One of the strategic directions of the economic development of the PRC is the innovation activity of industrial enterprises. A quantitative comparison of the level of economic security of the PRC with other countries of the world is possible on the basis of the Global Competitiveness Index. In 2018, WEF experts have developed a new tool for assessing the performance of world economies — Global Competitiveness Index 4.0 in 2018. It reflects the ability of world economies to compete with other countries in the context of the fourth industrial revolution. Based on GCI 4.0 - 2018, competitiveness is assessed on 12 factors. They are important components of the long-term growth of the national economy and income.The top ten in global economic competitiveness rankings are: 1. United States of America, 2. Singapore, 3. Germany, 4. Switzerland (for five consecutive years leading the ranking of competitiveness leaders), 5. Japan, 6. Netherlands, 7. Hong Kong, China, 8 United Kingdom, 9. Sweden, 10. Denmark. According to the Global Competitiveness Index 4.0 in 2018, China ranked 28th in 2018. The main factors of competitiveness are shown in fig. 1.Exploring the experience of modern socio-economic development of the PRC, one can not neglect to leave the history of its development. The main directions are scientific, technical and innovative development. At the heart of this development is the theory of technological progress by Den Xiaoping. It outlines several theses: science and technology are important productive forces; intellectual workers (including workers in scientific and technological specialties) belong to the working class, and their abilities must be remunerated, as well as the reform of the management of science, technology aimed at the liberalization of productive forces. Figure 1 China’s Global Competitiveness Index 4.0 in 2018[1] From 1975-1978, the incubation phase continued in the PRC. It is related to the implementation of state innovation policy. Its essence was the introduction of direct government orders for research, the purchase of foreign technologies (sets of equipment for industrial enterprises).A feature of the “experimental” stage (1979-1985) is the organization of contract-based cooperation between government agencies, the main institutional sectors not only within them, but also between them. The development of technological dualism (by analogy with the dualism of prices and forms of ownership), and the formation of a multilevel technological system (retaining the features of a combination of traditional and high technology) led to the liberalization of sources of funding for research and development. The partial removal of the state control in the sphere of foreign economic activity allowed the industrial enterprises of the country to independently purchase foreign equipment and technologies. Special Economic Zones (SEZs) are being actively opened to attract foreign capital.The implementation of structural reforms in the period from 1986-1995 contributed to the introduction of a project (grant) system to support the development of science, selection of research institutions.At the stage, which lasted from 1996-2005, there is an increase in GDP science intensity due to the active investment of the business sector. Privatization of industrial enterprises and scientific institutions was carried out. The issue of commercialization of newly created technologies for state educational institutions has been legislated. New forms of direct state financing of innovations are being developed by providing tax breaks for high-tech industrial industries and more.Starting in 2006 and to this day, the main goal of the country’s economic development is to enhance the innovative perception of the use of science and technology. Over 10 years, the cost of innovative development has increased by 21.0% annually. The country ranks second in the world in terms of total funding for innovative development. The share of business spending on innovative developments in China’s GDP is higher than in EU countries. There are more graduates (bachelor level) from Chinese higher education institutions than Japan, Korea, the United States, and Germany combined. The number of scientists and engineers employed in China’s economy has doubled, compared to 2000. The share of China in the indicator characterizing the construction of semiconductor plants has increased by 40.0%, while in the USA - by 8.0%. Chinese manufacturers came in first place in the world in the production of solar batteries, in the manufacture of air power plants, and is also the world manufacturer of lithium batteries. In the short term, China plans to reduce the economy’s dependence on imported technologies by 30.0% and increase the share of high-tech industries in GDP by 60.0%.In recent decades, the number of patents for intellectual property results, including patents for inventions, has increased significantly in the PRC. According to the World Intellectual Property Organization, China is the leader in the number of patent applications filed. In 2016, China’s inventors filed more than 1 million patent applications. Among all the PRC States, it is the only country where patent growth is accompanied by an increase in the share of residents among applicants. This is due to the presence of highly qualified Chinese researchers, the growth of inventive activity, the interest in protecting and commercializing their own developments. For example, over the past 5 years the number of patents in the field of artificial intelligence has increased by 190.0%.