Innovation in China: Not Seeing It

The European Chamber of Commerce just came out with a massive report on innovation in China and it says there’s not nearly enough of it. The report, Dulling the Cutting-Edge: How Patent-Related Policies and Practices Hamper Innovation in China, [link no longer exists]  says it is intended to prod Chinese government authorities into effecting change to encourage innovation.

The study focuses not on the quantity of China innovation, but on its quality and in that arena China is “overhyped” and sorely lacking:

While patents are exploding in China and certain innovation is also on the rise, patent quality has not proportionately kept up and in fact the overall strength of China’s actual innovation appears overhyped. Statistical analysis in this study not only reveals concerning trends in the quality of China’s patents at present, but suggests that while patent filings in China will likely continue to notably grow in the future, patent quality may continue to lag these numbers. In fact, projections in this study indicate there might be over 2.6 million less-than-“highest-quality” patents filed in China in 2015 alone, which is substantially more than estimated “highest-quality” patents filings in that year. With this in mind, and objectively considering its performance on additional innovation metrics, it is clear that China’s innovation ecosystem deserves a new type of scrutiny.

The core of this study is devoted to investigating, through in-depth on-the-ground research and analysis, significant patent-related reasons for China’s patent quality and related innovation shortcomings. In an effort to hone this investigation, the study focuses on key unaddressed institutional and regulatory issues most closely related to patent quality that can be practically remedied in the near future.

This study uncovers how a network of patent-related policies, other measures, and practices in China collectively hamper both patent quality and innovation at large. These dulling devices are categorised in terms of certain government-set patent targets and indicators (Chapter 2); policies and other measures meant to promote patents (Chapter 3); and rules and procedures for reviewing patent applications and those for enforcing patents (Chapter 4). Although given their intertwined nature it is not always possible to clearly separate their impacts on patent quality as distinct from those on innovation at large, these dulling devices collectively create a vicious cycle: they hamper patent quality which then hampers innovation and vice versa, i.e. hamper components of innovation which then hampers patent quality, which then again further hampers innovation).

It is relatively easy to go from being a poor country to a middle income country by deftly handling/managing cheap labor, but it is very difficult to go from a middle income country to a developed one. This jump is difficult because it takes more than low wages and hard work. This jump requires innovation. The sad truth is that those who live in China and know the country have serious doubts about its ability to make that leap. They cite to an educational system that preaches following the pack, not blazing new trails, and a business ethos that focuses more on minor incremental change over big breakthroughs.  Bill Dodson, who wrote the book, China Inside Out: 10 Irreversible Trends Reshaping China and its Relationship with the World, sees China’s chances of becoming truly innovative as about the same as Ottumwa, Iowa, becoming the next Paris.

Does China have what it takes to become a front-line innovator?