What we get wrong about China
November 28th, 2012
10:47 AM ET

What we get wrong about China

By Bhaskar Chakravorti, Special to CNN

Editor’s note: Bhaskar Chakravorti is senior associate dean of International Business and Finance and founding executive director of the Institute for Business in the Global Context at The Fletcher School at Tufts University.The views expressed are the author's own.

We now know who will be leading the two most important nations for the global economy – for the next four years in the United States’ case, and for a decade in China’s. By the time President Obama is ready to leave office, China will have passed the U.S. in GDP terms, at least according to a report by the OECD. But with GDP no longer Chinese leaders’ top concern, the country has its sights set on catching up with the U.S. in another area – innovation.

On a recent to visit to speak at the World Economic Forum's Summer Davos in Tianjin, I was struck by the sense of urgency among Chinese leaders to close the gap when it comes to innovation. It was clear to me that it is time for the U.S. to pay close attention, because urgency in China is generally followed by execution.

Unfortunately, America has worked itself up over the wrong issues as far as “competitiveness” is concerned: we bemoan the fact that China has taken our jobs (and 42 percent of Americans believe that China is already the world’s largest economy, a Pew survey suggested). But those worried about the country’s future would be better served focusing on U.S. competitiveness in innovation, something that has the potential to put this country’s growth back on track.

The problem is that there is a general (and misplaced) belief that China will always be a loser, that it can only imitate, not innovate. Critics argue that its society is too top-down and that American innovation will always be buoyed by Silicon Valley.

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But the reality is that it is naïve to believe China cannot narrow the gap in innovation, and the second Obama administration would do well to consider that America could actually learn a thing or two from across the Pacific. And it could start by grappling with some widely held myths:

1. There is no innovation in China, only piracy and imitation.

Most innovation begins with imitation; America got its start by imitating inventions from the Old World. Meanwhile, many Chinese "imitations," such as Alibaba, Tencent or Sina Weibo, have moved far beyond being mere copies of their U.S. counterparts. Each is solving problems uniquely relevant to Chinese businesses and consumers, something that could create platforms for innovations that are propelled into global markets.

2. The Chinese approach to innovation is too top-down and state-led – real innovation only comes from the bottom-up.

The Chinese state is committed to bringing China to the ranks of the innovative nations by 2020. Silicon Valley entrepreneurs might shudder at this top-down approach. Yet consider, for example, where the American entrepreneur would be if the U.S. government had not funded the Defense Advanced Research Projects Agency that gave birth to the Internet. The state must play a role in investing in foundational innovations, such as the Internet and mobile technologies. Once these foundations are laid, then a competitive bottom-up ecosystem will encourage creative destruction. But sadly, U.S. government investment in such foundational innovations has been on a steady decline.

3. Intellectual property rights protection in China is too weak to encourage innovation.

China's weaker intellectual property protection could, arguably, make it easier to foster a climate conducive to open innovation. Of course, a balance needs to be struck between open access to intellectual property and protecting it – with no protection, innovation will stall, because investors need returns on their investment. Unfortunately, in the U.S., intellectual property protections block innovation just as much as they promote it.

4. In a globalized economy, sustaining innovation requires investment in international markets; China's brand and soft power abroad is weak and dated.

Despite several unresolved issues such as territorial disputes and balance of trade, China's influence in the world's fast-growing regions, including Africa, Latin America and East Asia, is growing more rapidly than that of the United States. When Chinese innovations look for inputs or consumers and they turn to these markets, they are likely to have as many opportunities as well-known U.S. brands – perhaps even a better chance. Indeed, when it comes to ties with Africa and Latin America, China is often one step ahead of the U.S.

5. China's education model emphasizes rote learning; innovation can only flourish in environments that encourage exploration, critical thinking and a broad education in the liberal arts tradition.

The danger with the Chinese approach is that if you don’t expose students to other disciplines and encourage critical thinking, they may lack the breadth to blossom into creative problem-solvers and risk takers. However, the U.S. system has some severe deficits of its own. A recent U.S. Department of Commerce report, for example, highlights a growing gap in science, technology, engineering and mathematics education. Notably, immigrants are the ones filling the education gap – half the start-ups in Silicon Valley were founded by immigrants.

Sure, the Chinese model of innovation needs plenty of work, but in many ways China is also learning from the U.S. and following in our early footsteps. As China moves up the curve and adds the uniqueness of its own experience and approach, it may create a new hybrid model that has lessons for other nations, including the United States.

Remember, it’s true that the global positioning system is a product of the U.S. Department of Defense. But the Chinese were the ones who gave us the compass in the first place.

Chakravorti is author of “The Slow Pace of Fast Change: Bringing Innovations to Market in a Connected World.”  

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soundoff (58 Responses)
  1. E. Fitzgerald

    Nations normally due what they perceive to be in their own best interests, including the U.S. We need to try to understand more and demonize less. There does not seem to be a magic formula that solves all disagreements. Brinkmanship is a very nervewracking and expensive process.

    December 13, 2012 at 7:52 am | Reply
    • Lol of OZ

      Totally logical. Growth of mankind as whole. Whoever has the resources should endeavour to do the most. And in this day and age money=resource :) Petty squabbles and technology hoarding is just process inefficiency in the long run.

      December 20, 2012 at 10:54 pm | Reply
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  4. jsm

    The comments on intellectual property rights are really glossed over, at least from the viewpoint of the US working with China. Why would you want invest in a country that is more interested in stealing your technology than actually working with you long term? There are many foreign companies that have learned this the hard way and lost millions.

    December 19, 2012 at 9:32 pm | Reply
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