Asia will be tomorrow's driver of global innovation

In 2012, foreign direct investment into emerging economies exceeded that into advanced economies for the first time. One reason is the shift of global innovation to Asia, and China in particular.

Innovation is often measured by input indicators, such as research and development, and output indicators, such as patents. While patents tend to reflect past developments, research and development may anticipate trends.

Today, international rivalry in research and development is no longer driven only by the US, Europe or Japan, but Asia and particularly China. According to the 2014 Global R&D Funding Forecast, growth in such funding slowed last year in comparison to 2011-2012, primarily due to the ailing euro zone and stagnating US economies.

Research budgets continue to be cut in advanced economies while emerging economies are not immune to the stagnation in the West. Economic prospects and research growth in Asia have slowed, but continue to outpace the rest of the world. The question mark in this outlook is Japan, which fell behind China in 2011.

Asia's share of global research and development is expected to climb to 40 per cent this year. For all practical purposes, the region is replacing the North American Free Trade Agreement economies of the US, Canada and Mexico as the global R&D driver. And China is fuelling many of these changes.

Since the early 1990s, Chinese growth has been fuelled by increasing investment in research and development, which is aligned with the current five-year plan. Such spending as a percentage of gross domestic product is expected to increase to almost 2 per cent this year.