EMS - CIS - SR - Do Not Overlook China's Innovation Drive200624

Shape Your ConvictionTM
Emerging Markets
Strategy
China Investment
Strategy
Special Report June 24, 2020
In this Issue
02 How To
Do Not Overlook China’s Innovation Drive
Quantify
Innovation
• China became the world’s number one
03 China’s CHART 1
Innovations:
source of Patent Cooperation Treaty
China: Rising Dominance In Innovation
The Numbers (PCT) patent applications last year. % %
Speak PCT* APPLICATIONS**
50 50
07 Building Blocks • China is the world’s innovation
of China’s leader in such areas as digital
Innovation
communications, computer 40 40
11 Macro
Implications
technology, audio-visual technology
And Risks and telecommunications. 30 30
• Its increased expenditures in research

and development (R&D), its large pool 20 20
of postgraduates working in science and
engineering and supportive government 10 10
policies have enabled China to become
a major innovation hub.
Editorial Board 0 AS % OF WORLD: 0
Arthur Budaghyan
• A continuous successful push to CHINA
% US %
Chief Emerging innovate would allow China to keep
Markets Strategist productivity growth high, enabling its 50
PCT* PUBLICATION PUBLISHED
50
Ellen JingYuan He economy to grow at a solid rate with-

Associate Vice President out inflation. 40 40
Ayman Kawtharani
Editor/Strategist
30 30
Andrija Vesic
Associate Editor
China has become a major global innovation
center. The country overtook the US as the
Lin Xiang 20 20
Research Analyst new world leader last year in terms of the
Juan Egaña number of Patent Cooperation Treaty (PCT)
10 10
Research Associate patent applications it had filed.
Peter Berezin
Senior Vice President Unlike the many patents granted by 0 0
2020
Jonathan LaBerge patent offices in individual countries,1
Vice President 96 2000 04 08 12 16 20
* PCT IS PATENT COOPERATION TREATY.
1 ** PCT APPLICATIONS BY DATE OF RECEIPT AT
For example, the utility model patents and design INTERNATIONAL BUREAU.
patents in China in general have much lower NOTE: ALL SERIES SHOWN AS 12-MONTH MOVING TOTALS;
patentability requirements than the PCT patents. SOURCE: WORLD INTELLECTUAL PROPERTY ORGANIZATION.
Copyright ©2020 BCA Research Inc. All Rights Reserved. Refer to last page for an important disclaimer.
109929
Emerging Markets Special Report June 24, 2020 02
Strategy Do Not Overlook China’s Innovation Drive
China Investment
Strategy
CHART 2
The PCT Application Timeline
International National
phase phase
(optional)
Request for (optional)
supplementary Supplementary
Months from International international international
priority date publication search search report
0 12 16 18 22 28 30
PCT
Application File PCT International (optional) (optional)
filed with application search report File demand for International
patent office & written international preliminary
(Priority date) opinion preliminary report on
examination patentability
SOURCE: WORLD INTELLECTUAL PROPERTY ORGANIZATION
the PCT patents are of the high quality. latter is the sole determinant of a nation’s
Every PCT international application has to competitiveness and economic well-be-
meet rigorous international standards that ing, as measured by its per capita income
allow applicants to obtain patent protection levels. However, it is difficult to forecast and
simultaneously in multiple countries. measure innovation.
China currently accounts for 22% of the Patent counts are one of the most
total number of PCT applications at the commonly used proxies for innovation.
International Bureau (IB) (Chart 1, top However, countries often differ in terms
panel). It also ranks second in the world for of the definition, standard and classifica-
the number of international publications of tion of patents. Thus, using the patent data
the PCT patents (Chart 1, bottom panel). released by individual countries makes
cross-country comparisons less credible.
In this report, we identify areas where
China is either leading or lagging behind In contrast, PCT patent data is comparable
other countries in terms of innova- and reliable as every PCT application has to
tion. Finally, we draw conclusions about go through the same procedure and is subject
the effect of this innovation on China’s to the same set of standards. Given the time-
macro-economic outlook. line of the PCT patent procedure, shown in
Chart 2, applications and publications are the
proper measures of the number of patents
How To Quantify Innovation each country is originating (Box 1).
Innovation enhances a country’s ability Bottom Line: The number of PCT patent
to develop new products and production applications and publications are a good
methods. Innovation also closely relates to measure of a country’s capacity for
technological advancement, which leads innovation.
to improved economic efficiencies and,
ultimately, to increased productivity. The
109929
China Investment
Strategy
BOX 1
Proper Measures Of Innovation: PCT Applications And PCT Publications
The PCT system is composed of two main – international and national focus –
phases, which together take over 30 months to complete (Chart 2). Once granted by
the individual focus country’s patent office, a PCT patent remains valid in that country
for as long as 20 years.
PCT applications and PCT publications are better measures of innovation than the
PCT grants.
First, the PCT system allows one patent to have multiple grants. Hence, the number of
grants reflects the number of individual countries where the patent will be in effect. In
this sense, the grants data does not accurately reflect innovation.
Second, the PCT grants occur in the target country (national) phase, which is usually
12 months after the patent publication date and 18 months after the PCT application is
received by the IB.
Third, the real impact of a PCT patent on the economy may have occurred long before
its final national granting. For example, a PCT applicant may have already put the
innovation to use before it files a PCT application.
This is because the law in most countries allows for backdating the patent holder’s
rights to the date when the international patent application was published. This means
that the patent holder could claim retroactive-damages against infringers, if there are
any, once the patent is granted.
China’s Innovations: TABLE 1

