How close is China to the technological frontier?

From Anil Gupta, bad news:

To be sure, China’s R&D expenditure increased to 1.5% of GDP in 2010 from 1.1% in 2002, and should reach 2.5% by 2020. Its share of the world’s total R&D expenditure, 12.3% in 2010, was second only to the U.S., whose share remained steady at 34%-35%. According to the World Intellectual Property Organization, Chinese inventors filed 203,481 patent applications in 2008. That would make China the third most innovative country after Japan (502,054 filings) and the U.S. (400,769).

But more than 95% of the Chinese applications were filed domestically with the State Intellectual Property Office—and the vast majority cover “innovations” that make only tiny changes on existing designs. A better measure is to look at innovations that are recognized outside China—at patent filings or grants to China-origin inventions by the world’s leading patent offices, the U.S., the EU and Japan. On this score, China is way behind.

The most compelling evidence is the count of “triadic” patent filings or grants, where an application is filed with or patent granted by all three offices for the same innovation. According to the Organization for Economic Cooperation and Development, in 2008, the most recent year for which data are available, there were only 473 triadic patent filings from China versus 14,399 from the U.S., 14,525 from Europe, and 13,446 from Japan.

Starkly put, in 2010 China accounted for 20% of the world’s population, 9% of the world’s GDP, 12% of the world’s R&D expenditure, but only 1% of the patent filings with or patents granted by any of the leading patent offices outside China. Further, half of the China-origin patents were granted to subsidiaries of foreign multinationals.

That’s the worst news you are likely to read today.  By the way: “…the allocation of government funds for R&D projects is highly politicized.”


I worry about patents as a measure of innovation.

Some patents are filed precisely as obstacles to innovation.

Some are filed then not exploited.

Some are filed despite having no possible commercial use.

Also, what does 'number of patents filed' correlate to? Growth? Productivity? Happiness?

The Patent system is a repository of human invention and innovation. If ever the apocalypse ever came and went and we still survived, all the the blueprints for rebuilding all of our technology is in the patent office. (we just have to make sure the patent files are not lost).

The system is set up with automatic expiration dates so while some patents may be filed as obstacles to innovation, they will only be obstacles for a little while until the patent expires. In the mean time, you have right there, a freely available document on which the next person can innovate off of.

This is manifestly untrue for software patents, where millions (literally!) trivial "inventions" (like, blinking cursor) are filed just for the purpose of patent wars and trolling among large corporations.

How is it untrue? patents do expire. The content of the patent is a full working description of the idea. It is recorded and preserved. These "patent wars" are small prices to pay for recording the idea.

Imagine, after the apocalypse, society has rebuilt most of the technology, but it just sits there, unused because no one knows what to do with it because people back before the apocalypse thought software patents were dumb and never bothered to record the ideas.

I'm not saying there aren't some inefficiencies, but the system itself works, and is a great aid for us humans to not have to re-invent the wheel constantly.

AndrewL, you are remarkably naive (or disingenuous) about software patents. There is absolutely nothing in the text of any software patent that is useful in any way to anyone actually trying to write software. They are of no intellectual interest to technologists, only to lawyers.

Software patents represent ownership of broad and entirely obvious ideas, although this is supposed to be impossible according to law, because of regulatory capture of overworked patent clerks, who mostly just shrug and rubberstamp anything that lands on their desks. Burning them would be like burning a pile of title deeds to property, not burning a library -- you could just issue new ownership certificates to the same or different people.

Patents are useful when the amount of work required to create an invention is high and the amount of work to copy it is low. Pharmaceuticals are a good example. It's unlikely that anybody would invest the amount of money it takes to bring a drug to market if they couldn't have a period of exclusive sales.

Patents are not useful when the amount of work required to create an invention is low or the amount of work to copy it is high. Software patents usually fall into this category (the poster above wasn't joking about things like blinking cursors being patented), and business method patents definitely fall into this category. In this case the holder of the patent contributed little or nothing to technological progress, and in return they get the right to stifle their competition. That's bad for consumers and bad for society.

