Innovation in China

Forbes is running a new column about China – from the boots-on-the-ground view of Intel’s deputy general manager for China — China’s Invent-It-Here Syndrome. The statements should be eye-opening:

The Chinese government’s goals are sweeping: to develop, influence or downright own the core intellectual property of the next generation of technologies that will power the global economy. To do this, the government has committed to doubling its spending on research and development so that it reaches 2.5% of China’s gross domestic product by 2010, approaching $100 billion annually. China is also on track to have more research scientists and engineers than any other country by 2015.

But it is not just about increasing R&D (something we failed to do in the last federal budget). It is about creating a mercantilist technology policy.

In the past 18 months, China has officially embarked on a multi-year, multi-faceted plan to transform “made in China” into “invented in China.”
You can read about state economic plans on the Internet, and they sound dry and flat. In China, however, these plans are alive. They imbue every conversation with Chinese technology companies and with Chinese government ministers with urgency. They get written into contracts. (emphasis added)
Here’s how China’s long-term economic plan came alive for me: This past summer, I moved to China for Intel to co-run our sales and marketing operations there. A few weeks into the job, I realized that doing business in China involved much more than winning sales in the world’s only very large and very fast-growing PC market.
For instance, international standards are the glue of the PC and communications industry, ensuring that machines can communicate and work together, no matter where they’re made. Big corporations devote significant time and people power to making sure their ideas are represented on the standards bodies that write these rules.
But in every introductory “ops” review I did in China, all our managers talked about how the “local standards” were a key to Intel’s success in every market. By insisting (as any country can) that products sold in China must adhere to local as well as international standards, China makes sure that Chinese inventions get built into high-tech products sold here. That means there is a Chinese voice in which products succeed or fail in China. And products that succeed in China have a much higher chance of succeeding globally.

OK — and so what is our response? So far, and officially, nothing.
But that does not mean we can’t or shouldn’t do anything. For some of the actions we could take, see Julie Hedlund and Rob Atkinson’s paper The Rise of the New Mercantilists: Unfair Trade Practices in the Innovation Economy. There are many more reactive and proactive steps we can be taking.
Most importantly, we need to understand that other countries are playing a different game. They believe in an active policy to promote economic growth in this new I-Cubed Economy. We may disagree with what they are doing. We may think we have a better way. But until we get into the game with a strategy of our own, we will be left on the sidelines.
And the sidelines is not the place where we want us or the next generation to be.

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