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China – Synonymous With Innovation

Key highlights

• China punches above its weight in terms of innovation and there are indications that China’s innovative streak is strengthening.
• In addition to household names such as Huawei and Tencent, Chinese substantial global reach in innovations extends to batteries for new-energy vehicles (NEVs) and photovoltaic & solar cells in sustainable energy applications.
• China will continue to climb the innovation ladder due to an increase in research and development (R&D) expenditure under the latest Five-Year Plan.
• Investor access to Chinese listed companies will increase with a rise in weightage of China A-shares in major indices over the next few years.

China’s ranking in the Global Innovation Index has risen from the 35th spot in 2013 to 14th in 2020 (Figure 1). It currently ranks 1st among 37 upper-middle-income economies. In fact, China remains the only middle-income economy among the top 30 most innovative countries in the index. A deeper look into the 80 innovation indicators shows that China takes the pole position in eight of them including the scale of the domestic market; formal training at companies; patents by origin and creative goods exports, among various other indicators. China filed 58,990 international patents in 2019 making it the top patent applicant over the incumbent US, according to the World Intellectual Property Organization’s 2020 report (Figure 2). While overall international patent applications grew 5.2% in 2019, applications from China surged 10.6%. In terms of patents in force, China is closing the gap (2.7 million patents) with the US (3.1 million). The quality of China’s research papers has also been improving, ranking 2nd in the Nature Index, which tracks the quality of global research output.

China exceeds level of innovation expected at current stage of development (Figure 1)

Source: Global Innovation Index 2020

Top International Patent Applicants(Figure 2)

Source: WIPO Statistics Database, September 2020.

The World Bank estimates that China’s research and development (R&D) “expenditures as a share of GDP are multiples above what is common for a country at China’s level of development.” More is to come, as China is boosting its already high R&D expenditure, underpinned by the most recent national Five-Year Plan which aims to increase R&D outlays by 7% or more each year over the period.

Read the full article HERE to find out what's in store for innovation in China.

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