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3 Research Priorities arid Funding Mechanisms Within Chimes overall goal to quadruple total industrial and agricultural output by the end of the c=mry, He main role of biotechnology is to improve human health though advances in agncul~re and medicine. Chinese leaders have Liquefy emphasized that they want to pursue "Bose scientific and technological result that can yield the best and fastest results." They have also promoted Me concept that"economic construction must rely upon science and technology and the latter must cater to He needs of He former." In 1988, an ~nf~mal Among swey was conducted of He People'sDaily, a Chinese newspaper acknowledged as a reliable indicator of government Sinking and policy prionties, in which every article and editorial concerning science and technology also gave prominent mendon to China's economy. Given this ideological framework, it is not sensing Hat current research priorities are strongly biased toward applied lather Han basic research At present, research pnondes are reflected in two major grant programs, the High Technology Program and He Seventh S-Year Plan, and in He four Pant programs adminus~d by NSFC. The resources and allocations of these programs are summarized in Table 1A, and He dis~ibudon of funds between various types of research institutions is described in Table 2. It should be noted that these grants cover only research expenses and minimal (typically 10 percent) overhead. Salaries are paid by the gov~nent administrative agencies Mown as work organizations or danwei) responsible for the institutions where He research is carried out, for example, the State Education Commission (SEDC) for major universities, CAS for its research institutes, He Ministry of Agricultwe, and He Ministry of Public Heals. In comparison, note that glories and overhead typically consume nearly 6

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RESEARCH PRIORITIES AND FUNDING MECHANISMS TABLE 1 China's Biotechnology Funding Programs A. Research Grants I~.~~am Emphasis Fundg Number Median (1987) of Grams G=n~ (1987) High Technology Applied projects in 30 100 1.0 (3_5)b Program a~cul~e, methane, and pit engineering Seventh Applied prods 20 108 0.2 (4) S-Year Plan NSK: Basic science 10 326 0.03 (3) B. Key laboratories lobotomy Emphasis Total Fundinga (1984-1988) Jiangmen Single Cell Food processing 60 Protein Biotechnology Base Shanghai Center Downs~n processing 57 of Biotechnology (no designated product) K' y laba~atones (ll) Reseal and fig 55 nit lions of yuan O.71 yuan = IJS$13. iValues m p~uheses are giant durations (in years). Secludes only ecus for bio~nology and closely rated fields. For fatal biology expendi~s, see Table 3. TABLE 2 Distribution of Research Funds by Type of Research Institution (in percent) P - ~ Agna~ral and Un~versmes MedicalCdlegeg Academies Other High Tedhnology 22 20 38 20 program Seventh 60a 40 S-Year Han NSFC 63@ 37 7 . . Values are for uraversines and agriculmral insii~tes and medical colleges combined.

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8 BIOT&~OLOGY IN ClIINA 80 percent of allocate grant funds in the United States. ~ shore a much higher percentage of Chinese grant funds are spent on research. The amount of funds Cat can be converted to hard currency is variable from grant ~ grant, and it is dependent on complex arrangements win the granting agency and institute adm~s~tors. HIGH TECHNOLOGY PROGRAM AND THE CHINA NATIONAL CENTER FOR BIOTECHNOLOGY DEVELOPMENT Funds for the ~gh Technology Program me allocated directly by SSTC. They are administered through CNCBO, a purely a~ninis~adve body that was founded in 1983 at the sllggesdon of a group of eight visidng C}~inese-American scientists headW by Ray Wu and Shain~ow Kung. In 1986, We're 6 3 Plan" mandated CNCBD ~ spend approximately 30 million yuan. per year on highly applied projects in the areas of agriculture, medicine, and protein en~eenng. Grant proposals are peer reviewed by a separate subcommittee in each area and approved by an 11-member panel whose members are select directly by SSTC. Grants are awarded for 3 to 5 years and He reviewed annually. Because of He highly focused nature of this program, the individual grants are by far He largest in China, typically in He range of 500,000 to 2 million yuan for 4 years. In 1987, 100 grants were awarded out of a pool of 500 applications. The distribution of grants according to subject area was 40 percent for agriculture, 40 percent for medicine, and 20 percent for protein engineenng. These grants were approximately equally distributed between CAS, universities, and medical and agricultural sensates. The center is headed by Chief Engineer Liu Yonghui, who is assisted by Deputy Chief Engineer Xu Chengman. Scientific leadership is provided by Hou Yunde' chief scientist of the China National Expert Committee for Biotechnology Development and director of He Beijing Institute of Virology. The original concept was for CNCBD to coordinate all of China's biotechnology activities and to establish research centers in Beijing, Shanghai, and Jiangmen (Guangdong Province). As it now stands, however, CNCBD is primarily responsible only for the High Technology Program. The idea of a research center in Beijing has been abandoned, the Shanghai center is still under construction, and the Hangmen Me has been left to its own devices (see Chapter 4~. Additional responsibilities include consultation and promotion activities, management of experimental animals and equipment, and supply procurement. The CNCBD is staffed by 45 people and has an annual operating budget of 300,000 yuan. Part of these funds are supplied by import~xport companies that *The aficis1 rate of exchange is 3.71 yuan to US$1.

