Emerging markets are rapidly becoming synonymous with innovation. Strong technical education, state support and growing internet penetration, have all driven a surge in creativity.
This is evident when looking at intellectual property generation, as measured by patents, trademarks and industrial designs. According to the World Intellectual Property Organisation, half of all international patent (Patent Cooperation Treaty – PCT) applications now originate in East Asia – with China having rocketed to second place globally (after the US) last year. Indeed, the two companies with the largest number of applications globally are Chinese telecom firms Huawei and ZTE.
Source: World Intellectual Property Organisation. International applications filed under the patent cooperation treaty (PCT). Data for 2017.
Looking at filings at national patent offices, China already eclipses the rest of the world, with some 1.34 million applications in 2016, more than the next four ranked offices combined. Granted, China may to a large degree be following the ‘utility model’, which is less stringent, but even so this is reflective of a country that is now flexing its innovation muscle. And, importantly, the speedy growth in international filings shows a determination to spread homegrown ideas beyond its shores.
Of course, this is not purely a Chinese story. South Korea, for example, continues to perform very strongly in international rankings, helped in no small measure by the large number of applications by tech giant Samsung Electronics. We expect this innovation momentum to extend and to continue to spawn opportunities for long-term investors.