Skip to content

China's Growing Status in Innovation


Tuesday, April 30, 2019

The U.S. has long been a leader in innovation, but a recent Economic Synopses essay argues that China is starting to catch up.

Economist Ana Maria Santacreu and Research Associate Makenzie Peake noted that China has long been an adopter of foreign technology. However, two measures have been on the rise over the past several years:

  • China’s innovation efforts
  • The pace at which China is being paid for its own intellectual property

Innovation Efforts

Santacreu and Peake compared research and development (R&D) efforts of the U.S. and China for the period 1999-2015. As of the most recent year, China’s R&D intensity, measured by R&D spending as a percentage of GDP, was 2.1% of GDP versus 2.8% for the U.S.

However, China’s R&D intensity grew from less than 1% over the period studied, therefore increasing considerably faster than that of the U.S. “Because R&D intensity is a proxy for technological advancement, these data suggest that China is catching up to the U.S. in technology,” the authors wrote.

Royalty Payments for Intellectual Property

To compare the use of intellectual property, Santacreu and Peake measured royalty payments to China and the U.S. Similar to innovation efforts, China’s royalty payments from the world ($1 billion) lagged the U.S.’s ($113 billion) in 2016, the most recent year for which data were available. “This is not surprising, as the U.S. is one of the global leaders in innovation,” Santacreu and Peake wrote.

Yet, China’s royalty payments from the world as a percentage of the U.S.’s increased significantly. In 2007, China’s royalty payments were about 0.44% of what the U.S. received. By 2016, that percentage had increased to more than 1%. “Indeed, China has seen an almost 160 percent increase in intellectual property receipts from the world in the past decade, compared with an 11 percent increase for the U.S. over the same time frame, which indicates China’s increased knowledge diffusion throughout the world,” the authors noted.

Conclusion

Santacreu and Peake concluded: “Although it still has a long way to go to become an innovation leader, China is moving toward the role of global innovator and away from its traditional role as mainly an adopter of innovation.”

Additional Resources

Posted In Output  |  Tagged ana maria santacreumakenzie peakechinainnovationroyaltiesintellectual property
Commenting Policy: We encourage comments and discussions on our posts, even those that disagree with conclusions, if they are done in a respectful and courteous manner. All comments posted to our blog go through a moderator, so they won't appear immediately after being submitted. We reserve the right to remove or not publish inappropriate comments. This includes, but is not limited to, comments that are:
  • Vulgar, obscene, profane or otherwise disrespectful or discourteous
  • For commercial use, including spam
  • Threatening, harassing or constituting personal attacks
  • Violating copyright or otherwise infringing on third-party rights
  • Off-topic or significantly political
The St. Louis Fed will only respond to comments if we are clarifying a point. Comments are limited to 1,500 characters, so please edit your thinking before posting. While you will retain all of your ownership rights in any comment you submit, posting comments means you grant the St. Louis Fed the royalty-free right, in perpetuity, to use, reproduce, distribute, alter and/or display them, and the St. Louis Fed will be free to use any ideas, concepts, artwork, inventions, developments, suggestions or techniques embodied in your comments for any purpose whatsoever, with or without attribution, and without compensation to you. You will also waive all moral rights you may have in any comment you submit.
comments powered by Disqus

The St. Louis Fed uses Disqus software for the comment functionality on this blog. You can read the Disqus privacy policy. Disqus uses cookies and third party cookies. To learn more about these cookies and how to disable them, please see this article.