China's Innovation Eco-System
Navigating To Opportunity Through Challenge & Jeopardy
Navigating To Opportunity Through Challenge & Jeopardy
As a nation, China fully embraces innovation as key driver of its continued global rise. And that embrace reveals some of the unique contours of the Chinese innovation eco-system. China's hybrid market/command-economy style approach to innovation aligns national policy, operating companies (SOEs & private), capital (public and private), academia and economic initiatives in holistic service of advancing national innovation leadership. At a policy level, China's two most recent 13
th and 14
th Five Year Plans (FYP) feature innovation prominently as an explicit component of economic success. There are, of course, obvious (and not so obvious) limitations to a command-economy style approach to national innovation strategy. However, as proof of policy aspiration meeting practical reality: over the past five years China has increased its annual national R&D investment by 53% measured in dollars, essentially doubling the increase made by the US over the same period. China has also been steadily increasing its R&D spend as a percentage of GDP, up by 10.5% (from 2.022% GDP to 2.235% GDP) over the last five years. And, with China's annual GDP growth rate on average roughly 5% higher than the US over that period,
the trajectory of China's innovation investment raises the competitive stakes even higher. And with that investment momentum, China has announced plans to move even more aggressively into key forward-looking areas like AI/ML and establish an entire domestic industry in semiconductors.
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Determined to protect those innovations along with the market power they represent, China has also moved aggressively to fortify them with intellectual property (IP) positions – at home and abroad. Over the past decade China established a robust national intellectual property (IP) protection and enforcement regime. A signal of its success, the China National Intellectual Property Administration (
CNIPA) eclipsed the US Patent & Trademark Office (
USPTO) as the national office with the most annual patent filings and became the first office with more than one million patent filings. China's innovation ambitions extend beyond its borders, so it also stakes out competitive IP positions in key international markets. In 2020, China filed the most international patents under the Patent Cooperation Treaty (
PCT), displacing the US, which had held that top spot every year since the PCT system was established in 1978. Fueled by its growing innovation capabilities, aggressive government patent subsidies also catalyzed China's rise as an IP power, essentially paying Chinese corporations to obtain patents.
Combined, these efforts signal the growing market power resident in China's innovation eco-system, and the collective national desire to protect it.
Addressing the rise of China's innovation capabilities – and its growing innovation mercantilism – is a competitive imperative, and so it is also a central focus of CEICTM. Essential in this work, CEICTM dispels the myths, mis-perceptions and hyperbole attendant to China's innovation eco-system. Focusing instead on developing a deep objective understanding of its realities and future trajectory. One of the more uncomfortable realities is the explicit recognition that China (like many other nations, and the firms within them) is at once an adversary, competitor, co-dependent, collaborator, and opportunistic partner. The dynamics across this competitive spectrum vary and evolve across multiple dimensions: technology, industry, time and in response to changing circumstances. A principal objective of CEICTM is to help develop and deploy strategies for navigating China's evolving innovation landscape to persistent competitive advantage – at the firm-level and the national-level for key technology and industry domains.