The Numbers Speak Significant Growth In China’s PCT Applications
China’s innovation has surged, as evidenced PCT APPLICATIONS*
5-YEAR GROWTH RATE DURING
by a 128% growth in the number of the 2014-2019
country’s PCT applications over the past China 128%
five years. In comparison, over the same
South Korea 44%
period, the growth was much weaker for
other top filers like the US, Japan, Germany World 22%
and South Korea (Table 1). In fact, US Japan 21%

patent applications have dropped by 7%
Germany 6%
over the last five years. Together, these five
countries, including China, account for 78% US -7%
of global PCT applications. *PCT APPLICATIONS BY DATE OF RECEIPT AT INTERNATIONAL BUREAU;

SOURCE: WIPO, BCA RESEARCH
109929
China Investment
Strategy
Here are the main characteristics of the

TABLE 2
progress of China’s innovation.
The Sectors With Largest PCT Publications
First, China has been the major driver of % OF TOTAL WORLD PCT PATENT
global PCT applications, accounting for PUBLICATION (2019)
70% of increases over the past five years.

Computer technology 8.7%
This means that most of the global techno-
logical progress has occurred in China. Digital communication 7.7%
Table 2 shows the sectors with the larg- Electrical machinery,

7.0%
est number of PCT publications. China is apparatus, energy
among the top three players of all these Medical technology 6.9%
sectors (Table 3).
Semiconductors 3.3%
Second, the volume of China’s PCT appli-
cations is the highest in the world in the SOURCE: WIPO, BCA RESEARCH
fields of digital communication, audio-vi-

sual technology, telecommunications and
computer technology. China’s share of the
world total PCT applications in each of TABLE 3
these fields has risen above 34% (Chart Top Players In Top And Key PCT Filling Sectors
3). This suggests China possesses strong TOP THREE PLAYERS & THEIR RESPECTIVE
SHARES IN THAT SECTOR* (2019)
competitiveness in these fields.
TOTAL
SHARES OF
Third, Chinese PCT patent applications in CHINA US JAPAN
TOP THREE
the semiconductor sector surged by 172% PLAYERS
over the past five years, with its global Computer

33% 31.4% 13.3% 77.9%
share jumping from 10.6% in 2014 to 25.6% technology
in 2019 (Chart 4). The country is only

behind Japan, whose share fell from 37% Digital
42.5% 20.6% 10.2% 73.2%
communication
to 30% during the same period. The US
stands third with 20%. This reflects China’s Electrical
machinery,
considerable technological advancement in apparatus,
17.6% 12.7% 32.4% 62.7%
the semiconductor industry. energy
Fourth, the technological gap between Medical

9.3% 36.1% 15.5% 60.8%
technology
China and the US has been narrowing in
fields such as medical technology, phar-
maceuticals and biotechnology. In these Semiconductors 28.7% 17.0% 30.3% 76.0%
three areas, China’s share of global PCT

