China

China's Government Admits Chinese Patents Are Pretty Bad


Chinese President Xi Jinping at the Chinese Academy of Science and the Chinese Academy of Engineering in Beijing on June 9

Photograph by Li Xueren/Corbis

Chinese President Xi Jinping at the Chinese Academy of Science and the Chinese Academy of Engineering in Beijing on June 9

For years, China’s leaders have exhorted the country’s businesses to become innovative. After all, a glorious country like China that is reasserting its role as a global superpower should be known for more than just its copycat and me-too companies. So while Chinese presidents come and go, the message is the same: Whether it’s Jiang Zemin, Hu Jintao, or the current boss, Xi Jinping, the country’s leaders have consistently talked about the importance of local innovation. Paraphrasing Xi’s remarks at a speech earlier this month at the Chinese Academy of Science and the Chinese Academy of Engineering, the Xinhua news agency reported that the government’s goal is to “push forward the fusion of science and [the] economy, so that science and technology strength can be transformed into industrial and economic power.”

By China’s own scorekeeping, though, the country’s innovators still have a way to go before they can meet the Communist Party’s expectations. While the number of patent applications inside China is “booming,” according to a report today by Xinhua, “the quality of patents is still poor.” Writing about a report to the Standing Committee of the National People’s Congress, China’s rubber-stamp legislature, Xinhua added, “China owns very few patents featuring originality and high or core technology.” Fewer than 1,000 Chinese patents have won recognition from counterparts in the U.S., Europe, or Japan, added Xinhua.

China is making progress. The gold standard in international patents remains the U.S., and Chinese from the People’s Republic applied for almost 6,600 patents in the U.S. last year, according to data from the U.S. Patent and Trademark Office (USPTO).  That’s just ahead of France and more than double the number from India. China had the sixth-largest number of patents granted by USPTO. Still, China’s innovators are hardly leaders in the U.S. The Chinese total of 6,597 U.S. patents puts it far behind Japan’s 54,170 applications. Even more embarrassing, Taiwan, the island that Beijing considers a province of China, had 12,118 patent applications granted.

On the other hand, China might not need to innovate if it can just buy foreign innovation. With so many cash-rich Chinese companies making acquisitions overseas, the country can afford to pay for other people’s ideas. Alibaba, the largest e-commerce company in China, is preparing for a long-awaited initial public offering in the U.S. that optimists hope could be one of the biggest ever. In the runup to the debut, the Hangzhou-based company is trying to increase its patent holdings in the U.S. Last year, Alibaba bought 20 patents from IBM (IBM), and it now has 102 U.S. patents, with applications for more than 300 more, Bloomberg News reported in April.

Alibaba isn’t the only Chinese company buying up intellectual property. For instance, one of Alibaba’s neighbors in Hangzhou is Wanxiang Group, the country’s largest maker of auto parts and accessories. Wanxiang’s U.S. subsidiary, A123 Systems, which develops electric car batteries, last week acquired more than 20 patents from Leyden Energy, a California rival, A123 spokesman Jeff Kessen told Bloomberg News last week. 

Back home, though, “enterprises care very little about intellectual property rights (IPR) and invest little in technological research and development,” the new NPC report alleges. While buying up know-how in the West is a good short-term fix for some Chinese companies, the country still a lot of work to do before it has an environment that fosters innovation.

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Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.

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