2018 is the 40th anniversary of China's reform and opening up. Looking back at the great achievements China has made in economic development over the past 40 years, it is exciting. At the same time, while the demographic dividend is gradually fading, the debt level continues to rise, and economic growth is too dependent on infrastructure construction, and the market is beginning to worry about the sustainability of China's economic growth. How to maintain high growth and successfully overcome the trap of middle countries has become an important issue. "Innovation" is the only way for China to overcome the trap of middle developed countries. Only by continuously improving the efficiency of labor production can China complete the transition from an "industrial power" to an "industrial power" and realize the transition from "made in China" to "China" "Creation" transformation.
Our research shows that a storm of innovation is emerging in China, mainly in IT and emerging industries. Although there is still a lack in high-end manufacturing and medical and health industries, its scale may have a profound impact on the future of China and the world. From the world's largest total cashless transaction to the world's fastest big data calculation speed, from the world's largest electric vehicle market to the world's most advanced high-speed rail network, from the world's most prolific artificial intelligence scientific paper to the world's leading photovoltaic industry Chain, China has broken through technological bottlenecks in many industries and become a world leader.
Some quantitative indicators re-examine China's achievements in the past ten years and have made substantial progress in the field of innovation. In 2015, Chinese scientists published a total of 448,221 academic papers in the SCOPUS journal, which is lower than the US's 635,127 and ranked second in the world. The average citation for a single article is 3.09 times, which is lower than the US 3.92 times, but slightly higher than the traditional scientific research power Japan. Although the H-index (high-intensity citation) of these academic papers ranks only 14 and still lags behind other research powers, the gap between them has narrowed rapidly over the past few years.
The number of patent grants and applications in China has surged in recent years. In 2015, China authorized 275,000 patents, surpassing Japan with a slight advantage, the highest number in the world, and accounting for 28% of the patent grants of the world's five largest patent offices. According to data from the world's five largest intellectual property offices, since 2015, the number of patent applications in China has been 2.4 times that of the United States. This shows that China's patent grant volume is expected to significantly exceed that of the United States in the next few years. At the same time, China is also applying for more patents in Europe and the United States. In 2015, China had 8,116 patent applications approved in the United States (annual compound growth rate of 25% between 2010 and 2015), accounting for 3% of the total number of US patents granted in that year, and ranked fifth among overseas countries ( 2007 ranked only 15th), ranking higher than the United Kingdom and France. Japan, South Korea, and Taiwan that are ahead of China are all export-led economies. This not only shows that China's technological power is rising, but also shows that in some industries, Chinese companies have made strategic preparations for entering the US market.
After this dazzling achievement, the first question is, how did China rise rapidly, and what exactly ignited the spark of innovation in China? Whether she can maintain her leading position in these segments. We seem to have four key drivers of innovation.
The first is government policy support for start-ups, R & D and innovation. China's R & D expenditure has ranked second in the world. In the past ten years, China's R & D expenditure has grown rapidly at an annual compound growth rate of 18%, and reached 1.55 trillion yuan in 2016. It ranks second in the world in terms of purchasing power parity in US dollars, and is expected to exceed the United States as the world's R & D investment in 2018 Number one country. Over the past three decades, the government's investment in innovation has been twice the GDP growth rate, demonstrating its strong willingness to promote the country through science and technology. At the same time, the State Council together with other ministries and commissions have issued different policies to support innovation, such as the establishment of national economic and technological development zones and national high-tech industrial development zones. Preferential tax policies for high-tech enterprises are also an important part. In 2016, of the 380,000 industrial and manufacturing companies nationwide, a total of 80,000 companies met the standards of "high-tech" companies. In other words, 21% of industrial enterprises can enjoy a preferential tax rate of 15% (statutory tax rate: 25%).
The second is a flexible market ecology, or "barbaric growth." Chinese consumers and law enforcement agencies still have considerable tolerance for domestic brands. Stimulated by the huge domestic market, Chinese companies often use the "trial and error method", that is, they often push the market before the product is perfect, and then frequently upgrade the product based on consumer feedback. Therefore, from a strict definition, a considerable amount of the "after-sales service" expenses in Chinese accounting should be recorded as R & D expenses, and consumers are experimenters. For example, the annual sales of Chinese cars is 57% higher than that of the United States, but the number of market recalls is only one-fifth of the United States. Today's shared bicycles, which cause a huge waste of resources, are also an example of this.
The third is the engineer bonus. In 2016, China graduated 6.8 million undergraduates (four times the graduates from the United States), 550,000 graduate students, and another 430,000 international students returned home. Compared with the author ’s university graduation in 1995, only 660,000 people graduated in China. At the same time, we are also glad to see that the quality of university education in China has made great progress. In 2015, a total of 24 universities in China entered the QS World University Rankings 500, ranking fourth in the world in terms of number of schools. But in the past five years, China has been able to provide on average only 200,000 R & D jobs. We believe that China's abundant and cheap R & D talents in science and technology will keep China's R & D costs lower than foreign levels. In other words, we believe that the Chinese engineer's dividend has only begun to emerge gradually and is expected to continue for the next ten years.
The fourth is that ample savings provide a lot of innovation funds. China's savings rate has always been higher than that of developed countries, and in recent years more and more funds are flowing from real estate and stock markets to venture capital and other venture capital areas, thereby diversifying investment. Data show that 75% of Chinese startups are self-funded, which is significantly higher than 44% in the United States. In the past two years, the scale of venture capital alone has reached 100 billion US dollars, equivalent to 0.8% of China's GDP, which is three times that of the United States.
Chinese companies are making subversive impacts on the global industrial competitive landscape in many fields, such as photovoltaics, LEDs, and LCDs. We expect the above-mentioned factors supporting China's R & D growth to persist for a long time, so China will gradually achieve more breakthroughs in more manufacturing. Mainly China can continue to invest in research and development, accumulate silicon, so that thousands of miles should have the opportunity to successfully break through the traps of middle countries and enter the ranks of developed countries.