BUSINESS

Innovation Shifted To China During The Downturn: U.N. Report

09/16/2010 08:56 am ET | Updated May 25, 2011

It's an unfortunate fact of a downturn: declining corporate cash flows and slumping confidence usually induce firms to file fewer patents and slash spending on research and development.

Apparently, China didn't get the memo.

As much of the world invested fewer resources in innovation during the global downturn, Chinese firms spent more on innovative efforts, such as R&D and patent and trademark applications, according to a report by a UN agency.

On Wednesday, the World Intellectual Property Organization (WIPO) said that patent applications in China jumped 18.2 percent in 2008 and another 8.5 percent in 2009. Over the same period, ZTE, China's second-largest telecom equipment maker, boosted R&D spending 44.8 percent.

In the U.S., patent filings fell 11.7 percent in 2008 and 2009, while companies like General Motors, Hewlett Packard and Microsoft slashed their R&D budget by more than 20 percent from 2008 to 2009. In Europe and Japan new patent filings dropped 7.9 and 10.8 percent, respectively, in 2009.

"China is moving up the value chain and rapidly increasing exports based on domestic innovation, so inevitably it is filing an ever-growing number of patent applications," WIPO's Chief told a news conference as the agency announced its latest findings.

China decided years back that it no longer wants to be the sweatshop of the world. The country's recent investments in innovation at a time when loans and venture capital were sparse reflect its ambitions to become an innovation-oriented nation by 2020.

China's penchant for patents may partly explain why it's shifting away from low-cost manufacturing, as the New York Times reports this morning.

Read the World Intellectual Property Organization's full report below:

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