China's Innovation-Driven Development Strategy and Prospects

Abstract

Recently, the key issue in China's economic development strategy has been innovation. China joined the world's top 25 most innovative countries for the first time in 2016, according to the global innovation index survey conducted by the World Intellectual Property Organization. This is the first case that a middle-income country has broken into the top 25, though the ranking is still lower than the US (4th), Germany (10th), Korea (11th) and Japan (16th). While China's innovation strategy was particularly emphasized this year, it is actually not such a recent development. Through an export-oriented policy using low-cost production factors and an investment-led strategy for industrialization and urbanization, China has grown at a CAGR of over 10% over the past three decades following the implementation of its reform and opening policy. However, as the economic downturn in the wake of the global financial crisis continued in advanced economies, important export destinations for China, and the role of investment as a growth engine became limited, China was inevitably required to shift to a new strategy for development.