Transfer Pricing Associates

How to Get from “Made in China” to “Designed in China”

post Thursday January 26, 2012

made in china


The Chinese government has challenged itself to catch up with other countries in a race to put China on the map through labeling and patenting products as ‘designed in china’. The top 5 ways the government is hoping to achieve this target is through:


-          Proper education of lots of researchers;

-          Heavy investments in R&D;

-          Increasing international cooperation in research;

-          Application of patents;

-          Producing more and better academic publications.

China has approximately 1.5 researchers per 1000 citizens, compared to the USA’s more than 14 researchers per 1000 citizens.  The primary challenge for China is that of the 1.2 million Chinese students that went abroad to pursue a university degree, only 10% returned soon after completion of their studies abroad.  This means that 90% of Chinese students did not return or only returned to China many years later. [Source: US National Science Foundation]

The growth of R&D in China for the period from 1998-2007 has been exceeding 8%.  R&D growth in nations with comparable gross national products such as Turkey was 7% and was between 2-4% for developing countries like Mexico, South Africa, South Korea, Brazil, India and Indonesia.  The G8-countries, however, have shown a much more modest 1-2% growth in R&D investments, with the UK and France even showing a negative growth over the same period.

The second main challenge facing China is figuring out how to encourage corporate citizens to pay for a significant amount of the R&D expenditures, so that China and its citizens reap the benefits of the increase in R&D-triggered incentives among the G8-countries.  For example, China has stimulated corporations to kick-start R&D activities in China by promising companies a 15% corporate income tax rate, rather than the regular 25% CIT. [Source: Knowledge, networks and nations – Royal Society, 2010]

In order to achieve its goals, China must assume a more international approach to R&D projects. Therefore, the third challenge facing China is that most of the R&D efforts – which are reflected in the number of patents registered – take place in China, whereas a ‘designed in china’ label requires a high level of registration of these patents in lots of other countries as well. The latter would allow the Chinese owners to start commercialization of their patents in an international context. [Source: Knowledge, networks and nations – Royal Society, 2010]

In 2009, the number of patents registered in the US market – by far the largest market at this stage to commercialize your patents – totaled 1,655 patents from Chinese companies, 9,000 from German companies, and 35,502 from Japanese companies.  This brings us to China’s fourth challenge – with the current growth of patents in the US, it might take until 2028 for China to become the leader in the number of patents registered in the US. [Source: Knowledge, networks, and nations - Royal Society, 2010]

The number of publications in ‘peer reviewed’ magazines in China has been increasing between the periods 1999-2003 and 2004-2009, i.e. from 4% to 10%.  In comparison, the US portion of publications decreased from 26% to 21%.  In its ambition to get 40,000 global ‘thought leaders’ in 2020 in their respective areas of expertise, China needs to accomplish all of the 4 targets above mentioned. [Source: Knowledge, networks, and nations - Royal Society, 2010]

As a Chinese academic researcher stated, “it takes 10 years to grow a strong tree, however, it takes a century to build an environment where talent blossoms”.


Image by Salvatore Vuono

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