China used to be considered the factor floor of the world. Millions of laborers toiled in factories around the country producing cheap goods for consumption mostly by the developed world and also by other emerging countries. That scenario has changed these days as China embarks on a mission to transform the economy from a manufacturing-based economy to an innovation economy. Accordingly R&D expenditure is increasing in China and the results are already showing in terms of patent filings.

At a global level, the number of patent filings by China has increased tremendously and has now overtaken the US as the chart shows below:

Click to enlarge

Source: China’s Move from Factory of the World to Silicon Valley of the East by Eng-Teck Tan and Amanda Lai, Nikko AM

In addition to the top cities of Beijing and Shanghai, cities like Shenzhen, Hangzhou, Guangzhou, Tianjing and Nanjing are also becoming major innovation hubs.

A chart from the St.Louis Fed also shows the rising Chinese patent applications relative to USA:

Source: Has China Overtaken the U.S. in Terms of Innovation? by By Ana Maria Santacreu, Economist, and Heting Zhu, Research Associate, St.Louis Fed