*IN TERMS OF TOTAL PCT PUBLICATIONS PUBLISHED FOR THAT SECTOR.
patent applications is 9.3%, 12.5%, and 14%, SOURCE: WIPO, BCA RESEARCH
respectively.
109929
China Investment
Strategy
CHART 3 CHART 4
The Fields Where Innovation In Semiconductors:
China Leads In Innovation Rising Influence From China
% % % %
80 PCT* PUBLICATIONS: AS % OF WORLD: 80 PCT* PUBLICATIONS: AS % OF WORLD:
CHINA CHINA
US 60 60
60 60 JAPAN
DIGITAL COMMUNICATION US
40 40 SEMICONDUCTORS
20 20
40 40
0 0
% %
AUDIO-VISUAL TECHNOLOGY
20 20
40 40
20 20
0 0
2020
0 0
96 98 2000 02 04 06 08 10 12 14 16 18 20 22
% TELECOMMUNICATIONS % NOTE: SERIES SHOWN AS 12-MONTH MOVING TOTALS;
SOURCE: WORLD INTELLECTUAL PROPERTY ORGANIZATION.
40 40
30 30 The US still leads the world in these fields

with its share of 33.2%, 39.7 and 37.7%
20 20
(Chart 5). Hence, the gap between the US
10 10 and China is still quite large, in favor of
the US, in the areas of medical technology,
0 0
pharmaceuticals and biotechnology.
% %
COMPUTER TECHNOLOGY Finally, the Chinese telecommunications
company – Huawei Technologies – was
60 60
the single most prolific PCT applicant in
40 40
the world for a third consecutive year, with
its 4,411 applications published in 2019.
20 20 Three other Chinese companies - Guang
Dong Oppo Mobile Telecommunications,
0 2020 0 Ping An Technology (Shenzhen) and BOE
Technology – were also among the top
96 98 2000 02 04 06 08 10 12 14 16 18 20 22
10 companies in terms of the number of
NOTE: ALL SERIES SHOWN AS 12-MONTH MOVING TOTALS;
published PCT applications. Three years
109929
China Investment
Strategy
CHART 5 CHART 6
The Fields Where China Is Catching Up China’s PCT Application:
In Innovation Mainly From Domestic Residents
% % % %
PCT* PUBLICATIONS:
AS % OF WORLD: CHINA:
CHINA 98 98
PCT* APPLICATION**
60 60
US FROM RESIDENT/TOTAL
40 40
MEDICAL TECHNOLOGY 96 96
20 20
94 94
0 0
94%
% %
PHARMACEUTICALS
92 92
40 40
2020
06 08 10 12 14 16 18 20
20 20
** PCT APPLICATIONS BY DATE OF RECEIPT AT
INTERNATIONAL BUREAU.
NOTE: SERIES SHOWN AS A 12-MONTH MOVING AVERAGE;
0 0
ago, only two Chinese companies were
among the top 10 PCT company applicants.
% %
BIOTECHNOLOGY This also suggests a significant growth
60 60 of innovation among the Chinese private
sector companies.
40 40 What about those China’s PCT patents

originating from residents2? Chart 6
shows Chinese residents have consistently
20 20
accounted for over 90% of the number of
PCT patent applications received by the
0 0
China Patent office.
2020
In addition, China’s PCT publication rate has
96 98 2000 02 04 06 08 10 12 14 16 18 20 22
lately converged with the rest of the world.
NOTE: ALL SERIES SHOWN AS 12-MONTH MOVING TOTALS;
China’s PCT approval rates – measured by
2
An application filed with an IP office by an applicant
residing in the country/region in which that office has
jurisdiction. Resident applications are sometimes referred
to as domestic applications. Source: WIPO.
109929
China Investment
Strategy
CHART 7 CHART 8
China: Rising Publication Rate Of PCT Applications China: R&D Intensity Is Still Relatively Low
% % % Of % Of
NUMBER OF PUBLICATIONS/ GDP GDP
R&D EXPENDITURE AS % GDP
NUMBER OF APPLICATIONS*:
CHINA
US
105 105 US
WORLD
4 GERMANY 4
CHINA JAPAN
SOUTH KOREA
100 100
3 3
95 95
2 2
90 90
1 1
85 85
2020
2020
06 08 10 12 14 16 18 20 96 98 2000 02 04 06 08 10 12 14 16 18 20 22
* THE NUMBER OF APPLICATIONS IS ADVANCED BY 6 MONTHS. SOURCE: WORLD BANK.
NOTE: ALL SERIES SHOWN AS 12-MONTH MOVING AVERAGES;
the number of PCT publications, divided by Yet, innovation gaps between the US and
the number of PCT applications originating3 China remain quite large, in favor of the
in China - has improved over the past two US, in the areas of medical technology,
years, moving closer to the world and the US pharmaceuticals and biotechnology.
level (Chart 7).
Bottom Line: China has become a major Building Blocks Of China’s