Finally, there's the problem of overbroad interpretation of patents. In many cases patent holders are in effect given ownership of things they didn't even invent. The best example of this is the patent fight between the Curtiss aircraft company and the Wright brothers. The Wrights successfully got their patent on wing warping interpreted covering all methods of controlling the roll of an aircraft in flight, including ailerons, which they certainly didn't invent.

These issues amount to more than just "inefficiencies." They're serious problems that undermine real innovation, support monopolies, and harm consumers. They need to be fixed. We can start by tightening the standards on what constitutes "novelty" for purposes of patents, and we should also reconsider the one-size fits every industry approach to patent terms. The time scale for innovation varies greatly between industries, and patent terms should reflect that. After that, we could see how the system develops and whether further reforms are needed.

If you meant to write "suppository" instead of repository I might agree with you.

The patent system, and most patents, is a joke.

"I worry about patents as a measure of innovation."

True. Other measures support very different conclusions.
"China passes the EU in High-tech exports
The value of high-tech exports worldwide
increased by an average of 5% a year between
2001 and 2006. This increase was mostly due to
the rise of Chinese exports in world trade.
Although in 2005 the EU was the leader in hightech
exports, China took over the lead in 2006
followed by the United States, the EU-27 and

Of course, the original article was flawed in other respects as well. According to the IMF China is 14% of world GDP now (2011) and will be 18% of world output in 2016.

Either patents are a terrible metric, or China is far from the technological frontier - which from a Solow model perspective is great news. If China's R&D spend is going to technological gains that that are within the frontier for the developed world, then there is lots of room for China to grow, and it will continue to do so until it catches up with the frontier (and then it'll grow at the developed world technology growth rate).

I agree. Unfortunately, I am not able to see why this article should be bad news, quite the opposite: if there is still so little real innovation coming out of China, then they are still playing catch-up which means great opportunities for further growth, which is good for everyone. What do I miss?

That’s the worst news you are likely to read today.

No, but only because it's already what I assumed to be true, given my knowledge of Chinese engineering. They've still been playing catch-up (which is still a positive thing!), not innovating.

Isn't it good news that there's so much potential for improvement?
(e.g. increasing rate of Chinese world-class innovation as relatively low-hanging fruit)

The problem is not China but journalists and pundits that know nothing about China. One day they argue that China has already achieved --or better overachieved-- some high level of whatever. The following day they argue that China will never achieve such a high level. I wonder when grownups will stop circulating the nonsense "news" fabricated by journalists and pundits.

My Chinese advisor has complained to me about the lack of real innovation in China.

On your point that China's allocation of government funds is highly politicized, please refer to any serious study of the U.S. government's allocation of research funds that make clear what criteria are used (not one of the many reports about the criteria that should be used). Hope the study includes a comparison across OECD countries so then we can start to talk about China.

As suggested in the comments above, isn't it rather good news in fact that China has lots of development headroom left before reaches the frontier and stalls, in which time it can (hopefully) get its institutions in order and become genuinely innovative? Today's China probably isn't capable of pushing the global tech frontier outward, but the China of 20 years from now might be.

“…the allocation of government funds for R&D projects is highly politicized.”

Encouraging sentence for the US economy.

"That’s the worst news you are likely to read today"
Really? Guess I better not read anything about the Norway killings, draughts, famines, AIDS ...

Oh yeah, also, Apple has more cash on hand than the US government, and the GDP grew only 1.3%. This is not worse news?

There are no patent protections in China. Theft of IP is rampant.

Do Chinese companies care about patents? That is a serious question, actually - do the Chinese feel that the patent process (apart from abusing it for Chinese gain, the same way the U.S. simply ignored Henry Bessemer's steelmaking patents or Charles Dickens' copyrights a century and a half ago) is worth any amount of time or effort on the part of a company or government agency?