[2]Particularly impressive is the number of patent applications in the field of nanotechnology. Over the last 20 years, the PRC has filed 209344 patent applications. This is twice more than in the US, which ranks second in the world in this indicator. In 2016, about 33.0% of the world’s scientific papers on nanotechnology were published by Chinese scientists.The monitoring of industrial enterprises operating in the PRC on an innovative basis shows that they can be classified as follows.·State-owned enterprises (“Haier”, “Lenovo”, “Chery”, “SAIS”, “ZTE”) and private enterprises (“Huawei”, “Galanz”, “Aux Group”, “Geely”).·Large, medium and small enterprises. The share of large innovative companies is 1.0% of the total number of large industrial enterprises in the PRC. A significant number of them were created on the basis of universities and research institutes (“Lenovo”, “Beida Founder” (Beijing University).·State-owned companies - more than 550 large innovative (experimental sites) companies in the PRC. The status of “innovative company of national importance” is conferred by three institutions: the Committee on Science and Technology, the Committee on Control and Management of State Property and the All-China Federation of Trade Unions.·Foreign, Chinese-foreign, Chinese companies and companies that have returned from abroad Chinese specialists.It should be noted that in today’s market conditions, China’s industrial enterprises produce more than 34.0% of innovative products in the world. For the development of innovative enterprises, the Government of the People’s Republic of China creates special climatic conditions that stimulate domestic manufacturers of high-tech products. In addition to tax breaks and subsidies, a system of providing land to enterprises engaged in scientific and technical sphere is used. In terms of area, these parcels of land are larger than necessary for the construction of a factory or factory. In additional territories, companies build homes or hotels, which are then used to invest in SSTD (Scientific and Scientific-Technical Development) and offset factory losses. State-owned banks provide low-interest rates to innovative companies, while local governments repay interest payments and the like.The main acts governing the development of innovative activities are the laws of China on the implementation of scientific and technological achievements, on the promotion of science and technology, on the promotion of medium and small enterprises. In addition, in the field of innovation development in selected sectors of the Chinese economy, the following is approved:·Order of the Office of the State Council of the People’s Republic of China On Innovative Management, Improvement of Service, Formation of New Powerful Drivers of Economic Development, Accelerated Changes of New and Old Drivers of Growth (2017). Measures to shift the economy to new components of growth are envisaged (improvement of the quality of public service delivery, development of mechanisms of control loyal to innovative activity, stimulation of mobility of new production factors; development of mechanisms of support and application of the guarantee system).·Instruction of the Office of the State Council of the People’s Republic of China On Institutional Mechanisms for Investing in Innovative Rural Infrastructure (2017). It is envisaged to create by 2020 a multi-subject financial investment mechanism and an efficient market order for the organization of construction, to unify the system of management of construction of rural infrastructure, to significantly improve itsquality.·Order of the Office of the State Council of the People’s Republic of China On the Development of Innovative Drivers of Growth at the County Level (2017), the implementation of which will accelerate the transformation and modernization of production, the creation of powerful innovative enterprises, the concentration of innovative and entrepreneurial personnel, the creation of specialized sites, industrial sites, industrial sites technoparks, etc.), promoting the improvement of the situation in the social sphere at the county level, targeted support and overcoming poverty through innovative development, increasing popularity and the implementation of on the ground technological innovation programs.·Order of the Office of the State Council of the People’s Republic of China On the Organization of Construction of the Second Stage of Exemplary Support Centers for Entrepreneurship and Innovation (2017) provides for the formation of the second stage of 92 such centers, including 45 territorial (in areas and zones of development of some cities), 26 - in higher education institutions and research organizations, as well as 21 in state-owned enterprises.