Innovation in China

Innovation In ChinaLegendary trend forecasters John and Doris Naisbitt have been analyzing global trends together since 2000, with a special focus on the fundamental transitions in China’s social, political and economic development and its impact on the West. Their latest book is Innovation in China: The Chengdu Triangle. They are currently working on a new book about the new global landscape.  - Rowan Gibson, Co-Founder, Innovation Excellence

Innovation in China

Pride goes before a fall. Pride estimates value, position and ability of oneself higher than those of others. Arrogance, pretention, illusion and blasé color a picture that does not reflect reality. Pride makes us blind. That’s what makes it so dangerous.

We can experience it on personal levels, and we are about to experience it on a global scale. It is not irreversible, but most likely: the West, dazzled in the belief of its immovable supremacy, is in denial of losing ground against a rising east and new alliances of emerging markets. Based on obsolete pictures of the past the West overestimates its own ability and underestimates the potentials of the rising powers. The main players, the U.S. and China, are easy to identify. And while the next decades will be dominated by a bi-polar world of the fading and the rising star, the further future is foreseeable: the hegemony of China, a nation that little more than thirty years ago was at the brink of economic, political and cultural collapse. It is part of the pride of the lecturing West that it is in denial of what stood behind the rise of China: its eagerness to learn, its guts to utilize trial and error, and the simplicity of adopting what works and dropping what does not. Mistakes are made, and it is not always the most elegant path China chooses, but it keeps moving.

The belief in Western supremacy relies on three main pillars, Western democracy, market economy and technological leadership. If innovation were given a citizenship, it would be American. China for its part is not about to continue as the executing branch of Western innovations. More so, innovation in China has peeled off its limitation to technology and business, and embraces social-political developments, feeding economic progress and technological advancements. It takes place in a fusion of strategic planning and flexible execution. Innovation in a state-directed matrix? Yes and no. The city of Chengdu is a good example of how far innovative thinking can be stretched in China. New social economic structures work in the interest of social stability and create a nourishing environment for entrepreneurial thinking and ideas.

Chengdu, with a population of 14 million, is the capital of Sichuan province. It is the city where paper money — a colossal innovation — first appeared in 1024. The printing of the Buddhist canons “Four Books” and “Five Classics” made Chengdu the early center in the art of printing. Innovative thinking is part of its history, and it is shaping its future.

Innovation in Chengdu is growing out of a strategically planned nourishing business environment and an entrepreneur-friendly administration in a stable social climate. Following the principles of a well-run company, Chengdu’s leadership combines management and business acumen with social consciousness and, to a much greater extent than we have ever seen in a Western local government, a service-oriented administration. A good example of innovative service are the quarterly meetings, the  Mayor holds, and in which every problem, request or complaints must be solved or dealt with within three days. The first meeting was held in March 2003 and meetings have been held without interruption since that time.

Unlike technological innovation, social and economic innovation cannot be created in isolation, but only in a context that engages the larger society. It is likely that the absence of election driven thinking makes it easier to find common ground when it comes to changing obsolete conditions and old thinking patterns.

The challenging social context in all of China is the abolishing of the dualism of its populations. It demands taking down the barriers which deny rural people the same rights and economic opportunities as urban dwellers and to include citizens in basic decision making processes. All made possible only by a large shift in thinking, a comprehensive transformation from a group and collective oriented society to an increasingly individual oriented society.

All issues of change are linked with each other, and require that improvements are not made independently in each of them, but coordinated among all of them. Innovation in Chengdu is about urban rural integration and access to economic progress for all citizens not on the base of a welfare state, but by enabling rural people to climb up the social ladder by their own merits.

To reach that goal Chengdu has developed a comprehensive model, simultaneously embracing three areas: reform of property rights, equalization of public service, and grassroots democracy.  All three elements are building the legal foundation that will give more rights to the individual. Innovation in each is stimulating the other two for a result greater than the sum of their parts. We call it “Chengdu’s Innovation Triangle.”

Reform of property rights created favorable conditions for land trading and land pooling leading to a higher efficiency and a gradual industrialization and modernization of arable land. The usual scattered and small lots of land did not allow efficient husbandry but as land reform allowed trading of land, large scale crops farming was possible and higher efficiency brought higher revenues to the farmers. Farmers who decide to join Chengdu’s city workforce can now lease or sell their land and work in industry or in the service sector. In this case the farmer would have a fixed income plus the monthly wage with the opportunity to return to their land later in life.

