Establishing an interface between public sector applied research and the Chinese enterprise sector: Preparing for 2020

China’s technological capabilities are emerging rapidly. Some argue that the country will become a challenger to established technological leaders in the near future. Currently, however, there is contradictory evidence regarding China’s potential for technological upgrading on a broader scale. By bringing together data on the public research system with evidence from the electronics industry in Guangdong province, this paper will show that many domestic firms continue to depend on foreign technology transfer whereas they have limited access to interest in domestic technologies. It is hence the purpose of this paper to illustrate the current mismatch between solutions supplied by the public sector and the true needs of Chinese firms. Its core argument is that technological development in China is not only suffering from a general lack of innovative capacity, as expectable at this stage of development, but also from an overt dependency on foreign technologies, that, if unaddressed, may impair its future potential for upgrading. We conclude that an increased provision of relevant solutions by domestic applied research institutes is possible in the mid-term but will depend on an improved management as well as on a new funding system that promotes the creation of customer relations with industrial firms.