China Innovation: When Will That Be?

China IP

Fascinating post over at This is China, entitled, Are We Innovative Yet? The China Challenge. [link no longer exists]

The post relays a conversation with a Chinese national who believes China is not innovative and never will be. She bases this on China’s educational system, parents not letting their kids decide what to study, and a legal system that does not protect IP.

Near as I can tell, she is right to think all of these things hold down innovation in China, but she is wrong to dub this a forever thing.

Increased wealth will eventually change China’s education system and parenting methods — this is already happening in places like Shanghai — And increasing innovation in China is already leading to increasing protection of IP in China.

All of this will take time, but it will happen, just as it has for Korea and for Japan. China will eventually innovate and protect IP. The question is when.

9 responses to “China Innovation: When Will That Be?”

  1. There are plenty of innovation in China, and Chinese are extremely innovative, just not in the way you are talking about.
    Just look at the way Chinese can get around administrative systems, and make tonnes of money. Just look at the rationale they can come up when confronted with facts. Just see how they grasp opportunities, however small, and make a go at it. All of these are innovation. I wish someone with access to these kind of information will document it to show the rest of the world. Xinhua in their legal/justice/judiciary section do a good job of documenting some incidences, but needs an academic to organize those, with more emphasis on the process of innovation – translating a rule or law into ways to get around it to make money, the way to organize around these processes and rules so that the money making is relatively safe and efficient.

  2. There are a lot of smart people in China but their talents are stifled by the social environment (an incentive system based on fear rather than reward for innovation). Since there are few legitimate outlets for their natural talents, the more opportunistic minded Chinese resort to “backdoor” dealings that Bill describes above. If anything, it’s really sad and no need to be so cynical about it.
    There are a host of other road blocks to innovation in China — education system, fear of authority (be it parental or government), inward looking mentality, fear to step out of the bounds and challenge convention, lack of effective incentive system, etc. etc.
    But it does not mean China will never be innovative. Nothing lasts forever. Things change, technologies change, people change.

  3. The main barrier in the way of research at the moment is firstly corruption and secondly a slavish attitude wherein the main goal is to get what other people already have, rather than invent something new.
    Seriously, R&D even at China’s main research centres is pretty much a joke unless there’s some kind of university JV involved. The attitude whereby the research grant is paid directly to the professor in charge and people do not see a problem with this is the one that has to change before Chinese R&D can go anywhere.
    Likewise the main emphasis in a lot of Chinese R&D is on the reverse engineering. It came as quite a shock back in my english teaching days when my first class at the university I was working at turned out to be a room full of masters and PhD students all specialising in reverse engineering and doing specialised courses in this area.
    Of course reverse engineering is an important part of business nowadays – see how part of the reasoning behind Microsoft’s refusal to licence its software to Sun was that they could reverse engineer Microsoft’s products and obtain the necessary information that way, without a licence being necessary. Of course, also, this particular university was engaged in the reverse engineering of technologies (including the materials involved in stealth technology) that the Chinese military is anxious to have for their build-up. But it is hardly helpful in terms of inspiring invention that many of the best and brightest in Chinese R&D see invention as something that can be mined from another’s work.

  4. Double negative makes a positive. Can triple positive makes a negative? “Yeah, Yeah, Yeah.” That’s my reaction if I met Susan. I have been in discussion with a couple Chinese domestic startups in the past couple months and met quite of few with the similar profiles just like Susan in the story, oversea educated and working in MNC. All they do is complaining about the lack of “innovations” in China. However, if drilled deeper into their thought process, the real complain is more about themselves then the environment. All the experiences and educations he/she has is mismatching with the big environment in China and this mismatch makes their lives miserable in China.
    Education system? Korea, Japan and Taiwan had similar system and the “reforms” of the system didn’t really happen until the countries had become prosper on the back of the innovators educated in the “old” system. Moreover, there is no scientific study showing the rigid education system affect innovation. Studies on Direct Instruction in the US has proven the contrary. The scripted teaching is good for the kids and their creativity.
    The question comes down to economy. There are just too many low hanging fruits in the economic opportunities in China that makes break through innovations unnecessary. The innovation is about putting 90% of the resources to the last 10% of the products and services. But most of the business in China can live happily making the 90% goods at 10% the costs. Additional 10% doesn’t bring in any new opportunity and they cost 10 times more investment.