This is especially the case when a growing number of American patents relate to software - a now almost definite brake on software innovation in the U.S., as the growing number of lawyers finding new clients to bleed dry (either attacking or defending - laywyers are utterly indifferent any distinction which does not involve being paid) has nothing to do with programming.

I can imagine, without being able to prove, of course, that the Chinese are keeping a lot of their innovation out of Western view - as an intentional strategy.

It seems like they care about patents, but only for signaling purposes, thus the large number of largely useless patents compared to useful patents, according to the story. My mental model could be very wrong, but I kind of see them as filing patents to make superiors look good. Those don't turn out to be very useful for the rest of the world on average is I think the point.

But on the other hand, they have so much catchup growth that I don't expect much. On the other hand, my house is already full of cheap plastic crap.

'hus the large number of largely useless patents compared to useful patents'
Or it is an import barrier - I have read decades ago that the Japanese used to use patents as a way to ensure that competitors/imports would have a very difficult time, such as allowing motorcycle manufacturers to patent red gas tanks or turn signal shapes (possibly wrong memory, admittedly).

In a way this is exactly what is happening with software patents in the U.S. - clearly, the rest of the world isn't about to recognize most business process/software/algortihm patents, but to the extent such software (particularly free software, which does not attempt to compete in merely commercial terms, resulting in a lack of commercial resources to fight against money driven attacks) is used in the rest of the world, it won't be in the U.S.

Which is interesting, when one considers that both HTTP and Linux are actually originally European in origin.

Great post. I've been patiently explaining this to people for years.

Another thing that tends to confuse people in translation is "engineer." We think of someone with an EE or mechanical engineering degree, but in China this usuallly means "auto mechanic."

Hoover and prior_approval definitely have a valid point. There aren't the same incentives to patent a novel invention in China like in the the US. where venture capitalist firms and major tech companies file patents to protect their businesses form costly lawsuits filed by patent troll companies like Intellectual Ventures. I'm sure this happens in China, but not to the same degree as in the US.

But protecting against Intellectual Vulture's patents on the obvious and prior art are met by filing for and obtaining more patents on the obvious and prior art, not by being innovative to finding novel and useful methods to patent.

I had the same reaction as everyone else, but I think it is bad news is that while they still have a lot of slack to be taken up in this area, they haven't started taking up the slack yet. It's great news if you think in terms of geological time scales.

Chinese government statistics, opaque, you don't say?

If China is the only country in the world where the manufacturing process you have patented can foreseeably take place on an economically feasible basis for the lifetime of the patent, then why on Earth would you bother patenting in the US, EU, or Japan?

This is news? I must be much closer to the frontier than most, then...

If we believe Tyler's Great Stagnation thesis then the second rung players like China don't need to get many patents. There isn't that much left to be invented. Just focus on executing and making cheaply and lots of the stuff already invented.

BTW, does the historical trend in the number of patents issued support the TGS thesis?

Are Chinese firms simply substituting trade secrets for patents? Domestic IP enforcement is, I guess, shoddy compared to Japan at a similar level of development.

Patents measure how many lawyers they have no how much innovation they create.
Using them as a proxy is just ridiculous.

Can someone explain why this is "the worst news you are likely to read today?" Sounds to me like China has a long way to go before hitting a ceiling. Anywhere in the world where lots more growth is likely seems like good news.

China has more people so you would expect more innovation. However, if someone had a good idea, I would think he/she would bring it to a country that truly respects private property and reduce the risk it would be appropriated by the government..

This is because the American patent system is out of control, with companies patenting sandwiches and click combinations.

Patents are mostly used for retaliation, extortion and to destroy competitors. It is a consequence of the strongest legal establishment in the world, and it certainly limits freedom for all Americans.

i agree, i feel like China is still playing the catch- up game. i, too, feel that they are far from innovating. yeah, their GDP may be increasing but does that mean that they're getting close to the technological frontier? i don't see this as bad news, i see this as an encouraging statement for America. China wants to try to surpass U.S? well, let's give them a bigger margin to catch-up to first.

Comments for this post are closed