A COMPARATIVE STUDY OF KNOWLEDGE-BASED ECONOMY DEVELOPMENT BETWEEN CHINA AND THE USA

In this paper, the author analyzes the gap in knowledge-based economy development between China and the United States, explores its cause, and gives some constructive suggestions to promote Chinese knowledge-based economy development. The paper has three parts. The first is a brief literature review. The author concludes that at present the indicator model is more proper than the econometric model and statistical framework. In the second part, the author develops an indicator model with four dimensions: knowledge input, human capital, ICT application, and innovation performance. Each dimension has several different indicators. The Analytic Hierarchy Process (AHP) is used to give those indicators different weights and to compose them into a compound index in all hierarchies. On the basis of the above methodology, the third part calculates and compares the overall index and four dimension index differences of the development of Chinese and American. knowledge-based economies. There is a large gap between China and the United States. The dimension of innovation performance embodies this gap. The next dimensions are human capital, knowledge input, and ICT application in turn. The author then discusses reasons for such a great lag between China and the United States. The conclusion sums up the main challenges and puts forward some suggestions to promote the Chinese knowledge-based economy development.


INTRODUCTION
In the last stages of the 20 th century, the knowledge-based economy proposed by OECD (1996) became a noticeably prominent event in the domain of economic theory.As one kind of new technical-economic paradigm, the knowledge-based economy emphasizes the role of knowledge, innovation, and information communication technology, which can help economists explore economic mechanisms hidden in economic growth, find new policies to promote economic development, and even help people understand why the poor and developing countries are poor and the rich and developed countries are rich (Word Bank, 1998).In recent years, China's fast growth has been facing more and more pressure from resource shortages and environmental pollution.To develop a knowledge-based economy becomes the inevitable choice.On the other hand, economic development demonstrates the same effect as one's consumer behavior.The United States has become the only political, military, and economic superpower, which is inseparable from formidable technological innovation.Since the 1990s, regarding the United States as one successful model of knowledge economic development, many countries including China are studying the United States' innovation policy and even copying its economic development model.Therefore, the purpose of this paper is to compare the Chinese and American Data Science Journal, Volune 6, Supplement, 9 July 2007 knowledge-based economy developments, to discuss the reasons that the Chinese knowledge economy falls behind the American knowledge economy, and to give some polite suggestions to promote Chinese knowledge economic development.

A BRIEF LITERATURE REVIEW
The report that proposed a knowledge-based economy, OECD (1996), measured the knowledge-based economy in five interconnected areas: knowledge investment, knowledge stock and flow, knowledge output, knowledge networks, and knowledge and its study.In fact, it is only a measurement framework because it lacks concrete statistics and data indicators.In order to "analyse trends in the knowledge-based economy" with the latest internationally comparable data, to "capture the changing relationship between science, innovation and economic performance so that policy makers may make informed decisions, set priorities and address the challenges of the knowledge-based economy" (OECD 2001), OECD has designed an index system for knowledge-based economy measurement, including the influences that knowledge has on economic development, on economic globalization and technology, and on international competitive power, with 42 indexes together (OECD, 1999).
In the biennial report, "the OECD Science, Technology, and Industrial Scoreboard," indicators changed unceasingly, which also reflected that the OECD still was in the exploration phase of knowledge-based economy measure research.Influenced by the OECD, the World Bank (1998) has developed a knowledge appraisal matrix to analyze the validity of knowledge promotion development (Table 1).It indicated that to develop a knowledge-based economy, a country needs to strengthen its ability to acquire knowledge, create knowledge, communicate knowledge, and use knowledge.At the same time, it also needs to promote their interactivity with encouragement, mechanisms, human capital, and skills and information infrastructure.Compared with the above research, a new economy measurement project carried out by the Progressive Policy Institute (PPI), which is supported by the American Democratic Party, not only develops a new theoretical method but also gives some positive measurement to the knowledge-based economy development in American states and cities (PPI, 1998(PPI, , 1999(PPI, , 2002)).Applying this method, Chinese scholars Li Jingwen (2000) and Hong Mingyong (2001) brought forward their own knowledge-based economy measurement index system.Meanwhile, Professor Yang Kaizhong (2004) , 2002).This research effort has only announced a rough draft at present and is inviting scholars from all over the world to participate in its discussions.Although the ABS has provided a new mentality and a general survey, the existing research demonstrates that the index system method is the dominant one.Just as the Bureau of Economic Analysis (BEA, 1999) pointed out, the present economic measurement system based on the NIPA has many flaws.However, it is more difficult to find a full-scale measurement for knowledge-based economic development.Therefore, the index system method perhaps is one of the best choices to measure knowledge economic development at present.In this paper, we also applied that method.

