From Made in China to Innovated in China : Necessity, Prospect, and Challenges. Shang-Jin Wei, Zhuan Xie, and Xiaobo Zhang

Transcription

1 From Made in China to Innovated in China : Necessity, Prospect, and Challenges Shang-Jin Wei, Zhuan Xie, and Xiaobo Zhang 1

2 China s (past) growth has been spectacular 14,000 Real per capita GDP (2.3 times) $13,277, 2015 Average real per capita GDP growth, ,000 Equatorial Guinea China ,000 China Bhutan 5.7 8,000 Korea % 6,000 4,000 2,000 - $1,297, 1980 $714, 1980 $3,644, 2000 $2,547, 2000 India $5,799, 2015 Vietnam Maldives Taiwan India Sudan Sri Lanka Note: Figures in 2011 PPP. Source: ADB calculations from WEO April Note: Figures in 2011 PPP. Source: ADB calculations from WEO April

3 SDN TTO MOZ ALB MDV IND VNM BTN NGASLE CPV ETH POL LAO LKA QAT RWA IRQ DOM TCD BGD TWN PAN UGA TUN IRL MUS ZMB BGR LSO SUR IRNROU MAR BFA GRDCHL SGP JOR PER TZA GHA EGY CRI HKG BWA LBN PHL HUN GUYISL URY FIN SWESYC TUR NPL MLT VCT LUX DMA MYSIDN THA LBY NIC NAM ZAF MWI DZA GRC MLI SLV NZL AUS NLD AUT COL ESP GBR ISRPAK CANBEL PRI SWZCYP BLZ STP MRTHND SEN MEX BRB BRA ECUCHE USA NOR PRT OMN KNA NER GMB BOL CMR BEN GTM COG FRA FJI DEU DNK BHS KEN JPN ATG LCA VEN VUT PRY ITA TON BDI PNG SAU MDG COM BHR BRN CIV KIR CAF GNB JAM HTI SLB TGO GABKWT ARE Real per capita GDP growth rate Source: WEO ZWE KOR CHN Chinese growth rate (%) Source: WEO GDP Per capita GDP Notes: Figures in 2011 PPP. Excluding outliers: Liberia and Equatorial Guinea 3

4 Some numbers to put things in perspective Average real per capita GDP growth of 8.7% during Real per capita GDP increased from $714 in 1980 to $13,277 in 2015 Only Equatorial Guinea has exceeded China s performance Real per capita GDP growth of more than 6% for 25 consecutive years from 1990 to 2015 Note: Figures in 2011 PPP. 4

5 Reasons for the growth success (1) Policy actions Economic fundamentals 5

6 Reasons for the growth success (2) Policy actions Launching market oriented reforms Agriculture - household responsibility system Industry and service grasp the large and let go of the small Lower entry barriers Embracing globalization Democratization of trading rights Openness to FDI Accession to the WTO Minimizing resistance Dual track system Special economic zones Political centralization + economic decentralization 6

7 Reasons for the growth success (3) Economic Fundamentals: low wage + favorable demographics 0 Rank of real per capita GDP among 138 non-oecd countries 72 Share of working age cohort (15-59) in population (%) 20 Brazil 68 Vietnam Philippines Nigeria Indonesia China China Philippines Brazil India 80 India Vietnam Bangladesh 56 Indonesia Nigeria Bangladesh Note: Figures in 2011 PPP. Source: ADB calculations from WEO April Source: Haver Analytics. 7

8 Rio Olympics opening ceremony 8

9 Beijing Olympics opening ceremony 9

10 Rising Real Wages (Men) Daily wage (yuan) Eastern Central Western Zhang, Yang, and Wang, CER

11 Rising Real Wages (Women) Daily wage (yuan) Eastern Central Western

12 Chinese factories: Past and present 12

13 Growth is likely to moderate further Vested interest groups have formed and lowhanging fruits of institutional reforms have been picked. Due to cyclical (weak global economy) and structural factors (rising wages, shrinking workforce) Postponing retirement age, increasing female labor force participation, and relaxing family planning policy will not reverse the trend in the short-run 13

