Innovation flourishing in China, says UBS report

China is transforming from being the world factory to an innovation-driven nation by embracing a fresh wave of innovation, a new report said.

According to the report from Swiss financial firm UBS, China's total research and development investment registered an 18 percent compound average growth rate between 2006 and 2016. If the same momentum is maintained, China will become the world's second largest R&D investor after the United States by 2020, with such investments accounting for 2.5 percent of the total GDP by then.

The country is also home to the second-largest number of so-called unicorn companies, next only to the US. Such companies have a market value over $1 billion each and have been operating for over 10 years. About 20 percent of these Chinese companies have made technology breakthroughs while the remaining 80 percent have made innovations in business models, explained Hou Yankun, chief China strategist at UBS Investment Bank China.