China has surpassed the United States in patent applications and has become world leader. Strong patenting activity, however, did not lead to strong productivity growth. The delinking of patenting activity from productivity growth could be explained by quality and relevance issues. Although the number of patents has been soaring, few are genuine inventions. Relatively low utilisation rates of patents point to a low degree of relevance. This paper uses a representative survey of Chinese patenting firms to provide a detailed picture of the patenting landscape along the dimensions of geographical areas, detailed industrial sectors, traditional and modern industries as defined by the Chinese government, firm age, size and ownership. It also overviews government subsidies across firms. Transport equipment makers hold most patents per firm, followed by electronics manufacturers. State-owned firms spend more on R&D per patent, but hold fewer patents per researcher than private or foreign-invested firms. High patenting performance and government support are not necessarily linked to high utilisation of patents. Smaller, younger and private firms expect a higher return on their patents and so do exterior design patent holders. Furthermore, the paper examines what drives patenting activity. Higher R&D spending by the firm and higher share of researchers in its workforce tend to be associated with higher patents per employee. Smaller and older firms tend to patent more, and government support also appears to matter. Exterior design patents are associated with different firm characteristics: R&D intensity is lower and government support matters less. Most firms consider IPR protection insufficient and the share of firms having experienced patent infringement is the greatest among the largest firms. Many of them do not do anything once their rights are infringed as they do not expect effective remedy. Instead of patenting, which may not provide sufficient protection from imitators, they adopt other strategies like reaping the first mover advantage to market their goods or sign confidentiality agreements with their staff or contracts on commercial secrets.

This Working Paper relates to the 2019 Economic Survey of China (http://www.oecd.org/economy/china-economic-snapshot/).