's recent public interviews provide insights into his key viewpoints.
One of the most notable points Dr. Liu has made in various forums is that China's major innovation challenge lies in the fact that a significant majority (~90%) of the country's top PhD graduates are drawn to academia, with less than 10% entering the private sector. Given that talent is the bedrock of innovation, this presents a critical issue.
Below is an excerpt from an interview Dr. Liu gave to China Entrepreneur magazine 《中国企业家杂志》during the 2025 Two Sessions in March. As an expert who is based in Jiangsu and deeply engaged with the development of the Yangtze River Delta region, Dr. Liu was naturally asked to compare the innovation outputs of Zhejiang (home to DeepSeek) and Jiangsu.
Dr. Liu notes that regions must leverage their unique strengths to develop industries suited to their local context. He mentioned that DeepSeek, at least in certain stages, had ample resources like GPUs and funding, which fueled the team's innovation. He also stated that companies must be the primary drivers of innovation, which should not be directed solely by scientific papers.
Below is my translation of the full interview. Please note that the translation has not been reviewed by Dr. Liu.
专访长三角国创中心主任刘庆：长三角城市要发挥所长，共同发展
Exclusive Interview with Dr. Liu Qing: Cities in the Yangtze River Delta Should Leverage Their Strengths for Joint Development
Following the 2025 Lunar New Year, the sudden rise of DeepSeek propelled Hangzhou's local start-ups known as the "Six Little Dragons" into the spotlight. Meanwhile, neighboring Nanjing, the capital of Jiangsu Province, has also drawn increased attention.
Some media outlets have questioned, "Why hasn't Nanjing produced its own version of the 'Six Little Dragons'?" In reality, Nanjing and Hangzhou have long been considered rivals and equals, with little difference in their levels of development. In 2024, Hangzhou's GDP reached 2.186 trillion yuan (roughly 300 billion USD), ranking eighth among Chinese cities, while Nanjing's GDP stood at 1.85 trillion yuan, ranking tenth.
During the 2025 "Two Sessions," China Entrepreneur Magazine conducted an exclusive interview with Liu Qing, a deputy to the National People's Congress and Director of the National Innovation Center par Excellence (NICE), to discuss topics including Hangzhou's emergence with DeepSeek and the integrated development of the Yangtze River Delta.
Liu told China Entrepreneur, "There's no need to be self-deprecating, nor is there any need to blindly imitate others."
As an expert with years of hands-on experience spanning "industry-academia-research" collaboration, Dr. Liu noted that the integration of scientific and industrial innovation hinges on talent. However, China's top talents overwhelmingly gravitate toward academic institutions. According to the Nature Index academic institution rankings, nine out of the world's top ten universities are in China, and nearly half of the top fifty are Chinese institutions, including many leading polytech institutions.
"This reflects the significant rise in the academic standards of universities in China, giving them greater voice and competitiveness in the global academic community," Liu said. "But it also indicates that even China's polytech universities are overly focused on publishing in top-tier journals. While China is getting closer to the cutting edge of science, it may be drifting further from practical engineering applications at the same time."
Under this approach, more than 90% of high-level research talent with PhDs gravitate toward academic institutions, while less than 10% enter the private sector. In contrast, in the United States, the split is roughly 50-50.
Liu argued that resolving "bottleneck" issues cannot rely on academic institutions alone—enterprises must play the leading role, which requires a steady supply of talent. Yet, the vast majority of PhDs still choose academia over industry.
Below is an edited transcript of the interview:
I. Nanjing Should Chart Its Own Path
China Entrepreneur: After Hangzhou and DeepSeek shot to fame, has there been a sense of urgency in Nanjing?
Liu Qing: I don't think there's any need to feel anxious. In 2023, Jiangsu set its goal to become an "internationally influential hub for industrial and technological innovation." So, Jiangsu should focus on its existing industries and prioritize applied technological innovation. In 2024, the central government further called for the "development of new quality productive forces suited to local conditions." This means each region should play to its own strengths and foster its own innovation culture.
Every city has its unique character—Nanjing, Hangzhou, and Hefei each have their own distinctive cultures. Local governments should build on these foundations. Of course, culture is shaped by local policies as well. While cities should learn from each other, there's no need for self-doubt, nor should anyone blindly follow trends or try to imitate others.
China Entrepreneur: When you say Jiangsu should "tailor its approach to local conditions," what does that look like in practice?
Liu Qing: Every city has its own style. Adapting to local conditions means working with each city's inherent attributes—its research environment, talent pool, and existing industrial base.
