China Racing to Become the World’s Largest Innovator – What could this mean for your business?

China is quickly becoming the world’s largest patent holder, filing more patents than any nation in 2011, to surpass the United States. What could China, with an existing manufacturing base and an impressive commitment to R&D mean for your business?

In one of our previous posts we spoke about how China is investing in its middle class in order to build a consumer-based domestic economy to contribute to its GDP. We also spoke about how China’s infrastructure has risen above other Southeast Asian economies to become a more robust manufacturing base that is difficult for other nations to compete with, given the sheer size and breadth of China’s supply chain and infrastructure. In this post we examine how this trend will be accentuated by China’s drive toward a more innovation-based economy in an attempt to capture a larger percentage of the global GDP and to ensure growth for the future in the face of rising costs.

While China has become renowned as the world’s manufacturing hub, the country is intent on rising up the value chain in order to capture a larger percentage of revenue from products sold abroad instead of simply relying on manufacturing for export. In so doing, the Chinese government has mandated in recent years that patent applications should rise to 2 million by 2015.

The significance of this has not gone unnoticed, with United States patent filings reaching just 480,000 in 2010 and surpassed by China in 2011. While the innovative nature of these patents filed in China is still largely lagging the United States, the number of inventive patent filings by China is rapidly increasing.

Further still, China now spends the second most of any nation on research and development, having surpassed Japan in 2006, though spending just under half of what theU.S. has committed. At the same time, the country and Asia as a whole is gaining on Western economies with shares of global R&D expenditures growing in favor of the likes of China, South Korea and Taiwan while those of the EU and the U.S. decline.

China’s increasing influence in research and development is perhaps most clear in those patent filings filed overseas. China’s patent filings in the United States have also been rapidly increasing, focused primarily in the new energy field with wind and solar technologies being the most prominent but also including telecommunications, battery and automobile manufacturing technologies.

Businesses can now take advantage of China’s increasing R&D expertise, particularly in the new energy sectors such as wind and solar. This gives businesses the ability to research and develop, test and finally manufacture a product for a specific market, while spending capital and resources on marketing and selling that product in its destination market, while benefiting from cost savings still intrinsic toChina and comparatively reduced lead time.

What do you think?

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