Index assesses innovation capacity of companies

Telecommunications, energy and consumer discretionaries are the leading innovative sectors on the National Equities Exchange and Quotations, more commonly known as the New Third Board, according to a recent research report.

The report conducted by the Beijing Patent Examination Cooperation Center at the State Intellectual Property Office and its subsidiary the Guozhi Patent Warning Consulting Center, in cooperation with Qinglin Huacheng, an investment company, created a new index to judge innovation capacities.

From the perspective of investors, the Patent and Innovation Index pays close attention to innovation awareness, achievements, operations and growth, Liu Yicheng, deputy director of the Patent Service Department of the Beijing Patent Examination Cooperation Center, who is also in charge of the research, said at a news conference in Beijing last week.

"We selected companies whose equities are traded through market makers on the New Third Board as the subject of our search, because they are more typical of the market," Liu told China Daily.

More than 5,000 companies were listed on the New Third Board by the end of 2015, with 22 percent of them traded through market makers - securities companies serving as intermediaries or wholesalers in the market.

The small group of listed companies has turned out to be a dynamic force and is increasingly favored by investors - it contributed 58 percent of the total trade value and 85 percent of total deals in the capital market, which is particularly popular with small high-tech businesses.

Discarding such sectors as commerce, finance and real estate that lack enough patent data for analysis, researchers focused on more than 800 listed companies in eight sectors.

Patent data is the key to innovation evaluation, Liu said. He cited patent applications to reflect a company's innovation awareness.

In the index, valid patent inventories and overseas filings coverage are used to show innovation quality and regional influence, and licensing and patent-collateralized loans are related to operations, he explained.

Yu Libiao, general manager of the Guozhi Patent Warning Consulting Center, said the innovation evaluation system could also be applied to other capital markets, with some of the indicators adjusted.

Zhao Wei, general manager of Qinglin Huacheng, predicted that the number of listed companies on the New Third Board would surpass the 10,000 benchmark by the end of this year.

When facing such a large reservoir of candidates, how to distinguish those that are worthy of investment will become a real challenge.

"An investor needs not only to consider what industry a targeted company is from or the neat financial statement it presents, but also to weigh its sustainability and creation capacity," Zhao said. "The report provides such an approach to scanning a company from a DNA level to see whether it has innovation capacity in its genes."