(Speech by Ambassador Liu Xiaoming at the Imperial College London, 18 Jan 2012)

Sir Keith O'Nions,
Teachers and Students,

People in Britain often say 'last but not least'.

I like this way of saying that you may be last - but you are just as important as any other on a list.

My visit to Imperial College London today is right to be described this way.

Imperial College London is the last G5 elite universities in Britain I have visited.

But your university matches any of the other four - Oxford, Cambridge, LSE and UCL. Your reputation, strengths and innovations are much admired worldwide.

Sir Keith O'Nions has most kindly invited me to speak about China's innovation.

I am very glad to respond to this request. I have been reflecting a great deal on the issue of innovation. I was able to do this in my postings around the world.

As Ambassador in Britain I am privileged to see many parts of the UK and so I continue to compare innovation in UK, China and around the world.

In the UK last year one visit made a particular impact. This was at Cambridge University and its famous centre of Sinology, the Needham Research Institute. It was there that my discussion with the research fellows touched upon what is known as the 'Needham Question'.

In his series of books called Science and Civilization in China, Dr Needham compared human progress in China and the rest of the world. There is a broad consensus inside China and world-wide about his conclusions. These were that for most of the past two millennia China had led the world in scientific and technological innovation. The 'Needham Question' asks why did China stop innovating around three hundred years ago.

In other words how did China lose all the advantage it had gained? Needham lists many fields in which China led the world. The most famous inventions that China gave the world were paper, printing, gunpowder and the magnetic compass. European countries grasped these inventions and greatly improved them. The consequence was that European countries rapidly overtook China with scientific and technological prowess.

On the 'Needham Question' there is no agreed answer amongst scholars both inside China and world-wide. Different conclusions may capture different facets of the truth.

The 'Needham Question' is about what happened to China centuries ago. However, there is another 'Question' related to modern China I would like to introduce to you.

What I am always being asked is this:

'What's the secret behind China's decades of fast growth?'

Naturally, there have been many explanations.

Today, I will give you my answer to the two questions – the 'Needham Question' and 'Fast Growth in China'.

My answer is clear and simple.

It is all about innovation.

This is the keyword to explain China's baffling decline and its rapid rise today.

From mid-14th century to the mid 20th century, China's economic decline was not by accident. A range of factors combined to make it happen.

In the Ming and Qing dynasties China had a closed-door policy. Cut off from the world, this created an illusion inside China about its economic superiority. It created conceit among its rulers. It blinded them to fast and deep changes elsewhere in the world. They were unaware of the innovation driving the economies of Europe and later the USA.

Economic historians have estimated that by 1840 China still accounted for a third of global GDP. But the speed of the industrial revolution in the rest of the world was leaving China further and further behind. China's entrenched and self-reliant economy strangled market forces, trade, and crucially innovation. It brought China to a virtual standstill.

In China the out-of-date feudal civil service examination forced intellectuals to be preoccupied with past literature. It positively discouraged developing insights necessary to meet challenges of their time.

The invasion of European powers drove China to the brink of collapse.

The result was utter disaster for China.

China failed to develop a can-do spirit. Chinese people lost the drive for institutional and scientific innovation. Even worse, this happened when the industrial and technology revolution began to gather greater and greater momentum elsewhere in the world. China's stagnation sped up its decline in relation to rising western powers.

If China lost itself in the dawning of this new world, then how did it manage to find a path toward rebirth and prosperity?

The clearest answers come from the immediate past thirty years of development in China. It will not surprise that innovation is the theme that runs through the answers!

There are six points I want to make.

First, China's reform and opening-up policies were ground-breaking in the history of the world.

The policies responded to the needs of the time and people's aspirations. But, how was this done? The answer was some very innovative thinking and actions:

· China reversed old policies and constructed new mechanisms to propel productivity gains.

· China reopened the door to the world after decades of disengagement.

· China encouraged two-way flow of capital, technology and human resources with the world.