Grassroots democracy — as elections in more than 800,000 villages in China is called — is a breakthrough in two directions: sharing responsibility and taking responsibility. Ordinary people can take care of their own concerns through elected representatives, but at the same time they are responsible for their choice. Elections in villages are not about political considerations but about economic considerations and better and more responsive management of village affairs. Elections are about developing poor rural areas and bringing modernity into remote areas.

To equalize public service between the favored urban and the disadvantaged rural population Chengdu abolished the “hukou” classification of “rural household” and “non-rural household” and registered all the local households as “residential households” in 2004. By the end of 2012 all residents of the city, rural and urban districts, will have equal access to education, health care and other services provided by the local government. Equal access to education, be it one of the 55 vocational or at one of the 42 provincial and national key universities is utilizing a previously neglected talent pool.

In this holistic view of innovation Chengdu has created favorable conditions for direct foreign investment. Not the least the excellent supply of workforce has led 219 of the Fortune 500 companies located in Chengdu, including a 100 billion investment of Dell over five years. In addition Chengdu is setting measures to support scientific development. It has adopted this strategy through the 13 industrial zones and set-up four clusters of innovative companies will work on an industry-academic-research based model in which alliances instituted by industrial leaders are developed along with research institutions, academies and industry peers. To summarize:

Innovation in ChinaThe first pillar of Chengdu’s reform is its wider focus which is not exclusive on industrial development, but on a whole range of investment attractions. In its early reforms Chengdu was similar to other inland cities. Its orientation was toward foreign trade and active efforts to attract overseas investment. But at a much earlier stage than other inland cities, Chengdu broadened its innovative activities to include market elements, such as technology, labor force, knowledge, financial services, market development, and land reform with the underlying purpose to raise local consumption levels and stimulate sustainable economic development in the region.

The second pillar of Chengdu’s innovation model is to seek to enhance the allocation and efficiency of “intangible assets.” To speed up technological innovation Chengdu has set up international technological and economic exchanges. In recent years it has encouraged the selective attraction of financial industries by inviting more than 50 domestic and foreign banks, insurance companies, securities companies, trust companies, future and fund corporations, and more than 20 distinguished domestic and foreign financial supporting intermediary service agencies to establish themselves in the city. All of this contributes to laying a sound foundation for Chengdu’s long-term economic development.

The third pillar of the Chengdu model is bilateral exchange.  Instead of inviting only foreign investment, Chengdu has sought to encourage bilateral economic exchange. In this stage “Going out” becomes an important part of the innovative strategy. Chengdu is encouraging local enterprises to reach outside their local area. Although Chengdu still lags far behind developed countries and coastal areas, it remains far ahead of other inland cities in moving out in an ever-increasing scale.

Chengdu is dedicated to beat its innovation drums faster, louder and more insistently on all fronts. But Chengdu is only one of China’s many ambitious and competitive cities. High Tech Parks are growing like mushrooms after a warm summer rain and lure with high wages and $150,000 moving grant for top executives. Top-talents find support in Incubation Centers. Mentors, seed capital, offices and technological equipment are part of the package. China’s “Thousand Talents Program” aims to bring back 2,000 talented Chinese paying salaries between 60,000 and 360,000 Euro. Up to the year 2020 China is dedicating 15 percent of its GDP to human resources.

The list could go on and yet, the answer of the West stays the same “Yes, but when is China becoming a Western democracy? When will China improve on the implementation of the rule of law? When will it end corruption, solve its environmental problems, water shortages?” We agree, the problems are there, including the need to find a decent way of dealing with divergent political opinion.

But — in its view of China, the West is fast in criticizing, slow in understanding, blind towards its own shortcomings, and in denial of the closing technological advance. Pride comes before the fall and once on the ground, it is hard to get back up.

image credits: john and doris naisbitt; argo-navis.com

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Innovation in ChinaJohn Naisbitt is an acclaimed author and speaker whose book Megatrends sold more than 14 million copies.On the New York Times bestseller list for more than two years, it was one of the biggest successes in publishing history. Megatrends was followed by the NYT bestsellers Reinventing the Corporation and Megatrends 2000. He wrote about the increasing importance of women in business in Megatrends for Women in 1992 and in 1995 Megatrends Asia anticipated the extraordinary rise of Asia and China, which Naisbitt has been studying and visiting since 1967.

Doris Naisbitt, an observer of global social, economic and political trends, is the Director of the Naisbitt China Institute in Tianjin, China and co-author of the bestseller Megatrends China: Eight Pillars of a New Society, co-autor of The China Model and author of Mai-Lin My China (CITIC Press October 2010). She holds professorships an Nankai and Yunnan University, and at Yunnan Normal Universities in China.

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