By Anil Gupta & Haiyan Wang
AS the era of China as the world’s low-cost factory comes to an end, innovation is now the most important element in the state’s development strategy.
China presents itself as a unique experiment in the power of the state to help the economy become more innovative. However, our analysis suggests that the results have been mixed so far. The state’s single most important role has been to ramp up the “input side”—aggressively. In 2015 China’s share of global research and development expenditure, at 20 pecent, was well above Japan’s at 9 percent or Germany’s at 6 percent, and second only to that of the US at 26 percent.
China’s record on the “output side” has been much less impressive. From 2010 to 2015, the share of China-origin patents among all patents granted by the US Patent and Trademark Office (USPTO) was only 2.2 percent. Over the same period, the share of USPTO-granted patents for inventions originating in Japan, Germany and South Korea was 18.8 percent, 5.5 percent and 5.5 percent, respectively.
Some of the government’s policies, ostensibly designed to help China become an innovation giant, are themselves a major impediment.
First, the bulk of China’s government research and development funds are allocated on the basis of political connections rather than merit as judged by independent scientific panels.
Second, China spends relatively little (only 4 percent of total) on basic research as compared with economies in the Organisation for Economic Co-operation and Development (17 percent of total).
Third, the government places far greater priority on the quantity over the quality of patents. From 2010 to 2015, the number of patent applications filed with the State Intellectual Property Office tripled from 300,000 to over 900,000. This pursuit of scale for the sake of scale risks devaluing the quality of the typical patent even further.
Fourth, the “Great Firewall of China” makes it hard for Chinese researchers to access global information, since they aren’t able to use Google Scholar.
Fifth, foreign companies feel pressured to transfer technology in order to gain market access in China and are at a distinct disadvantage regarding intellectual-property-related judgments in Chinese courts.
Anil Gupta is the Michael Dingman chairman in strategy, globalization and entrepreneurship at the University of Maryland’s Smith School of Business. Haiyan Wang is the managing partner of the China India Institute.