Between 2007 and 2016, the number of patents filed in China grew by 700%, this is versus growth of 19% in the US, 22% in France, 6% in the United Kingdom, and 8% in Germany.
In this global fight for technological and economic leadership, we have on one side of the ring the USA defending their ‘Superpower’ title and on the other side China, who are shedding their skin as an imitator and emerging anew as a genuine innovator.
700% growth in the number of patents filed in China between 2007 and 2016
We saw in a previous article how Europe intends to tax the American tech giants, in an attempt to try and protect its market. Let’s analyse today the choices of China, with a strategy at the antipodes, in the race for technological leadership.
The Chinese dream is making it all possible
China’s president Xi Jinping’s ‘Chinese Dream’ has set China’s goal to be a world-class innovator by 2050. The country intends on achieving this by transitioning from a manufacturing-based economy to an innovation-driven, knowledge-based economy.
The Great Chinese Firewall has managed to block the mightiest companies from invading their economy and in turn, impressed the world with its ability to create a tech empire of their own within their boundaries. In recent years, Chinese tech companies have been popping up everywhere and leaving their mark in financial markets.
Tencent and Ali Baba feature in the top ten biggest companies in terms of market capitalisation
Baidu, by Tencent, is the country’s biggest search engine and the second largest in the world. It operates several tangential services, including tools for maps and cloud storage, and the company is currently working on AI and self-driving cars, echoing Google’s efforts. Most people are also aware of the Alibaba success story. China’s biggest e-commerce company is gaining prominence outside its borders and is currently beating Amazon in the race to a $500Bn valuation. The universe that is WeChat is best known for its array of influential messaging and social media platforms. With approximately 1 billion monthly users, this app is China’s biggest social service. It has Facebook (the app), iMessage, Google News, Venmo, and Slack all rolled into one massive platform.
Two key success factors: Business models and Education system
This success is due to several factors. These ‘Tech Giants’ have a different business model in comparison to the ones in US or Europe. The model is not heavily reliant on advertising, instead these companies charge additional fees for subscriptions, which gives them more scope for future monetisation and a way to attract investors. Also these giants are tirelessly throwing off cash to invest in new ventures, projects and technologies which ensures they can constantly grow and improve by investing and reinvesting in their projects.
Additionally, there is a stronger focus on science and technology across all levels in the Chinese education system and this has played a big role in empowering Chinese youth to create and innovate. In fact, according to a recent report, predictions for 2030 see an increase in Chinese STEM graduates by 300%, whilst the USA and Europe are far behind with only 30%. Furthermore, the country’s has been able to balance the gender gap in higher education from a ratio 0.35 in 1980 to 1.00 in 2010. In comparison, with a persistent gender gap, Europe is missing out on 50% of its population.
Watching this revolution from what seems like the sidelines is Europe, waving goodbye to the train of innovation. With only 22%, 6% and 8% growth in the number of patents between 2007 and 2016 in France, UK and Germany, respectively, Europe seems late in the technological competition. While the EU is currently trying to revisit the taxation regulations with respect to the GAFA (Google, Amazon, Facebook & Apple), European nations needs more than ever to define their own strategies to stay in the race.