|GDP per capita China 2002 (Photo credit: Wikipedia)|
China’s Innovation Success Depends on Political Changes
Since 1978, the Chinese economy has seen phenomenal growth. ..... the country has grown by relying heavily on investments, exports, and its huge low-cost labor force. That formula has worked well so far, but evidence indicates that China is getting less and less from this approach lately. The country’s export growth is decelerating quickly, and China is already investing an amount equivalent to about half of its GDP—which is probably the highest level ever among any country in peacetime. ...... changing the country’s strategy so that its growth wastes less energy, requires less investment, and is less reliant on exploiting cheap labor as a competitive advantage. .... a transition out of the rapid growth model of the last three decades will be fraught with technical uncertainties and political complexities ..... The factors that drive a country to grow when its GDP per capita is $500 are totally different from the growth drivers when a country has a per capita GDP beyond $5,000. At $500—which was the case in China in 1994—you can copy the technology and production methods of other countries and drop them into your economy. ..... As a country gets richer, its growth formula changes. Innovations, technology, and productivity improvements become more important, as do domestic entrepreneurs and innovators. ...... Professors in China are like company employees, in contrast to their fiercely independent counterparts in the West. Research projects are often directed from the top down rather than being initiated by professors and researchers. Data sharing is difficult across bureaucracies ...... the huge export markets in Europe and the United States—is shrinking on the demand side. ...... technology-based growth drivers require more than simply copying other countries’ technology and business models. They require a rule-based system, IP protection, freedom to think and challenge authority, and a government with limited reach and power. In other words, they require Western institutions.