Emergence as a Global Economic Power } 703
for final assembly. That iPhone then sold retail in the United States for $500,
meaning that China captured about 1.3 percent of the value of the iPhone.
The largest share of this “Made in China” iPhone went for salaries, rents,
transport, marketing, markups by wholesalers and retailers, and profits to
brand-holders in the United States. A large part of the rationale of China’s
indigenous innovation drive is to capture for China a larger share of the
value of “Made in China” goods.
The number of patent applications is another World Bank measure of tech-
nological prowess in invention of new technologies. Figure 25-7 shows that
patents filed by PRC residents began rising rapidly circa 2000, about the time
of WTO entry, surpassing the United States in 2009 and Japan, the previously
leading country, in 2010. The quality of many of these patents is, however,
questionable. Many were apparently filed in response to governmental direc-
tives and incentives for patent applications or as an attempt to undermine
foreign charges of IPR infringement. Foreign firms and analysts deem many
of China’s new patents to be “junk” not representing any genuine innovation.
Still, the steep gradient of China’s upward curve indicates that at least the at-
tention given to technological innovation has increased.
Other World Bank indicators show how far the PRC has yet to go to become
a global leader in technology. In terms of research and development spending
as a percentage of GDP, China spends less than half the level of Japan, and
well below those of the United States and Germany. It is significant, however,
that China’s spending shows a steady upward slope, while the spending of the
other leading countries shows greater fluctuation. Finally, in terms of number
450,000400,000
350,000300,000250,000200,000150,000
100,000JapanPRCUSA50,000 Germany0
19791981198319851987198919911993199519971999200120032005200720092011
FIGUR E 25-7 Patent Applications by Residents