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RESEARCH PRIORITIES AND FUNDING MECHANISMS 9 CNCBD operates in Beijing, Hong Kong, and New York. Their primary export is e~enmen~l monkeys. Although He High Technology Program grants He peer reviewed, they are, in fact, more like contacts Han Wes~n-s~le investigamr-inidated grants. This difference stems hum He fact that essentially all of He grants support projects Hat are preselected though a complex negotiation process involving He SSTC, CNCBD administrate, and members of He China National Expert Committee for Biotechnology Development While most Chinese scientists feel that He High Technology Program grants are fairly reviewed, Here are Hose who signal their reservations by quoting a Chinese proverb, "Pavilions new the water receive the most moonlight" SEVENTH 5iYEAR PLAN (1986-1990) In He Seventh 5-Year Plan, tom1 investment in biotechnology and closely related fields is approximately 100 million yuan, or-20 million yuan per year. These monies are provided through CAS, SEDC, and the Ministries of Agriculture, Public Heals, Medicine, and Light Industry. The Seventh 5-Year Plan solicits and funds research in the areas of basic genetic engineering, plant genetic engineering, chromosome engineering, cell engineering, enzyme engineering, downstream processing, end bioengineenng products. In 1987, 108 projects were approved and supported from a pool of 150 applications. The average grant was 200,000 yuan, although certain key projects were funded up to 2 million yuan. Thus, the Seventh 5-Year Plan grants generally have been smaller than High Technology Program grants but substantially greater than NSFC grants (see below). The Seventh 5-Year Plan grants are administered by CAS. Scientific direction is provided by Mung Keqiang, director of the CAS Expert Committee for Biotechnology and a professor at the Beijing Institute of Microbiology. Grants are reviewed by a single committee of 24 scientists and administrators. The high percentage of accepted applications would indicate a review process that is less rigorous than He one applied at CNCBD or NSFC, ~ He extent that it reflects primary concern about an application's conformist to goals set by the expert committee. NATIONAL NATURAL SCIENCE FOUNDATION OF CHINA The NSFC was founded in 1986 expressly to support basic research In China. It is somewhat similar to He U.S. National Science Foundation (NSF) in Hat it funds, in addition to biology, research in a wide varier of disciplines such as mad, physics, and geology. In 1987, He Department of Biological Sciences received 3,507 applications, of which 979 were funded following the peer review

