China research drive paying off in tech gains

Chinese companies' readiness to invest heavily in research and development in pursuit of innovation over the past decade has led China to dominate the patent filings in Europe, experts say. And they believe this trend is likely to continue and, in turn, enhance the competitiveness of Chinese firms in the global market.

The number of patent applications from China at the European Patent Office, or EPO, has more than quadrupled in the past 10 years and, by 2021, they accounted for 9 percent of all applications at the EPO, rising from 3 percent in 2012, the European Union agency's data suggests.

EPO spokesman Luis Berenguer Gimenez said: "In the last decade, China increased its patent applications at a higher pace than any other of the leading countries. This shows that Chinese companies are investing strongly in innovation, and using and benefiting from intellectual property protection both in China and abroad.

"China has clearly put a lot of focus on technology innovation in recent years as a key factor for the growth of its economy. This is significant, and the results of this strategy are reflected in top growth in patent applications in a growing number of technologies."

Experts believe the increase in Chinese patent filings is the result of a strong increase in R&D activities.

"Since the mid-1980s, China has been steadily increasing its investments in State and privately funded R&D activities," said Stefan Wagner, professor of strategy and innovation at the European School of Management and Technology, also known as ESMT Berlin.

According to research analysis company Statista, China's R&D expenditure totaled more than $622 billion in 2021, exceeding that of the United States ($598 billion) in absolute terms and making it the single largest spender in the category. Compared with 10 years ago, China's R&D spending more than tripled.

Wagner said this development has been accompanied by a strengthening of the higher education sector that has boosted the number of university researchers, which contributes further to the increasing number of patent filings.

Geopolitical environment

While Chinese firms have increasingly realized the importance of innovation and shaped their patent strategies with consistent investment in R&D, He Shaowei, associate professor in international business at the University of Northampton, said the current geopolitical environment perhaps has further enhanced the urgency for them to make further investments.

"Take Huawei for example. Despite a significant fall in its revenue in 2021, it has decided to invest further in R&D."

Huawei, a major Chinese technology company, has fallen victim to geopolitical forces and ideology-based suppression from the United States and some of its allies. As a result, its production and sales have been seriously affected.

"Certainly, the trend (of Chinese firms increasing R&D spending) is becoming clearer and stronger year after year and there is no doubt that there are a number of very innovative Chinese firms," He said.

Chinese companies were particularly strong in filing patents on digital communications in 2021 at the EPO, marking the strongest growth in the field.

George Yip, professor at Imperial College London and Northeastern University in Boston, said: "China is benefiting from a latecomer advantage by leapfrogging the (traditional) analog communication stage (where the information signal sent from point A to point B) and accelerating in digital communication. As a result, both Chinese consumers and Chinese companies are among the most digitally oriented in the world."

Yip said he is confident that Chinese companies will continue to gain in global market share, as there are already more Chinese than US companies in the Fortune Global 500 list of the world's largest companies.

The past two decades have seen significant improvements not only in the quantity but, more importantly, also in the quality of Chinese R&D outputs, experts said.

"Over the past 15 years, China has tripled its high-impact scientific efforts (as measured by its share of the top 10 percent of most-cited publications), reaching 14 percent－the second-largest scientific powerhouse after the United States, which has 25 percent," Wagner said.

Jeffrey Towson, visiting professor at the China Europe International Business School, and head of the US-Asia Tech Strategy advisory, said: "The 'China copies' trope is really 20 years out of date at this point. Chinese companies have long been leaders in cost innovation and customer-facing innovation."