Success in innovation

Ultimately，the proof of successful innovation is the ability of companies to expand revenue and raise profits with new products and services and with improvements in design，manufacturing，or business models.Although the competitiveness of companies can be affected by non-innovation factors such as industry structure and factor costs，we believe innovation is a primary contributor to the growth of revenue and profit at the company level.To gauge China's success in innovation，we look at how well Chinese companies in the four archetype industry groups compete.First we look at where Chinese companies have captured more than their“GDP-based share”of global markets—where Chinese companies have a disproportionate share of global revenue compared with China's share of global GDP.While the competitiveness of companies can be affected by non-innovation factors such as industry structure and factor costs，we believe innovation is a primary contributor to the growth of a firm's revenue and profit.

Chinese companies show the greatest strengths in markets that require customer-focused and efficiency-driven innovation.For example，Chinese companies have captured more than 40 percent of global appliance industry revenue，or almost three times their GDP-based share based on China's GDP.In generic pharmaceuticals，where innovation is based on creating more efficient processes，Chinese companies also have about 30 percent of global revenue，and Chinese companies have 20 percent or higher shares in textiles and metals.One of China's greatest successes is in solar panels，an efficiency-driven industry in which Chinese companies have 50 percent of global revenue.

China has the most catching up to do in industries that rely on science-based and engineering-based innovation.While China has a disproportionately low share of global auto revenue and medical devices.China has more than 40 percent of global revenue in railroad equipment and is the world's largest producer of high-speed trains.China's success in high-speed rail and its strong position in wind turbines are the result of government action in these sectors.Chinese companies can attain significant shares of global revenue in many markets simply by filling domestic demand.