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10 BIOTECHNOLOGY IN CHINA process described below. The grants were distributed among fob types of awards, as shown in Table 3, and are summarized here. General Awards ~ 1987, Me standard general award was 30,000 yuan for 3 years, with little variation between individual grants. Universities and colleges received 63 percent of these grants. Nombly, 67 percent of the awards were to investigators between 36 and 55 years of age. Key Projects ibis program, =dated in 1987, supports the ongoing projects of reputable investigators that are judged to have a high probability of success and benefit ~ We Fist year, average funding was 40,000 yuan annually, or four times higher Han Hat for He general awards, and 61 pent of He investigators were from academic institutions. Frontiers of High Technology This program, also initiated in 1987, is designed to support high technology fields such as biotechnology, information sciences, and aerospace sciences. Although these areas represent more applied science, this program consii~tes only ~ percent of the NSFC grant budget. The average grant is only slightly higher Han that for general awards. Young Scientist Awards This program is designed to support young scientists (under 35 years of age) who He starting their first independent projects. It is hoped Hat He program will entice scientists who have received Heir Ph.D.'s abroad to return to China To this end, an applicant is allowed to apply for this award while he or she is living in another counny. In 1987, 29 percent of the recipients had received mining outside of China Ale concept for NSFC grew out of He CAS Science Foundation, which was crmted in 1982 in order to award CAS research grants selectively. The NSFC adopted a peer Renew system directly modeled on Hat of NSF in the United States. As Chows first Her review granting system, it represented an important step in modeling and improving funding mechanisms Hat has come to be widely regarded by Chinese scientists as a fair and unbiased method for allocating He scare funds available for basic research.

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RESEARCH PRIORIT ES AND WADING M=H^ISMS TABLE 3 Biology Grants of He National Natural Science Foundation of China 11 Type ~ Award Funds Median Percentage of Total (1987)~ Grants Biology Funding NSFC Awards General awards 24.5 0.03 (3)C 83 3Q6 Key projects 2.0 0.(14 (1) 7 3.4 Frontiers at 0th 2.14 0.045 (3) 7 21.9 Penology Young scientists Q75 0.035 (3) 3 21.9 Ed millions 0! yuan. The lemainirig percemage of awards were given for non~iology-reJated I. CValues in pa~en~eses are grant durations Dm years). After4 years of provisionaloperadon,NSFC was institutionalized as anadonal organization administered directly by He Sme CounciL The governing body of NSFC is an executive council consisting of 25 members appointed by He State Council. Adminisuadve leadership is provided by C~innan Tang Aoqing, Executive Vice Chairman Hu Zhaosen, and four vice chainnen. Ibe total 1988 budget for NSFC was 120 million yuan, representing a 20 percent increase Tom 19~7 and a 300 percent incremental increase compared with average funding levels from 1982 to 1985. The NSFC publishes an annual list of research goals Hat are prioritized on a sliding scale. However, most of the goals, especially in biology, are broadly stated, providing ample room for initiative by individual investigators. Grant applications are evaluated using a year-Ion", five-step process: 1. Approval by Be sponsoring institution. 2. Preliminary evaluation by the appropriate department of NSFC. Reasons for immediate rejection include concurrent funding by another agency, lack of appropriate laboratory facilities, unqualified principal invests, lack of progress Tom He previous grant period, or inappropriate subject matter. 3. Solicited peer reviews by Tree to seven experts in He specialty area of the application. The reviews may include recommendations for modification of the proposal (More than 10,000 scientists helped to review grants last year.) 4. Review by a panel of approximately 10 members for each program area. (In 1987, there were 41 panels comprising 488 scientists selected by NSEC from universities [51 percents, CAS [22 percent], and over research institutions [27 percents. The panel members evaluate the peer reviews and suggest a funding pnonn,r. 5. Approval by Be executive council.