· And China took the reform forward step by step like 'crossing the river by feeling for the stones'.

The reform and opening-up was a policy and institutional innovation. It brought enormous changes to the way Chinese people think. It infused strong vitality into China's modernization drive and transformed the nation.

Second, China built up a socialist market economy.

Chinese people ditched the dogma that the market economy is the preserve of capitalism. This gave market forces a central role in resource allocation. The result was dramatic as it unlocked immense productive potential.

The ground-breaking step led to the creation of a single market nationwide over a short period of time. It was also a starting point toward a sophisticated macroeconomic policy framework.

All these explain China's breathtaking economic rise in the past thirty years or so. The period saw the Chinese economy jump from the 15th place on global GDP rankings to become the world's number two.

Third, joining the WTO in 2001 redefined China's role in the world economy.

China promoted international economic cooperation in new ways. It means that China is more deeply and widely involved in international economic cooperation and competition.

The statistics show how China has helped drive global trade and prosperity.

Ten years on, China has slashed the import tariff rate. China has cancelled all the WTO-inconsistent non-tariff measures such as import quota and certificates. China has liberalized international trading rights and widened market access for foreign investors.

The past ten years showed a rapid rise of China's trade value from the sixth place to the second spot in the world.

On the FDI inflow China tops the table among developing countries. Meanwhile, it has grown to be the world's fifth largest investor country, with an outbound investment growing over 40 percent every year.

China imports an annual 750 billion US dollars of goods. This has generated a huge number of jobs and investment opportunities for its trading partners.

Fourth, China is moving forward with innovation in its political reform.

China is exploring new approaches to run the country. Instead of copying the so called 'western political system', China is developing its own style of democracy. This is tailored to its own national circumstances.

These are some of the innovations:

· China is improving the people's congress system and the multi-party cooperation and political consultation led by the Communist Party of China.

· The legal system is being strengthened with over 200 laws made.

· The life-long tenure of leadership positions has become a thing of the past.

· Smooth transition of Party and State leadership has become a norm in political life.

· Officials are appointed on principles of meritocracy.

· Effective mechanisms have been set up to deliver transparency and accountability. These include open examination, competitive election, and seeking public comments with regular assessment.

· We are using the internet and micro blogs to enrich public interaction. The aim is to bring the government closer to the people.

· We believe in the centrality of the right to survival and the right to development in human rights.

· In China, 'respect and protect human rights' has been written into the constitution and a national human rights action plan has been adopted.

Fifth, China's development has been guided by the vision that 'science and technology are the primary productive forces'.

We have unveiled a strategy of national rejuvenation through science and education. There is a deep commitment to turn China into an innovative society.

The Chinese budget for science and technology continues to rise quickly. In now reaches over 1.5 percent of GDP.

China has built a strong foundation and comprehensive disciplinary structure for scientific research.

In turn, China has also improved research rewards and an intellectual property protection regime. A wide set of incentives have been put in place to encourage innovation.

The number of invention patent grants in China has risen to number two in the world. Furthermore, we produce the second highest number of scientific research papers, with a reference amount ranking eighth globally.

The results of these policies can already be seen. China has world-leading research outcomes in high-temperature super-conductivity, nanotechnology, quantum teleportation and life sciences.

China also achieved breakthroughs in a broad range of major industries, including super hybrid rice, Chinese character laser typesetting, high-performance computer and third generation mobile communication.

China's primary, manufacturing and emerging industries are gaining a stronger innovation capacity. Its high-tech sector is providing new momentum to sustain economic growth.

The Chinese are employing technology innovations in major energy-saving and emission-cutting projects. The best examples include the Beijing Olympic Games, Shanghai World Expo, Three Gorges Project and Qinghai-Tibet railway.

In space technology, our successful manned space missions and lunar probe project have made new contribution for mankind to use space peacefully.

Sixth, China has committed to a path of peaceful development.

