Innovation Mandate: Is China Poised For Global Lead?

In a press release provocatively titled "China Poised To Become Global Innovation Leader," Thomson Reuters' intellectual property group presents the results of a new study which projects that China will lead the world in patent activity by 2011, a year earlier than the group had previously forecast.

China's total patent volume rose at an annual clip of 26.1% from 2003 to 2009, according to the study, compared with a growth rate of 5.5% for its closest rival, the U.S. In all, Thomson Reuters predicts that 611,649 patents will be filed in China in 2011, compared with 555,771 patents in Japan and 527,202 in the U.S. By 2014, it predicts, 1,226,894 patents will be filed in China, twice the number filed in No. 2 country Japan.

The study notes several trends that point to China becoming more of an innovation player, especially in high-tech areas.

• Chinese patents related to computers rose 4,861% from 1998 to 2008, according to the study, compared with a much more modest increase of 552% in patents for its more traditional agriculture and polymer areas.

• Patent quality, as measured by the ratio of applications to full granted patents, is on the rise in China, the study suggests.

• While innovation by domestic entities is driving China's patent boom, Chinese entities are also filing more patents abroad. From 2007 to 2008, Thomson Reuters says, China's overseas patent fillings rose 33.5% in Europe, 15.9% in Japan, and 14.1% in the U.S.

The study also notes that the Chinese government is driving much of the country's innovation via tax and other incentives and R&D tax deductions.

In our recent Innovation Mandate survey, asked 624 business technology pros which country or economic bloc presents the biggest and most immediate competitive threat to the U.S. as an IT and innovation power. India came out on top, cited by 44% of survey respondents, with China a close second, at 42%. Only 6% cited Japan and 6% the European Union. But the jury's still out. While noting that the BRIC nations (Brazil, Russia, India, and China) garner a lot of attention for innovation-led economic growth, the Information Technology and Innovation Foundation, a Washington-based think tank, ranked those countries near the bottom of 40 countries it assessed in 2009 on their ability to compete on the basis of innovation. "This does not mean that these and other low-ranking nations do not have some innovation strengths -- they do -- but as a share of their overall economies, these strengths are still quite minimal," the ITIF argued in its February 2009 report. "The main attraction of these nations remains their low costs, not their innovative infrastructures, and this situation will likely remain for many years, at least until they raise productivity in a wide range of sectors." However, China in particular is getting much more aggressive. In its 2009 report, while ranking China 33 out of 40 countries on current innovation capabilities, the ITIF ranked China first in innovation progress (in comparison, it ranked Singapore second, India 14th, and the U.S. last in progress). China last year budgeted about $25 billion for science and technology R&D, mostly applied research and much of it focused on clean technology, where the country is an early leader. That $25 billion represented an increase of more than 25% from the previous year's science and tech spending, and China plans to increase that budget by 8% this year. InformationWeek's Series On U.S. Tech Competitiveness Meantime, China graduates hundreds of thousands of engineering and computer science majors each year, and its citizens publish reams of scientific papers, in addition to filing those hundreds of thousands of patents, acknowledges Vivek Wadhwa, a researcher at Duke, Harvard Law School, and UC Berkeley who writes extensively on technology innovation. But be careful about equating quantity with quality, Wadhwa says. For one thing, engineers and scientists graduated in China, as well as in India, aren't up to U.S. standards, he says, drawing on extensive research he conducted in 2004. The "vast majority" of those patents and scientific papers in China "aren't worth the paper they are printed on," he says. "China is currently excelling in imitation, not innovation," he wrote in a recent missive to his extensive e-mail list. (The rise of Huawei Technologies on the shoulders of Cisco's intellectual property comes to mind.) "It has achieved wonders in modernizing infrastructure and its big R&D facilities are a marvel -- but almost nothing comes out of them," Wadhwa continued. "Its entrepreneurial startups are the exception. That is because the younger generation has had more freedom than its parents. And returnees are providing a boon. So moving forward, China may start innovating and become a real competitor in innovation/R&D, but they are years away." Wadhwa, for one, is less than impressed with the state-sponsored science parks and technology centers being erected in China and other countries. "Many of the hundreds of cluster-development projects that have been started around the world since the 1980s have either failed or are on life support, including Tsukuba, Japan's science city, and Egypt's 'Silicon Pyramid,'" Wadhwa wrote in a May 2010 article in Bloomberg BusinessWeek. "Because they typically die a slow death, you don't read about the failures on the front pages of newspapers. Political leaders long ago held press conferences to claim credit for advancing science and technology, management consultants earned hefty fees, and real estate barons reaped fortunes. Taxpayers were left holding the bag." What China has going for it that other countries don't are sheer numbers -- 1.3 billion eager people -- and a track record for taking the long-term view. So we can quibble over China's relative innovation strengths today, but there's no denying that it will be a country to be reckoned with in the very near future. Dismiss it at your peril. Rob Preston,
VP and Editor in Chief, InformationWeek
[email protected] To find out more about Rob Preston, please visit his page. More In This SeriesInformationWeek's Series On U.S. Tech Competitiveness
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