China’s Low-Productivity Innovation Drive: Evidence From Patents

Can China catch-up with the United States technologically by mobilizing its bureaucracy and assigning ambitious targets to local governments? We analyzed an original dataset of 4.6 million patents filed in China from 1990 through 2014 and paired this with a new, rigorous measure of patent novelty that approximates the quality of innovation. In 2006, China’s central government launched a national campaign to promote indigenous innovation and introduced bureaucratic targets for patents. Our analysis finds evidence that these targets, combined with political competition, pushed local governments to “game the numbers” by channeling relatively more effort toward boosting non-novel—possibly junk—patents over novel patents. Nationally, this is reflected in a surge of aggregate patents paired with a falling ratio of novel patents. China’s innovation drive is susceptible to manipulation and waste—it is enormous in scale but low in productivity.