Chinese people are deeply aware that preserving a peaceful world and achieving development in China are mutually reinforcing.

China initiated the Five Principles of Peaceful Coexistence in the 1950s. After the reform and opening-up started, China went further. The Chinese government defined peace and development as the theme of the world and called for a new political and economic order.

Today, China's ambition is to achieve world harmony. To do so, my country will continue with these values that are of benefit for all world-wide:

· The opening-up strategy.

· Building mutual trust.

· Shared benefits.

· Equality and coordination as essential elements to build a secure world.

Teachers and students,

China's 33 years of reform and opening-up is an endeavour unprecedented in the history of the world.

At its core, this is a story about innovation and its consequent huge success.

History also shows that success can produce complacency.

Complacency can also be the enemy of innovation.

So China must not slacken its innovation efforts or stand still. Instead, China needs to move on with an even stronger will to innovate.

We will advance institutional innovation.

China's economic, political and social reform will continue.

The government of China has a constant recognition of the need to innovate to unleash the productive potential, free people's minds and fix institutional weaknesses.

China will strengthen its democratic institutions and widen the forms and channels of participation in democracy.

'Put people first' will remain the overarching governance principle. The central mission will be to support and improve people's lives and promote social harmony and stability.

China will push forward economic innovation.

China will tackle those unbalanced, uncoordinated and unsustainable elements in the economy.

To do so, the focus is to shift to a domestic demand-led growth away from export and public investment.

China will restructure its economy and move our industries up the value chain.

A Chinese 'economy 2.0' means we don't need to sell 800 million shirts to buy an Airbus A380 anymore.

China will strengthen scientific innovation.

Chinese R&D to GDP ratio will rise to above 2.5 percent.

Technology will contribute to over 60 percent of economic growth. China will be among the top five countries whose academic papers are most frequently referenced.

China will invest more to develop frontier technologies in information, bioscience, material engineering and space.

A sustainable development strategy is key. So China will seek more progress in new energy development, energy-efficient technologies and clean energy.

These goals require China to produce more outstanding scientists and researchers. It means building top-rate research institutes, high quality universities and globally competitive R&D centres.

To move from 'made in China' to 'created in China', China will build a full-fledged national innovation system.

China will push forward cultural innovation.

One recent box office hit in Britain and America is the film Iron Lady.

Let me quote what Prime Minister Margaret Thatcher, the Iron Lady, said of culture: a country that exports televisions - but not ideas - has no hope of becoming a superpower.

In today's world, culture has increasingly become a weighty component of national power.

China will further enhance its cultural identity with greater confidence. So how will this be done?

China will build on the Chinese cultural heritage and absorb the best of other civilizations. In this way the Chinese people will build up a new culture and a cultural influence that fits well with China's global profile.

The mission is to expand China's cultural influence worldwide. In turn this will secure deeper cross-cultural mutual respect and understanding about Chinese culture.

China will continue its diplomatic innovation.

China will further explore the path toward peaceful development. It will lead by example to break the cycle of power and hegemony. This approach embraced by previous rising powers drew mankind into constant confrontation and conflict.

What China calls for is a spirit of solidarity and a sense of common purpose within the world community.

China supports intercultural dialogues and exchanges. They represent the best chance for building a global partnership to tackle the diverse challenges the world faces.

It will not only buttress China's peaceful development, but also make common development possible for all.

Teachers and Students,

China has a history of rising - falling - and rising again, over the past two millennia.

The decline and rejuvenation of China over the past centuries provide the best proof of the argument for innovation.

I believe that innovation is the soul and spirit of national progress.

Innovation is the driver of a thriving society.

A nation without innovative power can't secure a solid footing in the world.

The motto of the Imperial College London is 'Scientia imperii decus et tutamen' (knowledge is the adornment and protection of the empire).

Let me borrow your motto to give my conclusion about China's success.

Innovation is the adornment and protection of China.

Thank you!