Zheng Liang, Lan Xue


The most remarkable economic phenomenon of the past 30 years may be China’s “growth miracle.” According to the World Bank (2003), the average growth rates for Chinese gross domestic product (GDP) during the 1980s and the 1990s were 10.1 percent and 11.2 percent, respectively, making China one of the fastest growing economies in the world. The abandonment of centralized planning and the establishment of market institutions, as well as the market opening to foreign investment, have been credited as keys to the success of this growth. However, China’s economic miracle is often attributed to relative abundance of inputs such as labor and natural resources, and not to Chinese innovation. Is this true? What about the innovative performance of China’s domestic enterprises, in comparison with their competitors from abroad? In this paper, the question is explored using Chinese and U.S. patent data to estimate the innovative performance of firms.