innovator, instead of being an applier of Innovation
other technologies and patents. The country
has been very successful in innovation China’s push4 to innovate – its growing
in the fields of digital communication, expenditures in research and development
computer technology, audio-visual (R&D), its large pool of postgraduates, and
technology and telecommunications. its supportive government policies – has been
instrumental in promoting the country’s
technological advancement. Over the past
3
The country of residence (or nationality, in the absence of
a valid residence) of the first-named applicant of an IP ap-
several months, a series of pro-innovation
plication. Country of origin is used to determine the origin policies have been announced, demon-
of the IP application. Source: WIPO.
4
strating the government’s determination
In 2006, the State Council announced the National
Medium- and Long-Term Plan for Science and Technology to foster innovation and technological
Development (2006-2020). In 2010, the State Intellectual advance.
Property Office (CNIPA; Chinese Patent Office) published
the National Patent Development Strategy (2011-2020).
109929
China Investment
Strategy
We believe the pace of China’s innovation

CHART 9
will remain strong.
R&D Spending In China Is Lower Than In The US
700,000
Bn
First, China will boost its R&D expendi- US$ GROSS DOMESTIC EXPENDITURE ON R&D AT
tures, which are the backbone of innova- CURRENT PPP USD
tion. 600
600,000 CHINA US
• R&D intensity, defined as a country’s

500
R&D expenditures divided by its GDP, 500,000
tends to be positively correlated with
such innovation outputs as the number 400,000 400
of patents granted. China’s R&D inten-
sity is well below that of many countries
300
300,000
(Chart 8). Moreover, its 2019 level of
2.15% was also below the country’s 2020
target of 2.5%. 200
200,000
• There are three main types of R&D

100
100,000
– basic research, applied research and
experimental development, among which
2020
basic research is most important to tech- -
2015 2016 2017 2018
nological breakthroughs. In 2018, basic
SOURCE: OECD
research, applied research and experi-
mental development accounted for 5.5%,
11.2% and 83.3% of the total Chinese Chinese expenditures in basic research
R&D spending. are only about one third of what they are
in the US. Total R&D spending in China
Basic research refers to empirical or
has also remained smaller than in the US
theoretical research that seeks to obtain
(Chart 9). Nevertheless, given the largest
new knowledge about the fundamental
part of R&D spending is labor compensa-
principles.
tion, lower wages in China imply that in
Applied research is the application of real terms, the US-China R&D expendi-
existing scientific knowledge to practical ture gap might be in favor of China.
situations, which leads technologies or
• On May 11, the Chinese government
inventions.
released guidelines that laid out several
Experimental development is a systematic measures designed to boost basic
kind of work, drawing on knowledge research through an increase in expendi-
gained from research and practical expe- tures and the hiring of human talent from
rience and producing additional knowl- both domestic and overseas markets. The
edge, which is directed towards produc- authorities called for more involvement
ing new or improving existing products from the private sector.
or processes.
109929
China Investment
Strategy
CHART 10 CHART 11
China: China:
Robust Growth In R&D Investment Ahead The Pool Of Human Capital Is Getting Larger
Ann% Ann% Ann% Ann%
Chg NOMINAL RESEARCH & DEVELOPMENT Chg Chg Chg
EXPENDITURES: CHINA:
30 5-YEAR MOVING AVERAGE 30 NO. OF GRADUATES:
30 POSTGRADUATE 30
TOTAL
20 20
20 20
10 10
10 10
0 0
Ann% Ann% Th Th
Chg Chg 60 60
BASIC RESEARCH
50 50
30 30
40 40
30 NO. OF GRADUATES: 30
DOCTOR DEGREE
20 20 CHINA
20 US 20
10 10
10 10
2020 2020
04 06 08 10 12 14 16 18 20 98 2000 02 04 06 08 10 12 14 16 18 20
In China, the private sector5 contributes Second, there is a larger pool of