·Order of the Office of the Central Committee of the Communist Party of China and of the Office of the State Council of the PRC On the Development of Ecological Agriculture Based on Innovative Institutional Mechanisms (2017) provides for the improvement of functional specialization and spatial placement of agricultural objects, strengthening the protection of resources and their economical use, strengthening of protection regulation of the environment in agricultural production areas, protection and restoration of the ecosystem in agriculture, formation of incentive mechanisms and removing restrictions on innovative development.·Communication from the Office of the State Council of the People’s Republic of China On Extending Innovation Support Measures (2017) is to implement the initiative to create pilot zones for the comprehensive promotion of innovative reforms: Beijing-Tianjin-Hebei region, Shanghai, Guangdong, Sichuan, Hubei, Shaanxi, Liaoning in the areas of financial and technological innovations, formation of innovative entrepreneurial environment, involvement of foreign specialists, coordinated development of the military and civil industry.·Instruction of the Office of the State Council of the People’s Republic of China On Active Promotion of Innovative Development and Application of Supply Chains (2017), which is expected to form by 2010 a set of new technologies and models of supply chain development, as well as to create about 100 enterprises-leaders in the global chain of networks supplies.In addition to the existing legislative framework on the territory of the PRC in the field of innovation activity of industrial enterprises, the main priorities for the development of this sector are defined in state programs, the main aspects of which are given in Table 1. Table 1 State Innovation Policy Implementation Programs in China Having analyzed the peculiarities of implementation of regulatory support for innovative development of industrial enterprises of the PRC, which are capable of producing competitive products as a priority for the long term, we should consider:·assistance to the state in the formation of high-tech industries, including in the direction of creating an efficient system of technology transfer;·providing state support in the creation and development of modern forms of innovative infrastructure (clusters, industrial parks, SEZs, technoparks, etc.) in the provinces of the country, which has a network of scientific and technological and industrial enterprises with high scientific and technological potential;·use of existing scientific and technical potential for development of priority types of economic activity (agricultural technologies, biotechnologies, nuclear and space technologies, etc.);·creation of favorable conditions for research in the field of scientific and technological development (chemical technologies and new materials, information technologies, etc.);·improving the regulatory framework in the field of development of scientific and innovative activity in the PRC;·integration into the global innovation sphere.Particular attention is paid to the creation and development in the PRC of organizational forms of innovation that are characterized by the availability of preferential regimes. In particular, this concerns the 5 Special Economic Zones (Shenzhen, Zhuhai, Shantou, Xiamen, Hainan). Under the current regime, the administrations of the zones (governing committees) enjoy the rights of provincial governments in regulating economic development and developing a regulatory framework. In particular, they are independent in borrowing money in the world and domestic credit markets. The placement of bonds abroad is within the limits set by the central government. In doing so, they are responsible for their obligations at their own expense.The limit on foreign investment is set at $ 50 million. USA. The foreign resident’s investment must be at least 25.0% of the authorized capital within the newly created enterprise.As for the enterprises-residents of SEZ, a preferential tax rate for income, five-year “tax holidays” with full or partial tax exemption applies (the first two years - no tax is levied, the next three years - 50.0% of the current rates). By 2008, the preferential income tax rate was 15.0% (for other Chinese companies outside the preferential zone, the rate was 33.0% at that time).According to the announcement of the State Council of the People’s Republic of China On the Transitional Policy of Granting Benefits on Corporate Income Tax Benefits (2007), five-year transition period for new rates of the specified tax was established for the enterprises-residents of SEZ from January 1, 2008: in 2008 - 18.0%, 2009 - 20.0%, 2010 - 22.0%, 2011 - 24.0%, and since 2012 - 25.0%. This only applies to residents who were registered before March 15, 2007 and had previously enjoyed a 15.0% preferential tax rate. As for residents who were registered after that period, since January 1, 2008, a single company for all Chinese enterprises has been introduced. Income tax rate is 25.0%. For residents who have previously used a preferential income tax rate of 24.0% (residents of border areas, open coastal cities), the rate has been increased to 25.0% since 2008.Regarding SEZ residents engaged in industry, manufacturing, repair, and foreign trade, a 17.0% VAT rate applies throughout the PRC. However, VAT and customs duties are not levied on imports of production equipment and materials that are exported by a foreign resident at the expense of their share in the enterprise.Consumer