Countries generally do not start creating much new-to-the-world technology until they are pretty wealthy—specifically, until their per capita output and income approach that of the world's richest countries. China is still quite poor. As recently as 2010, its per capita income was less than one-tenth that of the U.S. Yet according to the official data, Chinese businesses increased their R&D spending by 26.2 percent per year between 1996 and 2010. The number of patents that America's own patent office has granted to Chinese inventors rose 4,628 percent between 1996 and 2010. What is going on here?
A close look at these patent filings reveals that multinational corporations, not Chinese firms, own the majority of the U.S. patents that were issued during this recent boom. In other words, Chinese indigenous companies still lag behind their multinational competitors in generating inventions that get patented in major foreign markets.