For example, Jiangsu province doesn't have a complete vehicle manufacturing industry, but it is home to the country's leading high-end auto parts manufacturers in cities like Suzhou, Wuxi, and Changzhou. Key aerospace component materials are also primarily produced in Jiangsu. The province's industries tend to focus more on the B2B segment and advanced manufacturing. That's why I believe Jiangsu has no reason to underestimate itself.
Nanjing University has always been at the forefront of AI research. It's entirely possible that one of its students will launch a groundbreaking startup in the near future—perhaps someone is already quietly working on something big right now, and the outside world just doesn't know it yet.
China Entrepreneur: The Yangtze River Delta region is known for its strong overall innovation. Why did DeepSeek emerge in Hangzhou?
Liu Qing: From an environmental perspective, in recent years, the Hangzhou municipal government has fostered a vibrant ecosystem for the digital economy, attracting a wealth of talent. It's not surprising that DeepSeek originated in Hangzhou, given the city's strong foundation in digital industries and the presence of internet giants like Alibaba. These sectors create all kinds of spillover effects, including talent and capital.
As for DeepSeek itself, the first factor is resources. High-Flyer, the company behind DeepSeek, is one of the few institutions in China with tens of thousands of NVIDIA GPUs—these are essential physical assets you simply can't do without.
Second, High-Flyer operates in private equity investment. This means, at least at certain stages, the DeepSeek team didn't have to worry about funding; they could focus on their work instead of constantly applying for grants or chasing project budgets.
Third, DeepSeek has developed an excellent recruitment system that draws top talent. I've read that when Liang Wenfeng, founder of DeepSeek, went to recruit, he simply told candidates, "We've got all the GPUs you'll ever need." That kind of promise is a huge draw for people who are truly passionate and determined to do something meaningful.
II. Advancing Integrated Innovation Across the Yangtze River Delta
China Entrepreneur: The Yangtze River Delta is known for its high degree of integrated development. How do you see the division of industrial roles among the cities in the region?
Liu Qing: Integration in the Yangtze River Delta has a long history, and the development of industry here is built on mutual interdependence. For example, the combination of "Sunday Engineers" and private entrepreneurs gave rise to the township economy model in southern Jiangsu. Multinational companies established their headquarters and R&D centers in Shanghai, while locating their production lines in the surrounding areas—this laid the foundation for what is now known as the "world's factory."
(Note: Sunday Engineers (星期天工程师) refers to scientists and engineers, mainly from Shanghai, who in the late 1970s and 1980s used their weekends to provide technical services to township enterprises in the Yangtze River Delta. This group emerged from the gap between rural enterprises' technical needs and the underutilization of urban scientific talent.)
Take Kunshan, for instance: without being next to Shanghai, it likely wouldn't have developed as it has. Conversely, Shanghai's own growth has benefited immensely from the vast industrial base of the Yangtze River Delta. The cities in this region are interconnected and should leverage their respective strengths for shared prosperity.
The mission of the NICE is to drive the integration of science and technology innovation throughout the region. Our goal is to enable the free and efficient flow of all types of resources—especially innovation resources—according to market principles, and to provide a high level of technological support for high-quality development. Ultimately, we aim to foster deep integration of scientific and industrial innovation across the entire region.
III. Strengthening the Role of Enterprises as Innovation Leaders
China Entrepreneur: How can we further empower enterprises to lead innovation?
Liu Qing: First, companies should be the main drivers of innovation needs. Innovation shouldn't be guided primarily by academic papers; instead, it should be led by businesses—deciding what to pursue and how to get it done, especially in engineering-related fields. Second, enterprises should also be the principal source of investment in innovation. Third, enterprises should take the lead in applying the outcomes of innovation.
The 2025 government work report also highlighted the need to "provide institutional support for enterprises to participate in national decision-making on scientific and technological innovation and undertake major science and technology projects." I was genuinely excited to see this included.
In my view, if a company is able to do something itself, it shouldn't rely on the government. Government support should be reserved for challenges that are truly beyond the reach of individual companies.
China Entrepreneur: What's the best way to integrate scientific and industrial innovation?
Liu Qing: In reality, integrating scientific and industrial innovation is a two-way process. The first step is to address the supply of scientific achievements—both in terms of talent and tangible results or technologies. The second aspect is industrial innovation, which needs to be driven by actual demand. As long as a company has good technology and talent, and access to quality hardware, it will be capable of turning those assets into productive capacity, commercial applications, and a real competitive edge in both science and business. This has long been a hallmark of Chinese entrepreneurship, especially in Jiangsu and Zhejiang.