  5. I have been thinking about this idea of innovation in China a lot recently. I used to think that the system of rote education meant that innovative thinking would not flourish and if it did surely the cultural bias against innovators and the bird that sticks its neck out would crush the Chinese in technology. But I’ve changed recently, and I would attribute part of that change to a talk recently given at the Asia Society in New York. There I heard the author of Silicon Dragon: How China is Winning the Tech Race, Rebecca Fannin exchange views with two China VCs and another reporter turned author, James McGregor.
    These two other VCs, one with Crystal Ventures (invested in and one with Qiming Venture Partners in Shanghai, made two points that really has made me think twice. First, the fact that China’s market is so big gives the Chinese an economy of scale in terms of consumers that until this point, really only the American economy enjoyed. The implication was that if a Chinese company can “make it” with one or two products, then chances are that this company will eventually become the largest in the world for its product. (Of course we just saw the beginnings of this, albeit in oil and not tech, when PetroChina dethroned ExxonMobile as the world’s largest public company – more than twice the size of the old king).
    The second point that was made was that technology, for the most part, is incremental, not “pure innovation” whatever that means. In other words, the Isaac Newtons of the world only come around once every several hundred years and calculus is only “invented” once. The internet might be the greatest innovation of all time, but even Arpanet was built on American military telecom research.
    Sometimes I think we get confused by the differences in the words invention, innovation and incremental improvement of a product. The latter is what is truly important in technology
    battles. You look at the iPhone or the Blackberry. What are they? Cell phones and computers in one. It is easy to see where they came from because we have watch cell phones mutate into these personal digital assistants. Is that something that North America is inherently better at doing? Today it is, but I do not think that the Chinese are quite that far behind. Furthermore, I think we have already seen the following three major examples of tech innovation come out of China:
    1) Alibaba
    2) Focus Media
    3) 2008 MSN Messenger
    I did not realize this, but one of the VCs at the Asia Society meeting told me that the latest version of MSN Messenger was actually developed in China at Tsinghua University’s Microsoft Lab. He said that Microsoft did this because they realized that Chinese people on average spend much more time on the chat programs than do Westerners AND they like to use more features than we do. I think it’s true.
    Alibaba – it speaks for itself so I’m not going to get too involved with this one.
    But FocusMedia is one that often goes under the radar. The fact that founder Jason Jiang thought to put advertisements in front of the average Chinese office manager while he waited for the world’s slowest elevators is not some outlandish thought or crazy invention that needed to be developed over 30 years. It was a simple idea, needed a little seed funding from Softbank and then it became the world’s largest provider of advertising for elevator waiting consumers. This will happen again, and sooner than we would like to admit.
    One final thought came to me while I was reading an article in my favorite tech magazine, WIRED. The author of this article,
    Clive Thompson, bemoans the lack of innovation in America and attributes it to the fact that most kids and young workers have moved to the classroom and white collar jobs. This moves us away from the old paradigm, where we used to work with our hands and innovation was as natural as hand-eye coordination.
    Thompson says, “We’ve lost our Everyman ability to build, maintain, and repair the devices we rely on every day. And that’s making it harder to solve the country’s nastiest problems, like oil dependence, climate change, and global competitiveness.”
    I agree with him. Take a survey of my peers and I would guarantee you that you would have to “re-teach” them how to even change a tire. Thomspon takes it a step further, to the heart of Detroit, when he says,
    “Ever wonder why Detroit isn’t producing 100-mpg cars? One reason might be that the engineers there spend all their time tinkering with CAD software-developing design concepts in a purely virtual sense. They aren’t ripping open cars to see what’s possible, the way those amateur ultra–mileage Prius hackers do (some of whom, by the way, have modded their hybrids to get 100mpg).”
    You know at 100mpg, $4.00 per gallon gas is equivalent to 25mpg $1.00 per gallon gas – ah that harkens my salad days of 1999, when Sunoco sold 87 octane at $0.99 per gallon.
    And that’s the heart of the matter if you really break it down. There are millions of Chinese engineers that are in the classroom, millions on the factory floor, and millions tinkering with CAD files every day. Ultimately, innovation and technology needs a savvy combination of both theory and practice, and I do believe that right now, the world’s workshop is the new center for this cross-section of technology and industry.
    Daniel Turgel

  6. The “eureka” moment thing is a myth. Innovation is rarely like that. If it is, it usually happens due to a long series of previous hard work, which results in the seemingly “eureka” moment.
    I also think the dumbing down of society in general contributes to the lack of innovation.

