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Moreover, Chinese analysts and policymakers have become increasingly frustrated with the level of spillover
and technology transfer from Western R&D. Some critics claim that foreign firms “crowd out”
domestic firms in the market for highly skilled labor, monopolize technology standards, and thwart
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technology transfer and knowledge spillovers.3 Reflecting an aggrieved nationalistic feeling about this relationship, articles in the Chinese press complain that foreign companies own the technology used to enter Chinese characters—“the embodiment of five thousand years of Chinese civilization,” in the description of one Chinese commentator—on a cell phone keypad. So with each of the tens of millions of cell phones sold in China, a payment is made to a foreign company for the use of character input technology.4 The Chinese phrase for indigenous innovation, zizhu chuangxin, was introduced in a 2006 state-issued report, “Guidelines on National Medium- and Long-term Program for Science and Technology Development.” The report contained a mix of top-down, state-directed policies alongside bottom-up efforts meant to foster technological innovation. The top-down measures echo China’s old state planning system. They include raising the share of GDP dedicated to R&D to 2.5 percent by 2020 from 1.5 percent today, and investing in eighteen science and engineering “megaprojects”, including initiatives to develop nanotechnology, new drugs, high-end generic microchips, and aircraft.