Index systems of measuring knowledge-based economic development
The OECD (1996) once stated that the knowledge-based economy is a kind of economy that is established on knowledge and information production, assignment, and utilization.For this somewhat confused description, there are different explanations in academic circles; it is too difficult to distinguish whether any is right or wrong.output diffuse along many directions, with numerous potential receivers.Fourth, there are many output types, but some do not suit quantitative analysis, some cannot be measured directly, and some cannot be substituted for.
In fact, these problems exist in the measurement of knowledge output.Compared with output, the connotation of innovation performance is narrower and has a large overlap with the connotation of output.Therefore, output and innovation could be put together to denote the changes of output dimension.
As one kind of new technical-economic paradigm that technological innovation promotes, knowledge-based economic development must inevitably give rise to a new knowledge-intensive technical system, an abbreviated Data Science Journal, Volune 6, Supplement, 9 July 2007 S410 knowledge technology system.Obviously, there are some corresponding relations between a technology system and technology.The knowledge technology system development also manifests itself in the knowledge-based economy development, and therefore in this paper, it is also taken as one dimension of measuring knowledge-based economic development.In order to further decompose the indictor system into a simple intelligible index, we use three dimensions to construct an index system to measure knowledge-based economic development (Table 2).respective weights, the sum of which is 1, are evaluated according to their importance.Third, when there are three indicators or more, weighing can be evaluated according to their respective importance with the Analytic Hierarchy Process method (AHP), using equations 1-3.

∏ ∑
Here, κ 1 & κ 2 are the corresponding weights for two indicators, and w i separately are weights for the components in those two parts.

Chinese and American knowledge-based economic development indices comparison results
On the basis of Table 2 and 3).

Sino-American knowledge-based economic development analysis
From Table 3, it can be seen that there is a large gap in knowledge-based economic development between China  Obviously there are few valuable and original innovations in China.Second, China's innovation contribution is also weak.The related index only reaches 27.6 and the productivity index is only 2.72 compared to the 109.8 of the United States.Even discounting the exchange rate factor on Chinese productivity that underestimates influence, the lack of innovation might still explain why China's productivity is extremely low.There is no innovation or even innovative application in many manufacturing sectors.On the other hand, because China has a massive inexpensive labor force, the labor-intensive industry and high-tech manufacturing industry had a chance for speedy growth.Thus the Chinese competitiveness index and structure effect would still show good performance.This indicates that China's strategy of attracting advanced technology and promoting industrial reformation has been successful.

CONCLUSIONS AND SUGGESTIONS
Looking at the above results and analyzing according to the disparity size, the disparity between Chinese and American knowledge-based economic development manifests itself in three dimensions: knowledge technology system development, knowledge innovation performance, and knowledge innovation input.
Looking at the innovation angle, the dimension of knowledge technology system development involves Similar to the description of industrial economy, perhaps knowledge-based economy does not need a strict definition.This article merely takes the knowledge-based economy as one kind of new technical-economic paradigm.Technological innovation is the driving factor for economical paradigm reformation and pushes a country's transformation from an industrial economy to a knowledge-based economy.Therefore, one ideal way to estimate and compare the knowledge-based economic development of different countries is based on the innovation process, to operate on the causal relation of two dimensions, that is, innovation input and output.Innovation input factors already include knowledge investment and non-knowledge investment.The latter often refers to labor and capital input.Obviously, knowledge investment plays the main role in affecting knowledge-based economic development.As for output, the counterpart of knowledge input is knowledge output.OECD once used R&D density and technical profit rates to characterize this.Because the conception of knowledge output is confused and difficult to define, this way is not satisfactory.Geisler (2000) stated, "It is difficult to measure the output of technology activities because it is difficult to give them clear definition."He has enumerated four major problems in measuring scientific and technological output activities: First, some kinds of outputs, especially those in the later part of the innovation process, are difficult to describe.Second, the process of scientific and technological activity is full of complexity and diversity.Third, science and technology

Figure 1 .
Figure 1.Knowledge-based economic development indices synthesis process