about 78% of R&D funding while the human capital in China. The number of
government6 accounts for the rest. Local postgraduates rose by 5.8% last year, the
governments, in general, account for 60% highest rate since 2012 (Chart 11, top
of total government R&D funding while panel). Meanwhile, China has already
the central government contributes the exceeded the US in terms of the number
rest. of doctorate recipients in 2018 – 60.7
thousand vs. 55.2 thousand (Chart 11,
Chinese R&D expenditure and basic
bottom panel).
research spending has grown at a CAGR
of 10.8% and 14.5%, respectively, over the 5
Private sector’s R&D funds are mainly self-raised funds.
past five years (Chart 10). We expect a 6
Government funds for R&D expenditures include fiscal
similarly robust growth rate over the next appropriations for science and technology, scientific
funds, education expenses and non-budgetary funds of
five years. government departments. Source: NBS.
109929
China Investment
Strategy
In addition, the number of bachelor-equiva-

CHART 12
lent degree graduates in science and engi-
S&E Graduates: China Versus The US
neering (S&E) in China is about twice that 40.0
%
in the US. SHARE OF TOTAL FIRST UNIVERSITY
DEGREES BY S&E FIELD
35.0
In terms of first university degrees, the 30.0

CHINA (2015)
proportion of engineering students is much UNITED STATES

25.0 (2016)
higher in China (32.9%) than in the US
(6.8%), while the proportion of students 20.0
choosing the natural and social sciences is 15.0

much higher in the US than in China (Chart
10.0
12, top panel).
5.0
At the doctoral level, the proportion of
0.0
engineering students is also much higher in NATURAL ENGINEERING SOCIAL SCIENCES
SCIENCES
China (34.8%) than in the US (15.2%), and 40.0
%
the proportion of students preferring the SHARE OF TOTAL DOCTORAL DEGREES
35.0 CHINA (2015)
natural sciences is only slightly higher in the
UNITED STATES
US than it is in China. The share of doctor- 30.0 (2016)
ates in social sciences – which matter less 25.0
to the growth of technological innovation
20.0
- is much higher in the US than in China
(Chart 12, bottom panel). 15.0
10.0
Importantly, the US plans to tighten its
policy on international students from 5.0
China, who account for over one-third of 0.0

2020
US international undergraduate and grad- NATURAL ENGINEERING SOCIAL SCIENCES

SCIENCES
uate students.7 In 2018, 43% of Chinese SOURCE: NATIONAL SCIENCE FOUNDATION, NATIONAL SCIENCE
undergraduates and 63% of Chinese gradu- BOARD, NATIONAL CENTER FOR SCIENCE AND ENGINEERING
STATISTICS (NCSES).
ates in the US enrolled in S&E. Chinese S&E
graduates account for about 14% of the total
number of S&E graduates in the US (includ- Third, the Chinese government encourages
ing bachelor, master and doctoral degrees). small & medium size companies to increase
their capacity for innovation. In order to
With the US-China tensions to heighten in stimulate this innovative atmosphere, the
the years to come, many Chinese graduates government promotes policies such as
and former graduates from US universities direct subsidies towards patent filing fees,
will return to China. This will reduce the rewards for patents granted, and corporate
pool of available S&E human capital in the tax reductions for innovative companies.
US and increase it in China.
7
In 2018, there were 129,420 international graduate
students from China enrolled in US graduate and
undergraduate programs.
109929
China Investment
Strategy
Last, Chinese authorities are in the process As a result, China’s manufacturing sector
of designing a blueprint for Long-Term will remain highly competitive in the global
Science and Technology Development marketplace due to the country’s improved
(2021-2035). This is set to be released by the capacity for innovation. The growth of
end of this year. The guidelines will further China’s productivity has always been well
enhance the progress of the country’s above the global average and this gap will
innovation. likely persist (Chart 13). Its share of global
trade volumes will also remain high, despite
Bottom Line: Growing investment in R&D, US-China confrontations (Chart 14).
a large pool of mainland and returning
international postgraduates in science and We are positive on Chinese high-tech
engineering and supportive government exports,8 as the country will enjoy both
policies have enabled China to become a economies of scale and rising productiv-
major hub of innovation. ity. Chinese high-tech exports will gain in
global market share (Chart 15).
Macro Implications And Risks

