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China as an Innovation Center? Not So Fast…

China as an Innovation Center? Not So Fast…

China seems to have taken over the news by storm. Every day we hear how China is rapidly becoming one of the most developed economies; we hear about China’s patent filling and the exporting of high-tech goods to the west. We’re start to hear more and more about how China will take away the US glory soon. How much of this should we believe? Is China actually the new Innovation Center? Well, we say all such news is far from reality and they seem to be confusing leading indicators with lagging indicators at the moment. There is no doubt that the leading indicators for China’s innovation engine are quite impressive. Is it just a matter of time…?

China Takes Steps For R&D

China’s R&D expenditure has increased from 1.1% in year 2002 to 1.5% in year 2010 of its GDP and is further expected to increase to 2.5% by year 2020. China’s share of the total world expenditure on R&D has also increased from 5% in 2002 to 12.3% in the year 2010, making it attain second position, first resting with US, whose share is still 34%-35%. According to a recent research done by UNESCO, China is leading the list of countries to hire most people in the field of science and technology.

Even the figures of output looks amazing at the first glaze, but dwelling deep into them bring out the issues very well. According to World Intellectual Property Rights Organization 203,481 patent application were filled, making it China the third most innovation country after Japan with 502,054 fillings and US with 400,769 fillings. The catch here is that around 95% of the Chinese applications were filled domestically with State Intellectual Property office. Minor changes were made to existing design and most Chinese companies filled for patent rights .A better idea of the picture can be seen by looking at the global patent figures that is the number of applications filled with world’s leading patent office in US, EU and Japan. China will be seen way behind if talking about the score on this particular platform.

How Does China Fair On The Innovation Front?

China is the fastest growing economy contributes to 20% of the total world population, 9% of world’s GDP and 12% of total R&D expenditure, but only 1% triadic patent filling. Triadic patent filling is when an application is filled with/or granted patent from all three office for the same innovation. According to the figures provided by OEDC in 2008 there were 473 triadic patents filling by China as compared to 14,399 from the U.S., 14,525 from Europe and 13,446 from Japan.

After reading the above, there obviously arises a question why there is such a big gap between the efforts put in and the results that are achieved. Well innovation is a field in which a lot of investment is required in order to attain returns. Furthermore, it take a bit of a time for innovation to start yielding result and as China is new in this field with lesser experience, hence it is bound to take some time for input to match output. Though there are other factors as well that are hindering the output numbers from growing and we discuss below a few.

What Are The Factors That Hinder China’s Innovation?

The process of allocating funds is one of the mostly criticized factors as far as innovation in R&D is concerned. The process of granting funds is highly inefficient and non-transparent and most of the funds are allocated based on political bonding to individual ministries rather than being given on purely merit to scientific R&D institutions.

The statement given by Yigong Shi and Yi Rao, deans of Life Sciences at Tsinghua and Peking Universities respectively clearly highlights the issues in the grant allocation process. According to them China’s research culture wastes resources, corrupts the spirits and stymies innovation and the reason he has given for this is only bureaucrats and their personal favorites are provided with grants ranging from tens to hundreds of million Yuan.

Another major problem with China’s research approach is the focus on quantity rather than quality and the use of local standards rather than international to access research and awards them. The Chinese education system is also a hindrance in better quality research process, as the system is based on rote learning rather than creative thinking and hence Chinese graduates are reluctant to do anything out of the box. And that is the reason when Microsoft opened its second largest research center in Beijing, they asked their employees to come up with one project of his/her own liking that is in accordance with the goals of Microsoft and curtailed the problem of rote learning.

Beyond any benefit of doubt, China is progressing rapidly particularly in fields like telecommunication. But as far as innovation is concerned China is far behind most of the West, and will need some time before they can be recognized as an innovation powerhouse.

Note: The preceding is a summary of an article found though our research, and is provided here with editorial comment for members only. Please see the full article at the following link for full original content: http://online.wsj.com

The New Asia Innovation Team

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