With the 14th Five-Year Plan, the Chinese government has set itself the ambitious goal of creating a more innovation-based economy and becoming the world’s leading nation in science and technology by 2050. To this end, gross expenditures on research and development (R&D) are targeted to grow by at least seven per cent annually between 2021 and 2025. There are plans to stimulate more R&D in companies through extensive subsidies and other policy incentives. However, this is not the end of the story. As a recent study by ZEW Mannheim shows, misappropriation of subsidies has been widespread in China in the past and has long stood in the way of efficient use of state funding. Therefore, as early as 2006, a seminal change in China’s innovation and industrial policy took place and numerous measures were introduced to improve funding instruments and curb their misuse. “Should such measures become even more effective in the future, China will turn into an increasingly innovative competitor on the world market and at the same time become more attractive as an R&D location for foreign companies,” says Dr. Philipp Boeing, China expert at ZEW, commenting on the results of the study.