A Rise In Patent Applications Is Not Enough


BMI View : Governments and companies in emerging markets are increasing investment in local biopharmaceutical R&D. They are increasingly aware of the importance of this industry sector for promoting economic growth, fostering global competitiveness, as well as reducing the financial burden of disease on local citizens by improving access to innovative medicines.

Under China's 12 th five-year plan, the country aims to foster and develop 'strategic emerging sectors such as biology, new energy sources, high-end equipment manufacturing and new energy automobile'. The government has stressed a focus on improving research and innovation in science and technology, and aims to grow innovative talent. While we are bullish about China's progress in innovation, we highlight that in the short- to- medium term it will continue to lag behind developed countries such as the US, Europe, Japan and South Korea in terms of actual commercialisation.

Data from the World Intellectual Property Organization (WIPO) show that patents filed by residents in China reached 415,829 in 2011, higher than developed countries such as the US (247,750), Japan (287,580), South Korea (138,034) and the UK (20,107). While this is a good indicator to show the level of innovation in a country, we stress that it should not be the only indicator used to determine innovation.

China Filed The Highest Number Of Patents
Number Of Patents Applicants By Residents

However, data from the US Patent and Trade Office show that there were 5,341 patents granted in the US to Chinese applicants in 2012. This figure was lower than UK (5,876), South Korea (14,168) and Japan (52,773). The data also highlight that despite the high number of patents granted in China, the number of patents granted overseas serves as a proxy to understand China's current level of innovation from an international perspective.

Low Number Of Patents Granted
Number Of Patents Granted By Respective Countries In US In 2012

Number Of Researchers

Data from the China National Bureau of Statistics show that in 2011, the country had a total of 2,883,000 research and development (R&D) personnel. This figure was significantly higher than Japan (877,928), South Korea (335,228) and the UK (358,582). We highlight that the high number of personnel can be attributed to the large population. On a per-million population basis, the number of R&D personnel in China reached 2,073 researchers per million people - significantly lower than other developed countries.

Low Number Of R&D Personnel In China
Total Number Of R&D Personnel (LHS) & Number Of R&D Personnel Per Million Population

Amount Spent On R&D

We note that China's R&D expenditure has been rising. In 2011, R&D expenditure as a percentage of GDP reached 1.84% - a 31% increase from 1.4% in 2007. From an international perspective, this percentage is still low when we compared it with South Korea (3.73%), Japan (3.25%) and the US (2.76%), although it exceeds that of the UK (1.77%).

Rising R&D Expenditure, But Still Low
R&D Expenditure As % Of GDP In China (LHS) And In Other Countries In 2011* (RHS)

A crucial shortfall of the above indicators is the lack of breakdown into specific industries. Therefore, we cannot be sure of respective countries' specific progress in biomedical research and development. Moreover, given that a patent can be awarded to a product or process that provides novel solutions to problems, it is unknown whether patents awarded in China are for novel products or processes or if the patents granted have translated into commercial rewards.

This article is tagged to:
Sector: Pharmaceuticals & Healthcare
Geography: China, China, China, China