tax (excise tax), personal income tax and other types of taxes in force in the PRC are paid at the same rates as in the rest of the country. According to the decision of the local administrations, export-oriented or high-tech enterprises may be granted non-tax benefits (reduced rate or full exemption from payments for the use of land, water, electricity, gas, Internet, rental of premises, etc.).The maximum lease terms for land for SEZ residents are for: housing construction - 70 years; industrial use, construction of objects of science, health care, education, culture, sports - 50 years; objects of trade, tourism, entertainment - 40 years; comprehensive use - 50 years. The lease is granted after payment of the market value of the plot. Land lease tax is not levied. After the lease expires, the contract may be renewed on an annual basis for an additional charge.SEZ residents have the right to buy property for sale. Real estate tax is paid at the rate of 1.2% of its value, at lease - 12.0% of the rental value.When selling products on the Chinese market, SEZ residents, including foreign-owned enterprises, can act independently or through intermediary state-owned companies. When setting prices for their products, SEZ residents are obliged to take into account the recommendations of local price control agencies. Product prices should match those of other Chinese companies.Five SEZs established on the east coast of mainland China and Fr. Hainan (1980) to attract foreign investment continues to play an important role in the development of the national economy, Table. 2. In 2017, the total volume of their foreign trade increased by 7.4% compared to 2016. It reached a defector of 3.8 trillion. yuan, including exports - up to 2.2 trillion. yuan (+ 5.9%), imports -up to 1.6 trillion. yuan (+ 9.6%). The total share of SEZs in China’s foreign trade turnover was 13.7% (-1%). Table 2 Foreign Trade in Goods Made by Chinese FEZ in 2107 Also, there are 219 state-level techno-economic development zones in China (Beijing, Shanghai, Guangzhou, Tianjin, Dalian, Harbin, Urumqi, Wuhan, Chongqing, Hangzhou, Shenyang, Changchun, Yingkou and other major cities) and high technology. Existing 12 SEZs (Tianjin, Dalian, Guangzhou, Ningbo, Zhangjiang, Haikou, Xiamen, Fuzhou, Qingdao, Shantou, Zhuhai, Shenzhen) and 16 state border cross-border economic cooperation areas (Heiheng, Heinhei), Manchouli, Erlian (Inner Mongolia Autonomous Region), Hunchun (Jilin Province), Dandong (Liaoning Province), Inin, Bole, Tachen, Zimunay (Xinjiang-Uygur Autonomous Region), Ping. Dongxing (Guangxi Zhuang Autonomous Region), Zhuyli, Wanting, Hekou, Linzang (Yun Province) also receive benefits from the state.There are 11 pilot SEZs in the central subordination (Shanghai, Tianjin, Chongqing and Guangdong, Fujian, Liaoning, Zhejiang, Henan, Hubei, Sichuan, Shanxi) in China.In modern conditions of development of the state economic policy of the PRC on an innovative basis its functioning is a function of clusters. It should be noted that in recent decades their formation has been active. During this period, 150 units were created. Clusters are formed under the influence of factors such as: the geography of the potential cluster (its location); sector (based on statistical and documentary data), beneficiaries of financial or regional support (enterprises, higher education institutions, research institutions, etc.). The development of clusters in the PRC by type of economic activity is shown in Table 3. Table 3 Sectoral development of clusters in China The creation of a cluster in the PRC mainly occurs under one of several existing top-down scenarios (creation of advisory and monitoring bodies, cluster development strategies). There is also a manifestation of a mixed type of cluster creation (a combination of two paths “bottom-up” and “top-down”).According to the existing international typology of clusters in China, the following types of clusters are distinguished:·“inactive” or “underperforming” (perform an educational function that is partially used);·“potential” (show some key characteristics, there is a lack of production resources, lack of “critical mass”);·“working” or “over-performing” (self-sufficient clusters that produce a significant amount of products).In China, there are also features of the separation of clusters, based on the features of technological parameters: industrial (engaged in the production of traditional goods); innovative or intellectual (they have a significant share of the cluster’s innovative products, as well as the developed innovative infrastructure).It should be noted that in the PRC, clusters are created at the initiative of the government and the regions as special zones for the development of high-tech industries (automotive, electrical engineering, mobile phone manufacturing). The advantages of high-tech clusters are that they are focused on structural restructuring of the economy and strengthening of competitiveness. However, there are some drawbacks, in particular: most regions are similar in types of economic activity, thereby duplicating and over-investing in similar technologies; lack of preconditions for development in the region (high level of absorption of new technologies, necessary resources, etc.), as well as reduction of the number of jobs.