China Herald: Why China is investing in innovation

After his bestseller The End of Cheap China author Shaun Rein published this week his new book The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia. In five questions China Urban Development´s Adam Mayer asks him about innovation. A selection.

China Urban Development:

AM: The title of your new book The End of Copycat China also suggests the ‘end’ of something China is known for (intellectual property transfer in this case) as a signal for its next phase of development. Is the perception of China as a land of copycats still a reality?

SR: Chinese firms were copycats for the most part of the last thirty years. The main reason was that there was so much low-hanging fruit to simply transfer technology from the West directly into China and to customize if needed for local markets. It was easy for well-connected (and corrupt) people to get land on the cheap and put up skyscrapers or secure long-term monopolies supplying various government agencies. But now that costs are so high and the public equity markets are giving high valuations to innovative Chinese firms like Alibaba and Tencent, Chinese companies are focusing on innovation more and more — it would be a mistake to discount their ability to innovate. This is a natural progression to what happening in South Korea and Japan.

Yesterday I was at Lotte World Amusement Park in Seoul. From the term ‘cast members’ to Indiana Jones look-alikes, even Lotte is seemingly knocking off Disney and the George Lucas/ Stephen Spielberg franchise.

Intellectual property was and remains a concern so it did not make sense for companies to invest millions of dollars in innovation because someone would likely steal it. When I interviewed top entrepreneurs in the book — and I interviewed the founders of JD.com, Qunar, Tudou for instance as well as the former CEO of Alibaba.com and an angel investor in Xiaomi — property rights and lack of enforced was an issue many brought up towards a barrier for innovation in China. That said, the situation is getting better as the government is more likely to move to protect the interests of domestic Chinese firms hurt by copyright infringement than western players.

AM: Is there now a broad consensus among policymakers and business leaders in China that the country must innovate in order to continue on its path of economic reform? What are some examples of businesses or policies you’ve come across in your research that align with this goal?

SR: The Chinese government has definitely set the goal of innovative businesses taking up a larger part of the economy. Local governments are setting up innovation parks, like they did with the IT parks a business generation ago. Frankly, I am not sure that these initiatives will work as great innovation tends to occur in the private sector, often in small teams of entrepreneurs who think they can change the world. Chinese bureaucrats despite good intentions often do not understand and thus do not support new technologies which can hamper innovation.

That said, one sector that the government actively supports for innovation and which is seeing great growth is the bio-tech sector. Probably more than any sector I interviewed, except maybe mobile, biotech entrepreneurs were the most optimistic in China precisely because of the support the Chinese government is giving the sector from funding, equipment and opportunity to cooperate with academic institutions. Many said that the climate is better in China than in the US because of Obama administration funding cutbacks.

More answers in China Urban Development.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you interested in more innovation experts at the China Speakers Bureau? Do check our latest list.