The article argues that China has achieved a remarkable progress in promoting technology absorption and innovation over the past decade. China today spends 2.1 percent of GDP on R&D, more than the OECD average. By 2020, China together with the US will be responsible for more than half of the world’s R&D spending. These two countries may thus largely de-cide about the speed and direction of mankind’s technological progress. Despite the pro-gress, however, China still faces several challenges to becoming a global technological giant.
To face these challenges, China would be well advised to increase the quality of innovation outputs, strengthen efficiency of public support for innovation, further strengthen intel-lectual property rights, and help enhance managerial practices of Chinese firms.