  7. I agree with both David Li’s and FREAK’s assertions, about there being a lot of low lying fruit that is oh-so-much-easier to pluck than the sort of GE-Edison type of innovation that FREAK refers to. In other words, in today’s Chinese economy, with so many people still entering the market, lack of capital is a reality that makes it difficult to do the kind of systematic efforts that create innovative results; in addition, there just doesn’t seem as great a reward in putting in all that effort and money – not when you’ve got millions of Chinese who would still love to buy your 20 cent plastic widget.
    Further, as I argue in the post entitled, , China needs to seriously renovate social, legal and cultural institutions to become an Innovation society. Otherwise, it will continue to be locked into the small ‘i’ innovation – or “jury-rigging” – that live here in China associate with The Chinese Way.

  8. Thank you for setting this debate. I have something to say after finishing my book: Inside Story of China’s high-tech industry: making silicon valley in Beijing (Rowman&Littlefield, 2008). I interviewed hundreds of companies over 6 years period. Here are my conclusions. For detail, you may have to read the book.
    1. The development of indigenous enterprises is indispensible for China’s technological growth.
    Amar Bhidé in his 2008 book, the Ventursome economy, argues that the real economic payoff of innovation lie not so much in the value of new products created, but in how technologies are used. Although he is arguing for the continued American technological advantages, this argument applies equally well to China. It was Lenovo that first brought the mainstream PC technology to the largest number of Chinese consumers. It was Chinese Internet companies that created the world’s second-largest Internet market. In mobile phone and DVD technology, again Chinese companies were instrumental to make the technology appealing to mass consumers at a price they could afford. China’s indigenous companies, even if have yet played leading role in creating cut-edge products, have been extraordinarily effective in bringing western technology to Chinese enterprises and consumers, They have helped to unleash the tremendous gains in productivities as well as generate new ideas and business opportunities.
    2. Indigenous companies can be competitive if they can take advantage of the synergy between China’s exporting industry and domestic market growth.
    The most successful Chinese technical companies are built upon the China’s domestic market, not in export. These companies take advantage of their easy access to competitive, reliable, and high-quality component suppliers—the same suppliers for MNCs in the global industry and target the Chinese market with special designs and pricing, due to their superior understanding of and access to this market. If the market for their products also grows at this time, they have a good chance to best the foreign competition. This is the story of Lenovo, Huawei and many other successful Chinese high-tech companies.
    3. Collaboration and competition with MNCs is critical for Chinese innovation. The competition between MNCs and Chinese indigenous firms are not zero-sum game.
    While the indigenous companies can become a leading force for innovation, they cannot do so without working with MNCs. The competition between MNCs and indigenous companies are not a zero sum game as many tend to believe. The increasing involvement of MNCs in China in the past 20 years has been accompanied by, and in fact, dependent upon the growing competence of Chinese local companies.
    4. The lack of cutting-edge innovation among Chinese firms is a reflection of the Chinese current market condition, and it will change as the market changes.
    The Chinese market has advantages in its size, but not in its sophistication. Chinese consumer value low-price and they lack experiences with particular products. This means that most of them have yet to attach the same importance to the quality, design, and newness of products that consumers in advanced countries do. This provides little incentive and reward for autonomous technology innovation by indigenous companies. Therefore, it is not surprising, indeed it should be expected, that most Chinese companies concentrate on following the MNCs’ lead in making products cheaper and better suited to Chinese customers rather than blazing their own paths. One cannot judge the innovative potential of Chinese companies on what they are doing now. They are market oriented and they will evolve as the market evolves. Zhongguancun shows that innovation is a long term process, and can only be approached step by step, and not just by a few strong companies but by succeeding generations of them, as they each get closer to developing the innovative core.
    5. The role of the government is essential, not as a leader, but as a flexible collaborator with MNCs, indigenous companies and research institute in dealing with technological change.
    Some Chinese leaders want to revive the model of state-led science and technology development as in early defense inspired system. Unfortunately, this shows little understanding of the difference between military and civilian technology, or of the reality of the global marketplace in which Chinese companies must operate. Given the intensity of globalization today, a state-centered approach to R & D would be counterproductive, if not simply unfeasible. The state’s crucial roles are not just providing specific policies or R & D capital but collaborating effectively with other technological agents and learning to reform regional institutions under changed circumstances. Chinese government has to continue to collaborate with—rather than supervise or direct—other parties. Then a fairer and more open institutional structure for fostering innovation can be built.
    In the end, China can surely innovate and Chinese indigenous companies can learn and thrive in a globalizing and fast moving world. After all, it is the development of the indigenous companies, not MNCs or the Chinese government that will determine the extent to which China controls its technological destiny. This is no different than in other countries. Just as we could not imagine the United States as the leading technological society today without the leading U.S. companies, or Japan and Korea without Japanese and Korean companies, we should not imagine China’s technological transformation without its indigenous companies eventually taking leading roles.

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