A curious study of China

Sana Khalil, School of Economic And Trade, Human University (North Campus), Changsa, Hunan, China

Abstract

China seems well-positioned in terms of innovation output; nonetheless, have underperformed with regards to innovation input which presents a very curious case for study. I investigate the determinants of China's cross-regional innovation output and link the variations in innovation output with the level of economic development. Using panel dataset from 31 regions of China, I show that the differences in China's regional innovation output can significantly be explained by variations in R&D manpower and expenditure, share of highly educated students, and public education spending. Additionally, domestic patent stock, high-tech export share and output value of new products are positively and significantly linked with economic prosperity. Overall, a 1% increase in innovation output translates into a rise in per capita income of between 0.01 to 0.49 percent with patent stock being the highest contributor. My findings imply that the arguments against government R&D subsidies and education rebates seem implausible at best.