China as an innovation nation
John Kao. (Courtesy: John Kao)
September 12th, 2011
08:00 AM ET

China as an innovation nation

Editor's Note: John Kao, dubbed "Mr. Creativity" by The Economist, is the chairman for the institute of large-scale innovation and author of Innovation Nation. You can follow John on TwitterFacebook and at This post is the first of six pieces by John about his recent trip to China. Check back each morning this week at 8am for the next installment.

By John Kao – Special to CNN

I recently had the rare privilege of traveling in China as a member of a U.S. expert panel on Chinese innovation. We were convened by an agreement between the governments of the United States and China to contribute to an “innovation dialogue” that has been underway for the past two years and that is seen as being of strategic interest to both countries.

Our itinerary led us to a broad array of players in the Chinese innovation system, including policy makers at both national and state levels, entrepreneurs, managers of state-owned enterprises, academics, representatives of think tanks and others. It also involved a whirlwind tour of innovation hot spots in Beijing, Nanjing and Shanghai. We visited science parks, venture incubators, corporate labs of multinational companies, as well as start-ups in life sciences and digital media. We also sat down with our Chinese colleagues in a variety of settings, often accompanied by deliriously appetizing cuisine, to discuss the issues at hand.

What has emerged is a rather startling picture of a country on the move, whose drumbeat is...innovation.

In “China as an Innovation Nation,” which the first of six pieces, I will sketch the dimensions of China’s innovation drive in the light of the country's resurgent place in the world. It is important at the outset to get a sense of the scale of China’s innovation effort as well as its flavor.

In my second piece, “Why is innovation so important to China,” I will explore the question of why innovation has moved to China’s center stage and how that reflects some of China’s key underlying assumptions about its national strategy.

In the third piece, “Chinese innovation - paper tiger or king of the hill?” I will discuss whether China’s drive towards becoming an innovation nation is appearance or reality.

My fourth piece, “In search of the Chinese entrepreneur,” will examine Chinese entrepreneurship and innovation - its character, enablers and obstacles.

In the fifth piece, "Innovation war or innovation peace?" I explore the potential for a collision course between China and the U.S. in which the traditional notion of trade war must be broadened to include the potential for an “innovation war.”  I will offer some thoughts about what an “innovation peace” might look like, where the U.S.-China innovation relationship could go and in what ways it might benefit global civil society.

And finally in the sixth piece, "Sunrise on the Bund," I will offer a few personal observations on how to make sense of the complex, essential and often contradictory phenomenon that is China today.

Let's get started. Her is my first post, "China as an Innovation Nation":

One of countless dioramas displaying new Chinese science parks. (Courtesy: John Kao)

In my most recent book, I defined an innovation nation as “a country that is mobilizing its resources in a pervasive and innovative way... a country that is committed to constantly reinventing the nature of its innovation capabilities to improve the lot of humanity.”

I then observed, “Right now there are no Innovation Nations. But America has the potential to become the first...”

Based on my experiences in China, I now wonder if my assumption needs to be revised, and if China is now a contender to be the first innovation nation.

As a mirror to these thoughts, the Chinese Academy of Science sees China as becoming an “innovation driven nation” meaning “that innovation has become a major driving force for development and with high innovative development and strong innovation capability.”

Any discussion of China must begin with a few general statistics to get the scale of what we are talking about. With a population closing in on 1.4 billion people, China has surpassed Japan to become the world’s second largest economy. Relatively unscathed by the global financial crisis, China currently enjoys foreign exchange reserves of over $2.5 trillion, of which over $1 trillion is U.S. debt.

One could point to several factors that transformed China in a few short decades into the world’s factory: The Chinese work ethic and high savings rate, favorable valuation of the Chinese Yuan relative to the U.S. dollar, and the benefits of being able to make social tradeoffs that come with a centrally planned economy, all of which can boost productivity in targeted areas. Another way of saying this? The Chinese work hard to make things that we (and others) buy on credit. These things are increasingly supplied by a Chinese economy whose strategy is validated by a growing economic surplus augmented by high savings rates and deferment of both consumption and the kind of social entitlements that we take for granted in the United States.

With regard to the specifics of innovation, China now graduates more engineers and scientists than the U.S. China accounts for 12% of the world’s global research and development spending, making it the second largest in the world.  Its investment in R&D has increased to 1.6% of GDP and China plans to grow this figure to 2.5% by 2020. China is said to be building over one hundred new universities. Science parks are springing up around the country like mushrooms after a rain. And while isolation because of language barriers has historically been an obstacle to globalization, it is noteworthy that China is now on track to becoming one of the largest English-speaking countries in the world.

Most significantly, Chinese leaders all the way to the top are now publicly emphasizing the importance of innovation as a fundamental driver of China’s economic and social development. This is reflected in an active planning process; the 11th 5-year plan (2006-2010) for China emphasized the importance of innovation and the current 12th 5-year plan goes even further. It describes efforts to promote a wide range of strategic emerging industries in energy, environmental protection, next generation information technology, materials science and new kinds of vehicles. New talent development schemes and government-driven financing regimes are part of this story as well.

And these are not just words. Innovation is actively managed at all level of government. Developing a new generation of innovation savvy leaders is a top priority. There is also an evident willingness to experiment - whether in terms of new kinds of venture incubators, global alliances or investment models. Nothing, it seems, is off the table for consideration. In line with this, China’s many economic development think tanks are actively studying the innovation strategies and development models of other countries, most especially the United States.

And while it may be fashionable to knock China’s approach to innovation as being primarily focused on theoretical research and the filing of patents, the thinking in Beijing and elsewhere is far more sophisticated. In fact, the definition of innovation shared with us at the Chinese Academy of Sciences is that it is “a complex process of value creation, including, scientific & technological value, cultural value, economic value and social value, concerning activities ranging from scientific discovery, technological invention, business model innovation and their application as well as social diffusion.” Not a bad definition in anyone’s book.

Given the above, it would be the ultimate irony if my book “Innovation Nation,” which was recently translated into Chinese becomes more widely read in China than in the United States, even though it was written for a U.S. audience with the goal of stimulating our own national conversation on how to improve our own national innovation capability.

The views expressed in this article are solely those John Kao.

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Topics: China • Innovation

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