📈 Chartpack: China’s economic destiny [Part 2]

Can China maximise its innovation potential?

Hi,

Nathan Warren

here.

Last week, we started our investigation into whether China has what it takes to become the world’s largest economy by focusing on demographics. Another equally critical factor that could shape China’s economic trajectory is its innovation capacity. In this week’s Chartpack, we delve into China’s innovation ecosystem, placing it in direct comparison with the United States. Our exploration will spotlight research and development (R&D), patent filings, and the overall innovation environment, with the ultimate aim of gauging the likelihood of China overtaking the US economically.

Let’s get started!

Econometric literature suggests that countries that invest heavily in R&D also enjoy sustained GDP and productivity growth. China has adopted this philosophy wholeheartedly, emphasising an ambitious target of 7% annual R&D investment growth in their latest Five-Year Plan. The country is striving for technological self-sufficiency, demonstrating a strong commitment to funding this endeavour.

The return on this investment is already evident in the Nature Index, which measures each nation’s researchers’ article contributions. This year China reached parity with the United States on the index for the first time.

Furthermore, China has positioned itself as the front-runner in emerging technology areas like advanced materials, artificial intelligence, and quantum computing. The Australian Strategic Policy Institute identifies China as leading the world in research on 37 out of 44 critical technologies - a concern for the US considering many of these technologies have immense defence capabilities (for example hypersonic missiles, where China has the lead).

This growing research dominance has contributed to a surge in patent filings. Nevertheless, it’s imperative to note that a high quantity of patents does not guarantee high-quality innovation.