The OECD recently announced that this year, China’s R&D spending will surpass that of Japan. Estimates have China’s 2006 spending of U.S. $136 billion edging out Japan’s U.S. $130 billion investment. The original announcement from OECD is here, and an Associated Press article on the topic can be found here.

The rapid increase in R&D spending in China is one aspect of its current economic development policy that is designed to make China a major innovative force in the near future. The government announced a 15-year plan last February that has R&D spending rising to 2% of GDP by 2010 and 2.5% of GDP by 2020. This would put China’s R&D spending as a percentage of GDP at U.S. levels by 2020.

The ramifications of this long-term economic policy on the intellectual property system in China are obvious. The government’s goal is for China to become an innovation society, creating new technologies and being on the receiving end of royalty payments. The foundation of the intellectual property system is the belief that the granting of limited government monopolies encourages innovation. Beijing understands this and has been moving forward on new IP legislation, new IP institutions, and greater resources for IP enforcement. Progress has not been as fast as some of us would like, but in most areas, in has indeed progressed in a relatively short period of time.

There are three general areas that are often cited when discussing how an economy can achieve significant productivity gains (i.e., new technology and innovation): education, R&D, and protection of intellectual property. China’s emphasis on R&D spending suggests that a heightened focus on IP protection will continue as the country makes it way towards being an innovation society.

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