We have blogged several times about China’s success at reverse engineering such products as bullet trains, solar technology, drones, jet fighters, wind turbines, and computers. And, indeed, one of our 
strengths in the US has been the ability to stay ahead of competition through innovation (See Ch.5 and Figure 5.2). But The New York Times (Jan.2, 2011) has just reported that China has issued a new government policy aimed at increasing the number of inventions in that country. China’s goal is to have 2 million patent filings/year by 2015. (In 2009, there were 300,000 in China and 480,000 in the US).
So can China become a prodigious inventor? The answer will play out over decades–but also shape the global economy. “The leadership in China knows that innovation is its future, the key to higher living standards and long-term growth”‘, says the Director of US Patents. But the Chinese approach is an innovation by-the-numbers mentality, says one consultant. It is “emphasizing the quantity of innovation assets more than the quality.”
China’s strategy is guided and sponsored by the state. Should this be a source of concern for the US? Despite China’s inevitable rise, the US has a comparative advantage because it is the country most open to innovation. Our culture forgives failures, tolerates risk, and embraces uncertainty.
Discussion questions:
1. In the 1980’s, Japan was considered a similar threat to American industry. What happened?
2. Will China overtake the US one day as the world’s leader in innovation?
3. Comment on China’s use of metrics to meet the goal. What incentives are they using?
Ironically, just before receiving notice that this blog post was up, I received a notice that my Chinese publisher had put money in my account! Whenever I write a new book, I send it to several foreign publishers, including my agent in China. I have traveled to the country twice, and will return there this spring for another speaking/book tour.
On my travels, I have seen both sides of China – the thriving cities, and the rural areas that are polluted, poor and almost desperate. The Chinese are really wonderful people, and if they set their collective minds to a task, they are formidable. However, they are far behind the U.S. in the ability to innovate. And, if they intend to improve their world position, they have much to do internally first.
However, wherever I traveled in China – major cities or outlying areas, the whole country is filled with energy. They have something that Americans do not seem to have right now – optimism. If we had to live in their conditions, we would revolt these days. For them, however, the trajectory is sky-high and climbing still. If you measure their success strictly in terms of living standards, they will be many years catching up to us. If you measure success in the pride of the people, they are breathing down our nexks, and may soon pass us there.
It is an interesting place.
My impression is that China’s record on enforcement of patents is a tad spotty, to put it charitably. I wonder if the push for innovation will lead to stricter enforcement of all patents, or just of domestic patents, or neither.
China is not satisfied with being the number 1 manufacturer or even the largest economy, which it will likely be before 2050; it wants to be a knowledge-based, skill intensive country. To do that, the Chinese will have to build more universities, protect IP better, and embody a sense of innovation and entrepreneurship in people.
The early signs show that all three are now taking place. Deng Xiaoping “let the people be rich” ushered in a new era of growth and entrepreneurship whose steep incline began in the early 1990s. China is already enforcing IP laws better, and its own companies, Haier, Lenovo and Huawei are already innovating in greater numbers.
The concern the Chinese will have is related to quality, not quantity. The big question will be whether Chinese companies will be able to commercialize innovations and be as globally competitive as US and European companies…time will tell
Dr. Alon, I wanted to note, is author of China Rules: Globalization and Political Transformation (Palgrave McMillan,2009)and several other books on China.