Introduction

The PRC is a relative latecomer to modern industry and-by most standards- a highly successful one. Evidently, the PRC's market-oriented reforms have, thus far, produced remarkable results. The PRC's manufacturing sector has enjoyed high and sustained rates of growth, with shares of GNP and exports rising sharply. The emergence of dynamic small and medium enterprises (SMEs) is, above all, one of the most important outcomes of the entire reform process. SMEs are the major growing force behind the PRC's prominent success in terms of contribution toward the national GDP (accounting for 40%), scale of assets, diversification of products, and the creation of employment. Despite their significant contribution to the PRC's economy, SMEs tend to be neglected in offcial thinking about technology, although they now do rate a mention in the current long-term plan.

This paper will shed light on these issues by proposing a strategy that is oriented toward small and medium-sized firms. In particular, we make the case for a network cluster strategy that enhances the linkages between existing actors, while building on the PRC's existing NIS. We consider this strategy as particularly suited to the PRC at this stage in its development and transition, since the collective nature of the cluster may help resolve the problem of the "missing middle."¹

The rest of the paper is structured as follows. The next section presents a basic analytical framework for rapid industrial and technological catch-up based on the SME sector. Section 3 analyzes the PRC in terms of its internal strengths and weaknesses, within the framework of its national innovation system. It also includes a background discussion on the current status of SMEs in the PRC, as well as its industrial policies as they pertain to the SME sector. Section 4 then looks into several general global trends. These trends and economic imperatives are viewed as potential external threats to the PRC. In response to these threats, it is necessary that the PRC actively harness national policies as a strategic tool for continued progress. This section is followed by a discussion of the opportunities for future development, and in particular policy ideas for strengthening the PRC's national innovation system (NIS) (Section 5); much of the section's strategic directions draw on the analytical framework of Section 2. Concluding remarks will be drawn in the final section.

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1. Christian Louboutin
   (posted 09 June 2010 / 01:03:10 AM)
   
   Thanks for this useful article.