The Amount of Money Spent Has Not Decreased, but the Direction of Spending Has Changed: Understanding the New Economic Logic Behind "Intellectual Property Product Investments"
Hello everyone, I'm your financial observer. Recently, you might have noticed a seemingly contradictory phenomenon in the news: on one hand, our country's fixed asset investment (which includes visible investments such as building houses, roads, and purchasing machinery) has decreased by 7.2% in the first eight months of the year; on the other hand, there has been frequent mention of "new drivers of growth" and "counter-trend growth," especially "intellectual property product investments," a term that may sound a bit academic, but whose growth rate has actually accelerated.
What's going on? Does it mean the economy is struggling? On the contrary, this is actually a sign that China's economy is undergoing a profound transformation and upgrading. Today, we will break down this phenomenon in simple terms and make it clear.
Don't Be Scared by Negative Growth: The Money Isn't Gone; It's Just Moving to Other Areas
First, let's dispel a misconception: Does a 7.2% decrease in fixed asset investment mean that people are no longer spending money?
Not at all.
You can think of a country's investments as a family's expenses. In the past, this family mainly spent money on building large houses and buying luxury cars (traditional infrastructure and real estate). Now that those needs have been met to some extent, these expenditures have naturally decreased. However, the family has started to spend money on hiring tutors, taking online courses, and researching new recipes (technology, software, and research and development).
Although less money is being spent on building houses, more is being invested in research and development. This type of investment, although intangible, can bring high returns in the future.
Data shows that although overall investment has decreased in the first eight months of this year, intellectual property product investments (i.e., investments in "intangible assets") have not only not decreased but have increased by 9.2%. This indicates that funds have not left the market; instead, they have shifted from inefficient traditional sectors to more productive and innovative areas. This is a structural optimization, not a reduction in total investment.
What Are Intellectual Property Product Investments? They're Essentially Investing in the Brain
Many readers might find the term confusing: I invest in stocks and bonds, so how does that relate to "intellectual property"?
The National Bureau of Statistics defines intellectual property product investments clearly, and they mainly include four categories, with the first two accounting for over 90% of the total:
1. Computer software and database investments: For example, developing an app, building a cloud platform, or organizing large amounts of data.
2. Research and development (R&D) investments: The money spent by companies to create more advanced chips or more efficient batteries in laboratories.
The remaining two categories (mining exploration and original literary and artistic works) account for a small portion and can be ignored for our purposes.
In simpler terms:
In the past, investments were focused on building physical structures like buildings, which depreciate over time. Now, investments are in code, patents, and data, which create capabilities that become more valuable with use.
This is why officials refer to these investments as "energy-storing" investments. They are not like building roads, which remain useful once completed; they are more like installing advanced "chips" and "operating systems" for the economy, significantly improving efficiency.
Why Are Software and Data Investments Growing So Rapidly? Due to Domestic Substitution and AI
News reports indicate that investments in computer software and databases have increased by 10.9%, which is the main driving force behind this growth. There are three main reasons:
1. Accelerating domestic substitution: Many core software and databases used to rely on foreign sources. To ensure security and technological independence, domestic companies must engage in R&D. This is not a discretionary expense but a necessary strategy for survival.
2. The softwareization of hardware: In today's chips and electric vehicles, the hardware is just the framework; the real value lies in the software. For an electric vehicle, half of its value comes from the battery and motor, and even more from the in-vehicle system and autonomous driving algorithms. Chip design itself is a complex software process.
3. Data as the New Oil: The scale of internet data services is expanding. Companies need to clean and analyze data, build data warehouses, and train AI models, which requires servers, engineers, and computing power. All of these expenditures are considered intellectual property product investments.
For example: A car company might previously spend 10 billion yuan on building a factory (fixed asset investment) and now spend 5 billion yuan on building the factory and another 5 billion yuan on developing autonomous driving algorithms and connected vehicle systems (intellectual property investments). The latter, although intangible, determines whether the car can command a high price and dominate the market.
Global Trend: From Tangibles to Intangibles
This is not a phenomenon unique to China but a global economic trend. A report by the World Intellectual Property Organization shows that since 2008, the growth rate of intangible asset investments has been 3.6 times that of tangible assets. By 2025, global intangible asset investments are expected to exceed 10 trillion dollars.
Why Is the World Doing This?
Because physical assets are becoming less valuable, while knowledge is becoming more valuable:
- In the past, the value of a phone lay in its screen, camera, and metal casing (tangible assets).
- Now, the value lies in its operating system, app ecosystem, brand reputation, and AI capabilities (intangible assets).
- In the past, the value of a car came from its steel and engine.
- Now, the value of an electric vehicle comes from its battery technology, software-defined features, and brand prestige.
- Large language models (AI) have almost no physical form, but they can write code, perform designs, and provide customer service. Their value relies entirely on research, data, and software.
This means that future competition will not be about who has the largest factories or the most machines but who owns the most valuable intellectual assets. Those who control core algorithms, exclusive data, and patented technologies will have the power to set prices.
Policy Direction: Turning Intelligence into Assets
Let's look at how the government is responding to this trend.
The 14th Five-Year Plan explicitly supports investments in new types of infrastructure and intangible assets. Zheng Zhajie, the director of the National Development and Reform Commission, has mentioned promoting the recognition and monetization of intangible assets such as software and data.
This is crucial as it addresses two key issues:
1. Accounting issues: In the past, R&D expenses could only be recorded as costs on financial statements, reducing profits and making it difficult for companies to obtain loans. Now, policies encourage the capitalization of these expenses, turning them into assets that improve a company's financial health and make it easier to raise funds.
2. Incentive issues: If intellectual achievements cannot be monetized, employees and researchers lack motivation to innovate. By recognizing the value of intellectual work, policies create incentives for companies to convert patents, software, and data into real cash through transactions, licensing, and equity participation.
What Does This Mean for Ordinary People?
- For job seekers: Jobs that require physical strength and repetition will decrease, while those that require creativity, technical skills, and data analysis will increase. Your knowledge and skills will become your most valuable assets.
- For investors: Focus on companies that invest heavily in R&D and possess core patents and software capabilities. These companies have stronger competitive advantages and better resilience.
- For entrepreneurs: Don't just focus on opening physical stores or engaging in traditional manufacturing. If your projects generate data, create software barriers, or accumulate intellectual property, you will have easier access to capital and government support.
In Summary
The decrease in fixed asset investment is not a sign of economic decline but a symptom of economic transformation. We are moving from an era of building physical structures to one of optimizing efficiency through code and data. The growth in intellectual property product investments is the most tangible manifestation of this shift.
In one sentence: The amount of money spent has not decreased; it has simply shifted from building roads and factories to investing in research and development and software. This is not just a strategic adjustment at the national level but also a new rule that every company and individual must adapt to. In the future, intangible assets will be more valuable than tangible assets.