China's Investment in Intangible Assets by Industry: A Preliminary Estimation in an Extended Sources-of-Growth Framework

This paper documents our major procedures in estimating China's intangible investment by industry for the period 1995-2013. The estimation is controlled by China's aggregate intangible investment estimated in Hulten and Hao (2012, revised and updated) and integrated with the industry-level estimates for tangible investment and value added of the national accounts constructed by the China Industry Productivity Data Project or CIP (Wu 2016). We show that China's intangible investment intensity, measured as the share of intangible investment in nominal value added, grew by 5.3 percent per annum. By 2013 China had reached 8.1 percent in this intensity, compared to 16.7 in the US and 13.9 in the UK. China caught up with the industrialized economies more quickly in the industrial sector than in the service sector. In the industrial sector, China achieved 12.2 percent in intangible intensity, about 90 percent of that of the U.K. (13.4) and 70 percent of that of the U.S. (19.4). In the service sector, China achieved 6.1 percent, about half of that of the U.K. (12.3) and 45 percent of that of the U.S. (14.1). We also show that among major types of intangible investment in the industrial sector, unlike advanced economies, China tended to focus more on computerized information such as software and R&D that are promoted together with government-engineered industrial and infrastructural projects, rather than economic competencies such as branding that rely more on firms competing in the marketplace.