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12 BIOTECHNOLOGY IN CHINA The NSFC also administers the National Science Awards, which were established in 1956 to recognize outstanding achievements by Chinese scientists. Although they were given only twice between 1965 and 1987, the awards are now being presented biannually. In l9SX, Were were 777 nominees, of whom 180 were selected for awards: 11 fast prizes of 20,000 yuan, 39 second prizes of lO,OOOyuan, X9 third prizes of 5,000 yuan, and 41 for prizes of 2,000 yuan, for a total expenditure of 1.13 million yuan. EVOLU ICON AND CONSEQUENCES OF THE NEW FUNDING MECHANISMS The Me programs just summarized represent a radical alteration in both the levels and mesons of funding biological research in China Just 5 years ago, total e~endi~res on biotechnology and red fields were less Han 5 million ynan per year and were spent almost exclusively by CAS through a noncompetitive allocation system. Now expenditures are greater than 100 million yuan per year and are more evenly distributed among various types of research institutions through competitive grants. In the evolution of the new funding policies, Free trends have become clear the declining role of CAS, decentralization of the Wanting process, and strongly increase emphasis on applied research. The declining role of CAS, the few major ~end, is signalled by its decreasing direct Finding. In the past, CAS was primarily responsible for all of China's basic biological March and much of the applied research as well. However, concomitant win He greatly increased funding for the Free new grant programs, the State Council and State Planning Commission decided to decrease direct funding for CAS according to the following formula: for basic research, a 6 percent decrease per year over 5 years ~ a fee level of 70 percent; and for applied research, a 20 percent decrease per year over 5 years to a final level of zero. The only area Hat will be inched is research on China's natural resources. At present, CAS's total expenditures on biological research are 7 million yuan per year, of which 1 million yuan is eannarked for biotechnology. When seen in comparison with die figures present in Table 1A, this represents only 1.7 percent of total biotechnology research expenditures. After He planned 5-year cuts and inaction have taken Heir toll, CAS direct expenditures will account for an even smaller proportion of total biology and biotechnology funding. In addition to these decreases in research funds, CAS is also under strong pressure to reduce He size of its a~ninisuative staff and to Deeze He number of research waders. In order to achieve the lamer aim, students and staff members studying abroad are counted as still occupying a CAS position, even in cases where researchers have already long overstayed Heir originally planned visits. Not surprisingly, CAS administrators have bitterly opposed He new funding policies. In some cases, such as He idea of establishing a biotechnology center

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RESEARCH PRIORITIES AND FUNDING MECHANISMS 13 under CNCBD, their arguments have been successful. In over cases, such as the formation of key laboratories at universities, their protests have been ignored. While many of the CAS arguments can simply be attributed to fear of competition, others are well founded In particular, basic research is being short-changed both in this reorganization and by underfunding NSFC's mandate to support this type of research. As pointed out by Wang YingLdi, director emeritus of He Shanghai Institute of Biochemistry, it would have been difficult or impossible under current policies ~ have carried out one of China's greatest scientific achievements: the total synthesis of insulin A second major trend has been the effect of the new granting process on We decentralization of research units. Previously, each research organization was funded exclusively by allocations from its ~nwei which, in turn' were set by the State Planning Commission. In the past, academic institutions received virtually no funds from their damvei (SEDC) for research. Now each organization, be Hey research institutes or university-based science departments, is expected to compete openly for funds from He three major granting organizations and other sources such as provincial governments and companies. As indicated in Table 2, the big winners in this game have been the universities and colleges, which now receive roughly half of all funding. The new policies have resend in a hitherto unprecedented degree of autonomy bow for research instate administrators and for individual researchers. The one constant is that Be amount of funds allocated to each major program is still determined by the State Planning Commission through its Department of Science and Technology Planning, which is headed by Cal Dalie. The third major trend concerns the effects of the stated aim of bode the High Technology Program and the Seventh 5-Year Plan to promote highly applied research that will become self-supporting within a show period of time. As elaborated in Chapters 6 and 8, this, for the most park has involved the direct copying of Western research results with little attention to innovation, long-term development, or technology mat is slitted to China's unique circumstances. The only formal support mechanisms for basic research are grants from CAS, which as noted above are Aridly diminishing, and from NSFC. While NSFC controls a substantial amount of money, it is Spread out among a large number of grants so that He usual grant of 30,000 yuan for 3 years is insufficient to equip or run a laboratory. The practical result is Hat only those investigators who already hold a High Technology Pronoun or Seventh 5-Year Plan grant can effectively use Heir NSFC money to carry out basic research In Act, many of China's top researchers do just that by diverting funds from goal-oriented grants to more basic research. ~ many odler instances, however, poor applied research by unqualified investigators is being supported at the expense of good basic research by more qualified investigators simply because it is considered to be practical in terms of addressing He pressure to generate revenue-producing results. Clearly, this trend

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applied Debauch ~ motived byI~Jidod poUcycons _ dons ~ bather . In condense ~ sciends~ vied duhag the o~Juadon Dip wage MOSS elm_ ~ snag of hosed fdading A~ base Debauch. G1vcn go T~:VUx~ paucity of~ny _ b suppon~ilisnot _ ing day sciends~ have ~~ Wide ads d6~gn~nenl and have scqqdesced m ~en~I~J1ciesbecause am.