Innovation plans, Chinese style

A recurring theme of the blog has been what qualifies as real economic growth (see for example: 8 October, 2008, 17 January, 2009 and why has the united states had so much innovation?).  I have long argued that real innovation is getting more from the same set of resource inputs or getting the same from a smaller set of resource inputs.  Innovation is ultimately what drives the health and wealth of an economy.

This weekend the New York Times is running a story about Chinese plans for innovation over the next decade as announced in November.  The formal document is entitled, “National Patent Development Strategy (2011-2020).   The plans include:

• By 2015 – To have 2 million total patent applications annually, both utility and invention patent types.  Utility patents are for things like engineering features in a product, whereas invention patents are purely new products and ideas.  This compares to 480,000 total patents filed in the United States September ’09 to September ’10.
• By 2015 – To have 1 million invention patents.
• By 2015 – To double its number of patent examiners to 9,000.  For comparison, the United States currently employs ~6,300 examiners.
• By 2015 – To double the number of patents that its citizens and companies file in other countries.
• To make this all happen the Chinese government is planning on providing a portfolio of incentives, including:
  • tax breaks for highly innovative companies that file a lot of patent applications
  • better housing options for individual patent filers
  • cash paid out as a bonus to filers

Analysis: The Chinese document has certainly captured the attention of the U.S. Patent Office, governmental organizations, politicians and think tanks.  Even if the Chinese meet their very ambitious goals there is more that drives the real economic growth of a nation than just its patents.  As I outlined in my post, “why the united states has had so much innovation,” there are many components driving real economic growth.  You see, good ideas are not important unless actually implemented and made into a business.  So the Chinese have more to do than just issue a load of patents.

One of which is a culture of innovation that must be put into place, but is going to be very difficult for the Chinese to replicate given its authoritarian, centralized, iron-grip Communist government.  Another important thing that helps innovation and long-term economic growth are well-functioning capital markets.  Without question the Chinese capital markets have a long way to go in order to compete with western world capital markets, such as the New York Stock Exchange, the London Stock Exchange or NASDAQ.  Additionally, capital markets depend on transparency and the Chinese are notorious obfuscators of key economic data.  Lastly, I want to point out that an absence of needless bureaucracy is a big assist for taking great ideas to the marketplace.  Without question the Chinese have one of the most obtuse bureaucratic systems in the world.

So while I hope the U.S. Executive and Legislative branches of government take seriously the Chinese innovation manifesto, I am not afraid that the U.S. is about to stop innovating.  Nor am I afraid that the United States is about to not be competitive on a global scale as regards innovation.

Importance grade: 6; I applaud the ambitions of the Chinese.  However, China has more to do to compete globally than just issue a large number of patents.

Jason