Y
the above discussion, especially equations 1-3, we calculated the respective knowledge-based economic development indices of China and the United States.Because there are only two sample countries, in order to establish the reference system, we needed to give each explanatory indicator a valve value, consisting of a maximal value and a minimal value.The valve value referred to the knowledge-base economic development of America, Europe, Japan, Canada, Australia, New Zealand, Israel, and Singapore in 2000.The maximum value adopts a higher value, not necessarily always the highest value.On the other hand, there is an effect in different countries' economic development similar to the demonstrated effect in consumer behaviors.All the countries listed above are relatively in the lead in knowledge-based economic development.Since the 1990s, the United States has been the knowledge-based economic development model.The United States became the only political, military, and economic superpower in the world.This fact is inseparable from its formidable technological innovation ability.Including China, other countries are studying the United States' innovation policy in order to learn its economic development pattern.Therefore, the selection of a valve value referring to the above countries is scientific and logical.Taking R&D intensity as an example, this index's highest value in the above countries was 4.0 (Sweden) in 2000; the next was 3.40 (Denmark).The same indicator value in the second group of countries lay between 2.6-3.0,including Japan (2.98), the US (2.72), SouthKorea (2.65), Iceland (2.77), and Switzerland (2.63).Therefore the maximum value of the R&D intensity indicator is taken as 3, and the minimum value is taken as zero.Other indicators' valve value selections are X n and its weight W n , Volune 6, Supplement, 9 July 2007 made in a variety of ways.Based on the above discussion, the knowledge-based economic development indices of China and the United States in 2003 are calculated as follows (Table and the United States.The knowledge-based economic development index of the United States reaches as high as 91.4.Based on the explanation of the indicator valve value selection principles, this is also sufficiently explained even if it is a developed country.The United States is also the leading country in knowledge-based economic development.Compared with the US, obviously China's 36.07 index is very low.According to the knowledge-based economic development index score, each national knowledge-based economic development can be divided into six different levels: The dormancy stage (0-15), the germination stage (15-30), the start-up stage (30-45), the under-developed stage (45-65), the pursuing stage (65-85), and the leading stage (above 85).In this case, China's knowledge-based economic development is still in the start-up stage.
innovation diffusion and application.The dimension of knowledge innovation performance involves innovation output and efficiency.It is indicated that, besides the difference in input, the main reason for the large differences between China's and America's knowledge-based economic developments lies in China's slow innovation diffusion and weak innovation performance.These two causes are the weakest links, I think, in Chinese knowledge-based economic development.Looking at the policy-making angle, what should be done to promote Chinese knowledge-based economic Data ScienceJournal, Volune 6, Supplement, 9 July 2007

Table 1 .
at Peking University measured the knowledge-based economy development level in Chinese provinces.Knowledge-based economy development appraisal matrix

Table 2 .
A knowledge-based economic development measure system based on innovation process

Table 3 .
Knowledge-based economic development indices of China and the United States in 2003

Table 4 .
Looking at the 2 nd level index, the biggest disparity between Chinese and American knowledge-based economic developments lies in the knowledge technology system development index, respectively 24.25 and 91.52, a difference of 67.27.The reason for this is that China's ICT infrastructure is also very weak, and ICT applications are not popular and are at a quite low level in particular.From Table4, the disparity in ICT infrastructure and ICT applications between China and America is easily seen.For example, in 2002, American computer intensity (computer numbers per thousand persons) and telephone intensity (household telephones and mobile numbers per thousand persons) were respectively 23.8 times and 3.5 times those of China's.B2C, which is involved in computers, networks, communication, finance, enterprise, and individuals, is a typical comprehensive commercial application.America's B2C share accounts for 1 percent of the whole American merchandise retail value, but the Chinese B2C can almost be ignored.According to a survey made by the China Network Information Center (CNNIC), over 30% of Chinese enterprises do not know how to deal with e-commerce or are even aware of e-commerce.The disparity in ICT between China and the United States can be seen throughout Table4.Here more detail is needed to explain why Chinese ICT expenditure as a percentage of GDP is relatively higher than in the United States.On the one hand, China's low-income level drives up the relative ICT expenditure share.On the other hand, the number of ICT original innovations in the United States is much greater than in China.ICT expenditure is mainly spent for the United States' own technology, which underestimates their ICT expenditure share of GDP.Because of its low technical innovation level, China spends a large surcharge for its internal ICT consumption, thus overestimating its ICT expenditure share in the GDP.That said, there is a great disparity of original technical innovation between China's and the United States' knowledge-based economic development.Comparison of certain Sino-American ICT applications The second reason for the knowledge-based economic development disparity between China and the United States lies in technical innovation input and innovation performance.Those two indices are respectively 54.65 and 51.38.Looking at 2 nd level and 3 rd level indices, the main cause of the lower Chinese knowledge innovation investment index is the low level of research and investment ability.Compared with the same index of 95.00 for Data Science Journal, Volune 6, Supplement, 9 July 2007 expenditures is rare in the world.
American research intensity was seven times that of China's.Chinese deficient investment excessively favors higher education.However, China's gross tertiary enrollment ratio is only 16%, far less than America's 83% in 2002.On the other hand, the expenditure ratio per student among Chinese college students, secondary students, and primary students is 13.6:1.9:1,while America's is 1.3:1.2:1.The lopsided input structure seen in China's

Table 5 .
Comparison of certain knowledge innovation investment indicators between China and USACompared with the innovation investment in China, America's knowledge innovation performance dimension is much greater.First, Chinese innovation performance is very weak.For example, the Chinese patent output index only reaches 27.18.Of the patents granted by the State Intellectual Property Office of the People's Republic of China, only 16.2% were granted to native citizens and enterprises.Most of these are for utilities and design.