LECTURE: INNOVATION MADE IN CHINA

Based on recent findings in the empirical literature, this non-technical talk provides an introduction to the topic

Opinions are divided on whether China is the world’s biggest copycat or the next technological superpower. The State Council wants China to become an innovative country by 2020 and a world leader in science and technology by 2050. To this end its mission-oriented R&D policy also implies more competition for overseas incumbents. Foreign governments in the USA, the EU and elsewhere are concerned about China’s technological ambitions in combination with alternative models of governance. International reactions to these new challenges range from the introduction of trade tariffs to labeling China a systemic rival and re-thinking industrial policy making.

 

Indeed, several indicators suggest that China is successfully transforming into an innovation-driven economy. In terms of R&D expenditures China ranks second behind the USA and is projected to take the lead around 2020. China’s R&D-to-GDP ratio has already outstripped the EU average. China is leading in patent applications and ranks second in applications made under the Patent Cooperation Treaty (PCT). Currently China accounts for a quarter of global high-tech exports and as of 2015 has become the EU and Germany’s biggest source of imports.

 

Given the government’s strong leadership role in the Chinese economy, as a planner, actor and regulator, one important question is the extent to which China’s stunning rise has been influenced by targets, subsidies, and other policy instruments. Another important question is whether typical indicators for innovation, such as patents, are still valid in China’s policy-driven context. It is also crucial to know whether innovation inputs, such as R&D and patents, actually contribute to productivity growth and hence sustained economic development. Finally, China’s rise as a manufacturing powerhouse has been perceived as a massive supply-shock by incumbents in overseas markets and it remains to be seen whether this triggers or hinders innovation abroad.

 

A tentative outline of the talk:

 

  • Does innovation matter for China‘s economic development?

  • Market and public innovation incentives

  • Patents as an innovation indicator

  • Productivity returns to innovation

  • Impact of Chinese competition abroad