In­no­va­tion flour­ish­ing in China, says UBS re­port

China Daily (Canada) - - BUSINESS - By SHI JING in Shang­hai shi­jing@chi­nadaily.com.cn

China is trans­form­ing from be­ing the world fac­tory to an in­no­va­tion-driven na­tion by em­brac­ing a fresh wave of in­no­va­tion, a new re­port said.

Ac­cord­ing to the re­port from Swiss fi­nan­cial firm UBS, China’s to­tal re­search and de­vel­op­ment in­vest­ment reg­is­tered an 18 per­cent com­pound av­er­age growth rate be­tween 2006 and 2016. If the same mo­men­tum is main­tained, China will be­come the world’s sec­ond largest R&D in­vestor after the United States by 2020, with such in­vest­ments ac­count­ing for 2.5 per­cent of the to­tal GDP by then.

The coun­try is also home to the sec­ond-largest num­ber of so-called uni­corn com­pa­nies, next only to the US. Such com­pa­nies have a mar­ket value over $1 bil­lion each and have been op­er­at­ing for over 10 years. About 20 per­cent of th­ese Chi­nese com­pa­nies have made tech­nol­ogy break­throughs while the re­main­ing 80 per­cent have made in­no­va­tions in busi­ness mod­els, ex­plained Hou Yankun, chief China strate­gist at UBS In­vest­ment Bank China.

The in­no­va­tions have been made re­mark­ably in five major ar­eas: ed­u­ca­tion, fin­tech, elec­tric ve­hi­cles, ar­ti­fi­cial in­tel­li­gence and big data com­put­ing, ac­cord­ing to the re­port.

“China has been mak­ing sig­nif­i­cant progress in sci­en­tific re­search, given the num­ber of patents ap­plied in the coun­try ev­ery year and the pub­lished Sci­ence Ci­ta­tion In­dex pa­pers,” said Hou.

In terms of fin­tech, Ali­pay is one of the best ex­am­ples, as it out­num­bered Visa and Master­Card in 2016 in to­tal on­line trans­ac­tion vol­umes, ac­cord­ing to UBS. Ali­pay is the mo­bile and on­line pay­ment ser­vice of e-com­merce gi­ant Alibaba Group Hold­ing Ltd.

Mean­while, China has taken up 40 per­cent of the global mar­ket share of elec­tric ve­hi­cles, with an­nual sales to­tal­ing 500,000 units in 2016.

China has pro­duced 76 per­cent more pa­pers on the study of AI than the US in 2016 and 2017, also over­tak­ing the lat­ter in terms of the ci­ta­tion rate.

What is more, China has re­tained the world record in big data com­put­ing speed for three con­sec­u­tive years since 2014, which as Hou ex­plained, can be largely at­trib­uted to shop­ping car­ni­vals such as the up­com­ing Sin­gles Day on Nov 11.

“The Chi­nese gov­ern­ment has pro­vided huge support to R&D ac­tiv­i­ties in re­cent years, like tax in­cen­tives,” said Hou. “The en­hanced ed­u­ca­tion qual­ity, which nur­tured more grad­u­ates ma­jor­ing in has also cre­ated en­gi­neer can­di­dates.”

The flex­i­ble mar­ket ecosys­tem in China has cre­ated more op­por­tu­ni­ties for com­pa­nies. In this sense, con­sumers have a higher tol­er­ance for prod­ucts at pre­lim­i­nary stages and com­pa­nies can adopt the tri­a­land-er­ror strat­egy, he said.

“With a rich re­serve of sav­ings, abun­dant for­eign di­rect in­vest­ment, as well as pri­vate equity and ven­ture cap­i­tal firms’ in­creas­ing in­ter­est, in­no­va­tion vi­brancy can re­main high in China,” he added. sciences, more

The Chi­nese gov­ern­ment has pro­vided huge support to R&D ac­tiv­i­ties in re­cent years, like tax in­cen­tives.”

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