Developments in the Field of Innovations in China and Chinese Exports

Abstract

The aim of the paper is to examine whether efforts aimed at expanding Chinese innovations are reflected by changes in Chinese exports. To achieve the aim the combination of both qualitative and quantitative approach was used incorporating linear regression analysis. The results show that China has firmly established itself as one of the leaders in innovations, as expressed in terms of patent applications, as well as of research and development expenditure. Although this achievement has not been accompanied by unambiguously positive development in the export share of high-tech products, the share of domestic value added in Chinese exports has been increasing continuously since 2010. With positive annual increase in the number of patent applications by residents per million inhabitants as well as in the research and development expenditure (as a percentage of gross domestic product), a positive annual increase in the domestic value added share in gross export may be expected with two years lag. These results indicate that China’s innovation-driven development strategy has positive impact on increasing the domestic value added in export, thus improving the competitive position of China on global markets. Even though several studies may be found showing that innovation had a positive impact on export performance at the level of companies in China, this study contributes to the existing literature by providing country level data analysis considering the origin of exported value added. When interpreting results of this study, certain limitations should be borne in mind. First, as the value of Chinese innovations may be challenged, patent applications as a measure of innovation could overestimate China's innovation capability. Second, only a limited number of observations including time series from 2005 to 2016 was available for the quantitative analysis, with respect to the used trade in valued added indicator. These limitations could be addressed in future research.