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

49 Pages Posted: 28 Nov 2016 Last revised: 13 Jun 2021

See all articles by Shang-Jin Wei

Shang-Jin Wei

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Zhuan Xie

Peking University

Xiaobo Zhang

International Food Policy Research Institute (IFPRI)

Date Written: November 2016

Abstract

After more than three decades of high growth that was based on an exploration of its low-wage advantage and a relatively favorable demographic pattern in combination with market-oriented reforms and openness to the world economy, China is at a crossroad with a much higher wage and a shrinking work force. Future growth by necessity would have to depend more on its ability to generate productivity increase, and domestic innovation will be an important part of it. 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. In terms of drivers of innovation growth, we find that embracing expanded market opportunities in the world economy and responding to rising labor costs are two leading contributing factors. 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.

Suggested Citation

Wei, Shang-Jin and Xie, Zhuan and Zhang, Xiaobo, From “Made in China” to “Innovated in China”: Necessity, Prospect, and Challenges (November 2016). NBER Working Paper No. w22854, Available at SSRN: https://ssrn.com/abstract=2876399

Shang-Jin Wei (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Zhuan Xie

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Xiaobo Zhang

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States
202-862-5677 (Phone)
202-467-4439 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
67
Abstract Views
654
rank
416,917
PlumX Metrics