From “Made in China” to “Innovated in China”: Necessity, Prospect, and Challenges

By Shang-jin Wei, Zhuan Xie, Xiaobo Zhang. Journal of Economic Perspectives, 2017

362 citations recorded by the source corpus.

After more than three decades of high growth based on its low-wage advantage and relatively favorable demographics—in combination with market-oriented reforms and openness to the world economy—China is at a crossroads with a much higher wage and a shrinking work force. Future growth will depend, by necessity, more on the generation of increased productivity, and domestic innovation will play an important part in this. In this paper, we assess the likelihood that China can make the necessary transition. Using data on expenditure on research and development, and patent applications, receipts, and citations, we show that the Chinese economy has become increasingly innovative. We will argue that rising wages and expanding markets are among the important drivers of China's growth in innovation. On the other hand, we find evidence of resource misallocation in the innovation area: while state-owned firms receive more subsidies, private firms exhibit more innovation results. Innovation can presumably progress even faster if resource misallocation can be tackled.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/d1989b899f2de6b6164a932d6e80006779f2b58d

Citations in the corpus

• Notching R&D Investment with Corporate Income Tax Cuts in China (2018, neutral): “Wei et al. (2017) show that state-owned firms produce significantly fewer patents-per-yuan of investment than foreign or private domestic firms.”