Abstract: In knowledge economy, intellectual capital is the most essential factor of production. It is a major yardstick of the development of knowledge economy, a strategic resource for international economic competition, and a key factor in the overall national strength. Therefore, in the era of knowledge economy, the focus of international competition will be shifted to rivalry in the intellectual capital. At present, the industrialized nations are far ahead of the developing countries in knowledge innovation, information technology and enterprise structure. Knowledge economy has posed a severe challenge to the developing nations, whereas on the other hand, provided them with the extraordinary developing opportunities. China should vigorously engage herself in the international competition so as to win the superiority in knowledge innovation.