What are China’s Rising Expectations?

What are China’s Rising Expectations?

Supremacy in technological innovation will undoubtedly determine which country surfaces as the world’s dominant economic power in the long run. For China’s economic miracle to continue, its businesses must become even more competitive and innovative. The government is doing its part through controlled stimulus to innovation in a fashion difficult for Western nations to replicate. It is increasing R&D spending, financing start-ups, giving low-cost loans to Chinese companies, and providing private sector initiatives. It is also singling out tech companies and nurturing individual efforts in particular areas, like Ofo for dockless shared bikes. Some argue that this level of granular control achieved by an autocratic state could, in the long run, do more harm than good, preventing innovation from flourishing by making markets less competitive. It has happened in the past: From the Roman Empire to Islam, to China itself in the Middle Ages, once powerful states and highly creative societies let their desire for control and stability undercut their creative potential. For all of China’s investments in education and targeting of cutting-edge areas of science and technology, original inventions and engineering breakthroughs are still much less common than meeting consumer demands through internet juggernauts like Alibaba, or driving efficiencies in manufacturing in such industries as appliances where China has been quite successful.

So, there are clearly challenges to China’s dream of leading the world in innovation as it did during its imperial age. The nation’s economy is showing serious signs of strain as the trade war with the United States continues. Its volatile stock market has tumbled more than 20 percent in 2018 (though Western markets have fared poorly as well). Mounting government debt, which is at 25 percent of GDP, and surging corporate debt at 170 percent of GDP, are just some of the problems China faces in the global economic slowdown. The graying of its population and projected lack of workers in the years ahead is another serious concern, as it is for the United States, the EU, Japan, and most major economies of the world.

In spite of such challenges, visitors describe the startup atmosphere in China as electric, and as fierce as any other place in the world. China’s young entrepreneurs are creating their own Silicon Valley, replicating another of the staple institutions of innovation that we have seen appearing throughout history. Huddling together inside the cafes along “Inno Way” in Beijing, many of which cater to these twenty-somethings by helping newbies get acclimated and organizing meetings with potential investors. They provide a critical networking vibe. Studies have shown that these new entrepreneurs share such characteristics as acceptance of risk and a strong work ethic, (reportedly working much longer hours each day than their Silicon Valley counterparts). They are tremendously ambitious, optimistic, and driven by an insatiable curiosity. As we have shown, nations have copied one another throughout history as part of an evolutionary process of becoming more organically creative. During the Middle Ages, Islam and Europe freely copied from China’s extraordinary advances, as did America with Great Britain during the Industrial Revolution. Today, China’s meteoric evolution along the innovation spectrum shows a dynamic trajectory that has placed it in the top 25 of the world’s most innovative nations since 2016. More and more Chinese entrepreneurs are realizing that home-grown innovations form the engine that will drive their competitiveness in the years ahead. Networks link entrepreneurs both nationally and internationally with businesses, government officials, venture capital companies, universities, and government research centers.

At this point, observes the President of MIT, L. Rafael Reif, China is no longer “an innovation also-ran that prospers mainly by copying other people’s ideas and producing them quickly at low cost.” China has now followed the well-worn path of other “catching up” nations we have seen, from South Korea, to Japan, to the United States, imitating the existing leader until it is able to become an innovator in its own right. The transformation is nowhere more evident than in Yabuli, a frigid, rugged region in northeastern China that is now home to the Chinese Entrepreneur Forum. Since 2017 this annual summit celebrates and fosters innovation among the nation’s business leaders and the leading lights of its entrepreneurial community. The Yabuli conference center, a remarkably progressive structure that blends into the stark landscape and mimics the snow-capped mountains on the horizon, stands as a metaphor for China’s rebirth as a formidable center of innovation. Can the Western world afford to continue to ignore the possibility that China is rewriting the playbook on fostering innovation and entrepreneurship? The nation’s dynamic experiment blending authoritarianism with capitalism seems to be working.

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