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How China is bucking the trend on R&D spending

A new report from WIPO shows that China’s R&D spending is increasing rapidly. Is China making good on its promise to become an innovation-driven economy?

WIPO’s 2013 World IP Report (WIPR), released last Thursday, focuses on branding in the global marketplace. The 139-page report examines this issue from a number of angles, but a particularly interesting aspect traces advertising spending as well as R&D expenditures as a percentage of GDP in countries around the world and how these figures are shifting historically.

The WIPR notes that global spending on advertising is equivalent to about one-third of R&D spending. However, high-income nations (defined as those with gross national income per capita of $12,476 or more), follow a slightly different pattern. In the US for example, advertising has historically been a higher percentage of GDP than R&D. Research and development has increased fairly steadily over time, with advertising spending undulating but trending downward. According to the report, in 2010, advertising and R&D each accounted for slightly less than 2.0% of GDP.

China is trending differently. The WIPR shows that spending on advertising has hovered near 0.4% of GDP since around 1977. However, R&D expenditures as a proportion of GDP have risen rapidly during that same time, from just below 0.8% to approximately 1.3% in 2010. When you combine this with the growth in the country’s GDP over this time, the increase is even more impressive.

Building innovation requires more than just spending money, of course, and there are still concerns about China’s IP environment. Still, there is also increasing interest among international companies in China as an attractive location for research and development.

By contrast, many Chinese consumers still value international brands over domestic ones. For example, stories exist of where wearing sports apparel from a Chinese company may be grounds for humiliation if others are wearing Nike (registration required). This may be a reflection of the relative lack of spending on brand development by Chinese trade mark owners. Internationally, the story is much the same, with China being underrepresented in most rankings of the world’s top brands.

Of course, the much-discussed National IP Strategy does not just seek to make China a leader in scientific research; one of its aims is the creation of world-renown brands. The jury is still out on whether the National IP Strategy will succeed at all, but the WIPR report shows that at least in the area of scientific innovation, companies doing business in China are indeed dedicating more and more resources toward achieving that goal.

WIPO’s 2013 World IP Report can be found here.

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