China’s quest for innovation: progress and bottlenecks

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China’s quest for innovation: progress and bottlenecks

We identify three potential bottlenecks that might be hindering the translation of China’s innovation efforts into productivity growth.

Publishing date: 21 June 2023
Authors: Alicia García-Herrero Robin Schindowski

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Executive summary

As the Chinese economy continues to decelerate, the central government is investing heavily in innovation, doubling down on research and development (R&D) spending and STEM-oriented human capital. In this paper, we assess China’s progress so far, looking at the inputs to innovation (R&D and human capital) as well as intermediate targets, such as scientific research and patents. We then evaluate how China has fared with respect to the ultimate goal of commercialising this progress, by looking at the value-added of Chinese exports and the overall productivity of the economy. We identify three potential bottlenecks that might be hindering the translation of China’s innovation efforts into productivity growth.

This is an output of China Horizons, Bruegel's contribution in the project Dealing with a resurgent China (DWARC). This project has received funding from the European Union’s HORIZON Research and Innovation Actions under grant agreement No. 101061700.

About the authors

Alicia García-Herrero

Alicia García Herrero is a Senior fellow at Bruegel.

She is the Chief Economist for Asia Pacific at French investment bank Natixis, based in Hong Kong and is an independent Board Member of AGEAS insurance group. Alicia also serves as a non-resident Senior fellow at the East Asian Institute (EAI) of the National University Singapore (NUS). Alicia is also Adjunct Professor at the Hong Kong University of Science and Technology (HKUST). Finally, Alicia is a Member of the Council of the Focused Ultrasound Foundation (FUF), a Member of the Board of the Center for Asia-Pacific Resilience and Innovation (CAPRI), a member of the Council of Advisors on Economic Affairs to the Spanish Government, a member of the Advisory Board of the Berlin-based Mercator Institute for China Studies (MERICS) and an advisor to the Hong Kong Monetary Authority’s research arm (HKIMR).

In previous years, Alicia held the following positions: Chief Economist for Emerging Markets at Banco Bilbao Vizcaya Argentaria (BBVA), Member of the Asian Research Program at the Bank of International Settlements (BIS), Head of the International Economy Division of the Bank of Spain, Member of the Counsel to the Executive Board of the European Central Bank, Head of Emerging Economies at the Research Department at Banco Santander, and Economist at the International Monetary Fund. As regards her academic career, Alicia has served as visiting Professor at John Hopkins University (SAIS program), China Europe International Business School (CEIBS) and Carlos III University.

Alicia holds a PhD in Economics from George Washington University and has published extensively in refereed journals and books (see her publications in , , or ). Alicia is very active in international media (such as BBC, Bloomberg, CNBC and CNN) as well as social media ( and ). As a recognition of her thought leadership, Alicia was included in the in 2017 and .
Robin Schindowski

Robin is a Research analyst at Bruegel. His work focuses on the Chinese economy and its interactions with the international economic architecture. In particular, he is involved in the project "Dealing with a resurging China" under the Horizon Europe Fund.

He studied Contemporary Chinese Studies (BA) at the University of Tübingen - including a semester at Peking University and a semester at Fudan University in Shanghai. He holds a master's degree in Economics from La Sorbonne in Paris and the University of Paris-Saclay, with the second year fully funded as a scholar of the German Academic Exchange Service. He wrote his master's thesis on the impact of patronage networks in the Chinese government on economic outcomes. Between his bachelor's and master's degrees, he worked as an industry consultant at Deloitte Consulting in Germany, where he conducted projects in the field of supply chain management with a regional focus on the Asia-Pacific region.

Robin is a native German speaker, fluent in English, and full working knowledge of French and Mandarin.