14 Options for Chinese firms In: move to inland provinces Out: outward direct investment Down: shut down Up: innovation and upgrading. Future growth must mainly come from labor productivity growth. 14

15 Can the transition from made in China to innovated in China happen? China s Transition to a More Innovative Economy: Progress and Challenges, (Shang-jin Wei, Zhuan Xie, and Xiaobo Zhang), Journal of Economic Perspective, 31 (1): 49-70,

16 If you want to look reasons to say no, you can find them 16

17 If you wish to look for optimistic examples, you can find them too. WeChat s world 17

18 WeChat Wallet 18

19 Uber gave up 19

20 What do the systematic data say? What is the actual growth of innovation of China s firms? What accounts for the relatively fast pace of innovation (as measured by patent applications and approvals) by Chinese firms? Is there possible resource misallocation in the innovation space? 20

21 R&D/GDP vs GDP per capita Note: data for China are from 1995 to 2014, and data for all other countries are for 2014 or the latest year available. Source: OECD database and World Bank. 21

22 Number of Chinese patents has exploded Share to total 100% 80% 60% 40% 20% 0% Chinese patent applications ,500 2,000 1,500 1, Thousands Invention (%) Utility model (%) Design (%) Total domestic applications (RHS) 22

23 What explains China s innovation growth Easy approval? Government subsidies? Taking advantage of expanding market opportunities Spurred by rising wages? 23

24 Patent approval rate is not unusually high Patent Approval Rate in BRIC Countries, the Republic of Korea, and the U.S. 24

25 Invention patents in the US show a rising trend Invention Patents Granted in USPTO by Different Countries 25

26 Growing patent citations indicate quality improvements Citations on Invention Patents Granted by USPTO: Cross-country Comparison 26

27 Chinese product quality has steadily improved Export Quality: Conditional Plot on Export Market Shares in Selected Countries 27

28 What drives the rising pace of innovation? Statistical analysis 28

29 Quantifying the drivers of innovation Regress patents on: Wages R&D subsidy rate Tariff rate of trade partners Market competition Other firm characteristics (e.g., sales, tax rate, interest rate on liabilities, exporter or not) 29

30 Export firms are more innovative Patent Intensity by Firm Export Status 30

31 Labor-intensive firms innovated more Patent Intensity by Firm Capital Intensity 31

32 Key results Firm size is (+) associated with # of patents Export firms are more innovative Lower (foreign) tariffs are good for innovation Invention patents respond (+) to subsidies High tax rate discourages innovation Higher cost of capital discourages innovation Robust (+) relationship between wages and innovation 32

33 SOEs granted more subsidies Ratio of Subsidies to Sales by Firm Ownership and Size Source: China annual above-scale industrial firm surveys. 33

34 but lag behind private firms in patent generation Share to total 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Domestically granted patents Private firms (%) State-owned firms (%) Foreign firms (%) Total (RHS) Thousands 34

35 SOE R&D resources not efficiently spent Impact of R&D on Patent Output Variables Total Invention Utility model Design R&D (log)*fie * ** R&D (log)*soe ** *** R&D (log) 0.015*** 0.017*** 0.013*** 0.012*** Sales (log) 0.274*** 0.328*** 0.254*** 0.287*** Observations 785, , , ,235 Firm FE YES YES YES YES Year FE YES YES YES YES AIC Note: China annual above-scale industrial firm surveys. R&D data are available only during

36 Summary The Chinese economy fortune is at crossroads Can Chinese firms really innovate? Patent application Patent citations Drivers of firm innovation: (i) world market opportunities; (ii) rising labor costs Possible misallocation Subsidy allocation biased in favor of SOEs, but private firms innovate more Structural reforms that level the playing field can accelerate innovations 36

37 China Regional Innovation Index ( ) was released in December 2016; China Regional Innovation Report was published by Peking University Press in 2016.