The rapid pace of China’s innovation will 8
High-technology exports refers to products characterized
benefit its overall productivity growth and by high R&D intensity, such as aerospace, computers,
pharmaceuticals, scientific instruments, and electrical
its global competitiveness. machinery. Source: World Bank.
CHART 13 CHART 14
China: Innovation Will Benefit Its China’s Share Of Global Trades
Productivity Growth Will Remain High
Ann% Ann%
Chg REAL GDP PER PERSON EMPLOYED* Chg
(LABOR PRODUCTIVITY)
400 400
CHINA
WORLD
10 10 300 300
CHINA:
EXPORT VOLUMES RELATIVE
TO GLOBAL EXPORT VOLUMES*
200 200
5 5
150 150
0 0
2020 100 2020 100
92 96 2000 04 08 12 16 20 2000 02 04 06 08 10 12 14 16 18 20
* SOURCE: WORLD BANK. * REBASED TO 100 AT JANUARY 2000.
109929
China Investment
Strategy
CHART 15 CHART 16
Chinese High-Tech Exports: Global Research:
Higher Global Market Share Ahead Increasingly Collaborative
% % 70%
%
HIGH-TECH EXPORTS INTERNATIONAL COLLABORATION RATE* (2018)
AS A % OF WORLD*
25 IN US$: 25 60%
60
CHINA
20 GERMANY 20 50%
50
JAPAN
US
15 15 40%
40
10 10 30
30%
5 5 20
20%
10
10%
% %
CHINA:
HIGH-TECH EXPORTS/TOTAL EXPORTS** 2020
0%
UK FRANCE GERMANY US CHINA
30 30 *THE PROPORTION OF S&E RESEARCH PAPER THAT HAVE CO-AUTHORS
WHO HAVE DIFFERENT NATIONALITIES.
SOURCE: US NATIONAL SCIENCE BOARD, PUBLICATIONS OUTPUT: U.S.
TRENDS AND INTERNATIONAL COMPARISONS, DECEMBER 17, 2019
25 25 A final few words about the risks about

China’s innovation successes.
First, significant escalation in US-China

20 20 tensions may be disruptive to China’s
innovation in the medium term.
2020 This is because the world's scientists are
2000 02 04 06 08 10 12 14 16 18 20
increasingly collaborating in their research
* SOURCE: WORLD BANK endeavors. Major producers of S&E publi-
** SHOWN AS A 12-MONTH MOVING TOTAL.
cations (journal articles and conference
Importantly, while its labor force contracts, papers) all have high international collabo-
productivity remains the sole source of rate rates (Chart 16).
potential GDP growth for this nation. This rate for the US was 39% in 2018,
Successful innovation will allow China to rising from 37% in 2016. While the Chinese
keep productivity growth high, and enable it international collaboration rate was low,
to grow at a solid rate without inflation. at 22%, Chinese authors collaborated
109929
China Investment
Strategy
most frequently with authors from the US. in its efforts to secure further innovation
Indeed, about 44% of China’s international and technological advancement.
S&E articles had some form of collabora-
Second, over the years we have written a
tion with US authors.9
lot about the credit and money bubble in
In addition, tensions with the US, which are China, which represents a risk to innovation
likely to cut off China’s ties with leading US and productivity. “Helicopter” money and
and European universities and companies, unconstrained lending - originating from
could cause disruptions in China’s interna- “thin air” not national savings as we argued
tional collaborative research capacity. in previous reports –could undermine inno-
vation and productivity.
However, the US-China geopolitical
confrontation has made China more So far, China has succeeded in promot-
focused and determined to continue its ing innovation despite credit and money
push to innovate. China can prevail in this overflows and the misallocation of capital.
geopolitical confrontation only if it is able However, continuous credit and money
to continue upgrading its technology and booms could, in the long run, jeopardize the
maintaining its high productivity growth growth rate of the nation’s innovation and
rates. The leadership understands that and productivity.
will be even more focused and determined
Ellen JingYuan He
Associate Vice President
ellenj@bcaresearch.com
9
Source: US National Science Board, Publications Output:
U.S. Trends and International Comparisons, December 17,
2019
109929
China Investment
Strategy
Global Offices Copyright 2020, BCA Research Inc. Important Disclaimer

