State-owned Chinese firms receive up to four times more R&D subsidies but are less innovative than private Chinese firms, writes John Wu in Innovation Files

Fact of the Week: Private Chinese Firms Innovate More Efficiently Than State-Owned Firms, Yet China Showers Much More Generous R&D Subsidies on State-Owned Firms

The Chinese government funds an exceptionally large amount of R&D, with direct government subsidies accounting for a quarter of the country’s total R&D spending in 2015. As such, how well the government allocates those funds plays an outsized role in determining how innovative the nation can be.

Fact of the Week: Following China’s Anti-Corruption Campaign, Highly Productive Firms Received 44 Percent More R&D Subsidies

Fact of the Week: Following China's Anti-Corruption Campaign, Highly Productive Firms Received 44 Percent More R&D Subsidies

Recognizing that state-owned enterprises (SOEs) are less profitable and innovative than private firms, China relinquished control of many SOEs beginning in the late 1990s, but still gives former SOEs easier access to loans and favors them in allocating subsidies. A new study analyzed the impacts of this, observing Chinese enterprises’ performance between 1998 and 2013.

Fact of the Week: Former Chinese State-Owned Enterprises Produce More Patents than Current SOEs but Still Lag Private Firms

Recent years have seen China increase its spending on basic and applied research, which is likely to drive its innovation going forward and could be a large factor behind an eventual Chinese leadership role in global innovation.

Fact of the Week: Chinese R&D Spending Rose More Than 10 Percent in 2019

Since 2011, the U.S. government has spent over $400 million to provide broadband Internet access to 1.6 million people. A recent study investigated the impact that policies like these can have by examining the construction of broadband infrastructure across China, finding that every 10 percent increase in a regions’s infrastructure increased firms’ productivity by 1.1 percent and workers’ wages by 4.2 percent.

Fact of the Week: Every 10 Percent Increase in Broadband Access in China has Increased Productivity by 1.1 Percent and Wages by 4.2 Percent

But these generous policies so far have not resulted in market dominance. To date, only 148 of COMAC’s planes are confirmed to have been purchased.

Fact of the Week: China Has Provided Its State-Owned National Champion in Commercial Aviation as Much as $72 Billion in Development Subsidies

A December 2023 working paper found that China’s technology capital would decrease by about 36 percent in the absence of production and knowledge spillovers from multinationals.

Fact of the Week: Multinational Firms’ Production and Knowledge Spillovers Increased China’s Technology Capital by 36 Percent

Fact of the Week: Multinational Firms' Production and Knowledge Spillovers Increased China's Technology Capital by 36 Percent

Based on China’s economic characteristics, it should have seen about 212,200 resident patents in 2018, not 1.4 million.

Fact of the Week: Subsidies Have Reduced China’s Overall Patent Quality to Just 19 Percent of What It Would Have Been Otherwise

Fact of the Week: Subsidies Have Reduced China's Overall Patent Quality to Just 19 Percent of What It Would Have Been Otherwise

Chinese privately owned firms achieved an additional 0.16¥ in output for every yuan they invested in R&D, while state-owned firms created only 0.12¥ more output, writes John Wu in Innovation Files.

Fact of the Week: More Than 99 Percent of Listed Firms in China Receive Direct Subsidies From the Chinese Government

Related

Fact of the Week: Private Chinese Firms Innovate More Efficiently Than State-Owned Firms, Yet China Showers Much More Generous R&D Subsidies on State-Owned Firms

Fact of the Week: Following China’s Anti-Corruption Campaign, Highly Productive Firms Received 44 Percent More R&D Subsidies

Fact of the Week: Former Chinese State-Owned Enterprises Produce More Patents than Current SOEs but Still Lag Private Firms