Innovation with Chinese characteristics

UMUT ERGUNSÜ

Having been living in China for 10 years, seven of those 10 years spent in one of the top Chinese universities, I believe China’s education system is not one that prepares students’ minds for questioning. Consequently, Chinese people are not necessarily questioning the world around them, which begs the question: Without a mindset ready for questioning, how can a society innovate? 

I have been researching this topic for some time and I was quite happy when I received an invitation from the Center for China and Globalization think tank to participate in the China and Global Enterprises Forum in Ningbo between Sept. 23-25 which gathered together the well-known experts, scholars, politicians and business leaders from China and abroad. 

Firstly, I want to write a few sentences on Ningbo. Ningbo is a familiar city for those Turkish businesspeople that trade with China since it is home to the world’s busiest port. Turkish businesspeople import many goods from Zhejiang province and those goods are shipped from Ningbo port. Ningbo has been ranked by Forbes as China’s best business city for 10 consecutive years. It is one of the most dynamic business centers in the southern Yangtze River delta. Ningbo’s position along China’s Maritime Silk Road will undoubtedly create opportunities as the “One Belt, One Road” initiative gathers momentum. 

As China enters a new phase of its economic development, which is called the “new normal,” the role of the traditional industries, while remaining important, are now decreasing while new sources of growth have emerged and are expected to play an increasingly important role in the years ahead in generating the growth that China desperately needs to transform its economy. Services, household consumption, new economy style activities and urbanization based on smart city models along with fostering entrepreneurship and innovation are expected to fuel growth.

Innovation is expected to be the key factor in restructuring China’s current economy towards a high added-value, knowledge-based economy. According to high-level Chinese Communist Party officials, “innovation-driven activities are set to be the economy’s next growth engine, replacing labor and capital-driven ones.” Priority is now been given to “indigenous innovation.” The government is prioritizing the funding of the new ventures which are developing new technologies. Keep in mind that in the last 10 years, the patents granted to Chinese inventors have doubled.

So, against all odds, the data shows us that China gets more innovative as time passes, but it still has a long way to go. We will have to wait and see if it will be able to manage to transform its economy to a high value-added one. It seems to find the key to innovation with Chinese characteristics.

Nowadays in China “going global” is perceived as a key growth driver for Chinese companies. Supporting Chinese companies to go global is now a key element in the government strategy for achieving the restructuring and rebalancing of the economy. As more and more companies go global, private enterprises get involved as much, if not more, than state-owned enterprises (SOEs), while the range of sectors and of investment destinations gets more diversified. However, on the other hand, Chinese companies need to understand that they can cope with the challenges of going global.

As Chinese companies go global, foreign companies, including Turkish ones such as Beko, Aksa Jeneratör and Standard Profil, continue their presence in China. Although surveys show that foreign investors in China have lower expectations for China’s growth and profits than in previous years, foreign companies in China still remain optimistic about the continuation of their presence in the country. However, they are becoming more cautious about their future investments in China; increased costs, government regulations, higher protection in favor of domestic companies and the emphasis on “domestic innovation” are causing anxieties that once the Chinese companies fully grasp the know-how of some of the high-tech fields, foreign companies operating in these fields might be pushed out. However, responding to the need to secure foreign investment and technology inflows, the Chinese government is now considering the revision of the Foreign Investment Law to ease the access of foreign investors to services such as the finance, education, logistics and high-end manufacturing sectors.