UBS report says Chinese unicorns are on the rise

An innovation boom is under way in China, according to investment bank UBS.

A UBS research paper says China has more than a quarter of the world’s unicorns, start-ups worth more than $US1 billion ($1.28bn).

An innovation boom is under way in China, according to investment bank UBS, as Chinese companies promise — or threaten — a disruptive impact on the global industrial landscape.

A UBS research paper says China has more than a quarter of the world’s unicorns, start-ups worth more than $US1 billion ($1.28bn), and that as China’s weighting in global indices rises, its innovative firms will have an increasing impact on investor returns worldwide.

The report says that, “in order to avoid the middle income trap and become a more developed economy, China will have to transform itself from ‘made in China’ to ‘created in China’ ” — a route backed strongly by Beijing.

The investment bank attributes the increased focus by business on innovation (research and development outlays are up by five times in the last dozen years) to tax incentives, higher spending on education, especially on science and engineering, to wages in research centres being just one eighth of those in the US, on an environment “tolerant of early product launching and testing” and to a large savings base.

Analyst Jeroen Groenewegen, with Beijing based research company China Policy, told The Australian that the core issue in assessing China’s likely success at innovation was “whether you believe such top-down planning can generate innovation, and if so, what kind”.

The Chinese state is indeed investing heavily, both economically and politically, he said, and had been for more than a decade.

Because its returns had been comparatively modest, he said, the state was adjusting its support to incentivise the kind of indices that UBS highlights in its report, especially patents, scientific publications and university programs.

The report says there is “relatively less innovation progress” in China in healthcare and high-end manufacturing, where some Australian companies may be well positioned to contribute if they are prepared to invest in China, including in collaborations.