38 Major features Market-based and output-based Universe firm database Multiple dimensions (technology, talent, and investment)

39 The new innovation index combines the following data sources: Firm registry database, covering the number of startups and new investment National patent database National trademark database Venture capital investment

40 The major sub indicators patents Homegrown entrepreneurs trademark Innovation index Venture investment External investment New firms 朗润龙信数据创新实验室

41 Methods: (1)Transform 10 variables into z-scores (2)Calculate weighted z-scores 维度名称 ( 权重 ) 分项指标 在子维度中所占权重 在指数中所占权重 新建企业 (1/10) 新增企业注册数量 1 1/10 吸引外来投资 (3/20) 新增外来法人投资的笔数 1/2 3/40 新增外来自然人投资的笔数 1/2 3/40 吸引风险投资 (1/4) 新增风险投资的企业数量 1/2 1/8 新增风险投资的金额 1/2 1/8 诞生创业者数量 (1/10) 新增本地籍创业者数量 1/1 1/10 新增发明专利授权数量 1/2 1/8 专利授权数量 (1/4) 新增实用新型专利公开数量 3/10 3/40 新增外观设计专利公开数量 1/5 1/20 商标注册数量 (3/20) 新增商标注册数量 1 3/20

42 Innovation index Time period: Regional coverage: (1)Ranking by province (2)Ranking by city (3)Ranking by county (4)Ranking by urban district Industry: up to SIC4 level.

43 Trend of innovation 1.0e e e e e+06 No. of startup 年份 No. of VC investment 年份 Newly granted patents 年份 朗润龙信数据创新实验室

44 Spatial Distribution of Innovations

45 Rankings (Top 20 provinces) Rank Province Total score Ranking based on per capita 1 Guangdong 广东 Jiangsu 江苏 Zhejiang 浙江 Shanghai 上海 Beijing 北京 山东 河南 四川 湖北 安徽 福建 河北 湖南 辽宁 贵州 江西 陕西 云南 山西 重庆

46 Overall ranking Shanghai Beijing Shenzhen City Ranking (top 50) in 2015 Per capita ranking 46

47 总量排名 Beijing Guangdong 安徽省北京市福建省甘肃省广东省广西壮族自治区 贵州省 海南省 河北省 河南省 黑龙江省 湖北省 湖南省 吉林省 江苏省 江西省 辽宁省 内蒙古自治区 Shanghai 宁夏回族自治区青海省山东省山西省陕西省上海市 Zhejiang 四川省天津市西藏自治区新疆维吾尔自治区云南省浙江省 The most innovative provinces include: o Beijing o Guangdong o Shanghai o Zhejiang 重庆市 Graphs by 省市区 年份 Rankings by province over time ( ) The lower the better

48 安徽省北京市福建省甘肃省广东省广西壮族自治区 Northeast region has declined. 总量排名 贵州省海南省河北省河南省黑龙江省湖北省 Liaoning 湖南省吉林省江苏省江西省辽宁省内蒙古自治区 宁夏回族自治区青海省山东省山西省陕西省上海市 Liaoning s ranking drops from 5th in 1990 to 19th in 四川省天津市西藏自治区新疆维吾尔自治区云南省浙江省 重庆市 Graphs by 省市区 年份 Rankings by province over time ( ) The lower the better

49 Ongoing work Peking University is going to set up a data center to focus on information at the firm level ( 企业大数据研究中心 ). We will conduct Enterprise Survey for Innovation and Entrepreneurship in China (ESIEC) this summer. It will cover more than 100 counties nationwide, more than 10,000 firms. We will combine survey and administrative data (such as value added tax, social security, and utility bills) to keep track of both extensive and intensive firm growth. We plan to release quarterly indexes on firm performance and business environment.