All rights reserved.
The text, images and other materials contained or displayed on any BCA This communication reflects our analysts’ current opinions and may not
Main Office
Research Inc. product, service, report, e-mail or web site are proprietary be updated as views or information change. Past results do not guarantee
Montreal, Canada to BCA Research Inc. and constitute valuable intellectual property. future performance. Business and market conditions, laws, regulations,
1002 Sherbrooke Street West, No material from any part of any BCA Research Inc. web site may be and other factors af-fecting performance all change over time, which
downloaded, transmitted, broadcast, transferred, assigned, reproduced could change the status of the information in this publication. Using
Suite 1600 or in any other way used or otherwise disseminated in any form to any any graph, chart, formula, model, or other device to assist in making
Montreal, Quebec H3A 3L6 person or entity, without the explicit written consent of BCA Research investment decisions presents many difficulties and their effectiveness
Inc. All unauthorized reproduction or other use of material from BCA Re- has significant limitations, including that prior patterns may not repeat
Phone +1 800 724 2942 search Inc. shall be deemed willful infringement(s) of BCA Research Inc. themselves and market participants using such devices can impact the
+1 514 499 9550 copyright and other proprietary and intellectual property rights, including market in a way that changes their effectiveness. BCA Research believes
but not limited to, rights of privacy. BCA Research Inc. expressly reserves no individual graph, chart, formula, model, or other device should be
all rights in connection with its intellectual property, including without used as the sole basis for any investment decision.
London, United Kingdom limitation the right to block the transfer of its products and services and/
or to track usage thereof, through electronic tracking technology, and all BCA or its affiliated companies or their respective shareholders, direc-
8 Bouverie Street other lawful means, now known or hereafter devised. BCA Research Inc. tors, officers and/or employees, may have long or short positions in the
London, EC4Y 8AX reserves the right, without further notice, to pursue to the fullest extent securities discussed herein and may purchase or sell such securities
allowed by the law any and all criminal and civil remedies for the violation without notice.
Phone +44 0 207 556 6008 of its rights.
Neither BCA Research nor the author is rendering investment, tax, or
Non-residents of Canada confirm that they do not, and have never had legal advice, nor offering individualized advice tailored to any specific
New York, United States the right to use any of BCA Research Inc.’s materials in Canada, and portfolio or to any individual’s particular suitability or needs. Investors
1120 6th Avenue, 6th Floor agree that they have not and never will use any of the materials in Cana- should seek professional investment, tax, legal, and accounting advice
da unless they acquire this right by paying the applicable Canadian and prior to making investment decisions. BCA Research’s publications do
New York, NY 10036 Quebec sales taxes. All unauthorized use of the materials in Canada shall not constitute an offer to sell any security, nor a solicitation of an offer
Office +1 212 224 3669 be deemed willful infringement of BCA Research Inc. copyright and other to buy any security. They are designed to provide information, data and
proprietary and intellectual property rights. analysis believed to be accurate, but they are not guaranteed and are
provided “as is” without warranty of any kind, either express or implied.
West Coast, United States While BCA will use its reasonable best efforts to provide accurate and BCA RESEARCH DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED
informative Information Services to Subscriber, BCA cannot guarantee WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES
Phone: + 1 210 219 9924
the accuracy, relevance and/or completeness of the Information Services, OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR
or other information used in connection therewith. BCA, its affiliates, PURPOSE OR USE.
shareholders, directors, officers, and employees shall have no liability,
Hong Kong contingent or otherwise, for any claims or damages arising in connection BCA Research, its affiliates, officers, or employees, and any third-party
38/F, Hopewell Centre with (i) the use by Subscriber of the Information Services and/or (ii) any data provider shall not have any liability for any loss sustained by anyone
errors, omissions or inaccuracies in the Information Services. The Infor- who has relied on the information contained in any BCA Research pub-
183 Queen’s Road East mation Services are provided for the benefit of the Subscriber. It is not to lication, and they shall not be liable to any party for any direct, indirect,
Wanchai, Hong Kong be used or otherwise relied on by any other person. incidental, exemplary, compensatory, punitive, special or consequential
Office +852 2912 8055 damages, costs, expenses, legal fees, or losses (including, without lim-
Some of the data contained in this publication may have been obtained itation, lost income or lost profits and opportunity costs) in connection
from Bloomberg Barclays Indices; Bloomberg Finance L.P.; CBRE Inc.; with any use of the information or opinions contained BCA Research
CEIC data; First Bridge Data LLC; Copyright © 2020, IHS Markit; MSCI publications even if advised of the possibility of such damages.
Sydney, Australia Inc. Neither MSCI Inc. nor any other party involved in or related to
Level 19, 1 O’Connell Street compiling, computing or creating the MSCI Inc. data makes any express Important copyright and other information are available here:
or implied warranties or representations with respect to such data (or the https://www.bcaresearch.com/copyright.
Sydney, Australia
results to be obtained by the use thereof), and all such parties hereby
NSW 2000 expressly disclaim all warranties of originality, accuracy, completeness,
Office +61 02 8249 1867 merchantability or fitness for a particular purpose with respect to any
of such data. Without limiting any of the foregoing, in no event shall
+61 02 8249 1868 MSCI Inc., any of its affiliates or any third party involved in or related to
compiling, computing or creating the data have any liability for any direct,
indirect, special, punitive, consequential or any other damages (including
Cape Town, South Africa lost profits) even if notified of the possibility of such damages. No further
distribution or dissemination of the MSCI Inc. data is permitted without
16 Ebenezer Road MSCI Inc.’s express written consent. Real Capital Analytics Inc.; Reis
The Foundry Services LLC; Copyright © 2020, S&P Global Market Intelligence (and its
Cape Town, 8000 affiliates as applicable). Reproduction of any information, opinions, views,
data or material, including ratings (“Content”) in any form is prohibited
South Africa except with the prior written permission of the relevant party. Such
Office +27 21 276 1927 party, its affiliates and suppliers (“Content Providers”) do not guarantee
the accuracy, adequacy, completeness, timeliness or availability of any
Mobile +27 83 317 1908 Content and are not responsible for any errors or omissions (negligent
or otherwise), regardless of the cause, or for the results obtained from
the use of such Content. In no event shall Content Providers be liable
São Paulo, Brazil for any damages, costs, expenses, legal fees, or losses (including lost
income or lost profit and opportunity costs) in connection with any use
Office +55 11 9828 13005
of the Content. A reference to a particular investment or security, a rating
or any observation concerning an investment that is part of the Content
is not a recommendation to buy, sell or hold such investment or security,
does not address the suitability of an investment or security and should
not be relied on as investment advice. Credit ratings are statements of
opinions and are not statements of fact; Standard and Poor’s (“S&P”)
Copyright © 2020 The McGraw-Hill Companies, Inc., S&P is a division
of The McGraw-Hill Companies Inc. All rights reserved; or from Refinitiv,
“The Refinitiv Kinesis Logo and Refinitiv are trademarks of Refinitv and its
affiliated companies in the United States and other countries and used
herein under license.” In addition to the foregoing, Client shall display
or print the following notice in the Help About section or in a general
attribution page. “Copyright ©Refinitiv, 2020. All Rights Reserved. Use,
duplication, or sale of this service, or data contained herein, except as
described in the BCA Research products subscription agreement, is
strictly prohibited.”
109929

EMS - CIS - SR - Do Not Overlook China's Innovation Drive200624

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

EMS - CIS - SR - Do Not Overlook China's Innovation Drive200624

Uploaded by

Copyright:

Available Formats

Shape Your ConvictionTM

Special Report June 24, 2020

• Its increased expenditures in research

Ellen JingYuan He economy to grow at a solid rate with-

SOURCE: WORLD INTELLECTUAL PROPERTY ORGANIZATION

China’s Innovations: TABLE 1

and South Korea (Table 1). In fact, US Japan 21%

of global PCT applications. *PCT APPLICATIONS BY DATE OF RECEIPT AT INTERNATIONAL BUREAU;

Here are the main characteristics of the

70% of increases over the past five years.

Table 2 shows the sectors with the larg- Electrical machinery,

fields of digital communication, audio-vi-

over the past five years, with its global Computer

in 2019 (Chart 4). The country is only

the semiconductor industry. energy

Fourth, the technological gap between Medical

three areas, China’s share of global PCT

30 30 The US still leads the world in these fields

40 40 What about those China’s PCT patents

Bottom Line: China has become a major Building Blocks Of China’s

We believe the pace of China’s innovation

• R&D intensity, defined as a country’s

• There are three main types of R&D

In China, the private sector5 contributes Second, there is a larger pool of

In addition, the number of bachelor-equiva-

In terms of first university degrees, the 30.0

proportion of engineering students is much UNITED STATES

choosing the natural and social sciences is 15.0

China, who account for over one-third of 0.0

US international undergraduate and grad- NATURAL ENGINEERING SOCIAL SCIENCES

Macro Implications And Risks

2020 100 2020 100

25 25 A final few words about the risks about

First, significant escalation in US-China

Global Offices Copyright 2020, BCA Research Inc. Important Disclaimer

You might also like