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Challenge to China -- Let's see if you can innovate
Fortune ^ | 03/08/2010 | Michael Elliott

Posted on 03/08/2010 7:12:56 AM PST by SeekAndFind

What economic crisis? After a blip last winter, China is growing at more than 8% a year, and the scale and speed at which the country is building a modern infrastructure are mind-boggling.

But once you've absorbed the metrics -- the size of its trade surplus, the thousands of miles of high-speed railways, the new ports and highways -- a nagging question comes into focus: Sure, China can grow, but can its companies innovate? Can they build products that will compete in the global marketplace?

At first sight, it seems a ridiculous question. China's universities are turning out hundreds of thousands of scientists and engineers; its computing wizards are legendary, and not just because they appear to be among the world's best hackers and copiers of others' intellectual property.

Venture capitalists talk about the sheer thrill of watching Chinese startups, saying it reminds them of Silicon Valley in its garage-lab days. Yet it's worth remembering that China's recent supercharged economic growth has not been led by innovative private companies. It's mainly the consequence of a government-directed boom in bank lending, much of it to favored state-owned enterprises.

If you ask management consultants to list the Chinese companies best known and admired in the outside world, many of them would be in basic industry and infrastructure -- the oil giants CNOOC and Sinopec, for example.

Don't get me wrong; many of these businesses are world-class. I routinely get better mobile reception in rural China than I do in New York's Westchester County and this from a company, China Mobile, that regularly adds 4 million customers to its roster each month. But at least part of the companies' successes depend on privileged access to capital and their close relationships with China's power structure.

(Excerpt) Read more at money.cnn.com ...


TOPICS: Business/Economy; Culture/Society; Foreign Affairs; News/Current Events
KEYWORDS: china; innovation; product

1 posted on 03/08/2010 7:12:56 AM PST by SeekAndFind
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To: SeekAndFind

One difference between China and Japan ( when the later was still developing).

China can BUY TECHNOLOGY today with their vast amounts of Money.

Many of China’s biggest businesses are buyers of assets overseas — everything from companies to (so it can seem) half of Australia.

On the other hand, Japan’s corporate leaders 50 years ago were exporters, not acquirers. It was not just a question of finding new markets outside Japan; much more important, Japan’s postwar leaders understood that if its companies were to succeed, they had to compete with established corporations in the developed world.

That was how their technology, design, marketing, and customer service would become world-class. And so they went out into the world, however hostile it appeared. When Sony (SNE) opened a showroom in Midtown Manhattan in 1962, it was the first time the Japanese flag had flown in New York City since the war.

According tot his Fortune article, We just don’t see China’s most innovative companies because they have no reason to show us their wares. The Sonys, Panasonics, Toshibas, Hondas, and Toyotas had to export, but China’s domestic market is potentially far larger than Japan’s could ever be.


2 posted on 03/08/2010 7:15:34 AM PST by SeekAndFind
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To: SeekAndFind

When the world can no longer afford Communist Chinese products...as the lopsidedness of the Free Trade deals with the ChiComs become too much to bear....even for the most Liberal Globalist....the Communist Chinese economy will crash hard and fast


“Yet it’s worth remembering that China’s recent supercharged economic growth has not been led by innovative private companies. It’s mainly the consequence of a government-directed boom in bank lending, much of it to favored state-owned enterprises.” quote from article

No doubt that supporting Free Trade with Communist China means that you are a Communist. The state still owns the means of capital and production


3 posted on 03/08/2010 7:18:05 AM PST by UCFRoadWarrior (National Security begins at the Border)
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To: SeekAndFind

China has learned a lot from taking over Hong Kong. If China lets the free market spirit of Hong Kong infiltrate the entire country, then it certainly can innovate.

I see this article as wishful thinking. China will fail because they can’t innovate as well as us. This is the old “if the other guy breaks his leg, that will make us run faster” idea.

We should be focusing on innovation at home, and why OUR free market is not working as it should. If we do that, it won’t matter what China does.


4 posted on 03/08/2010 7:29:24 AM PST by Brookhaven
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To: SeekAndFind

I’ve said it many times before and I’ll say it again: China’s export economy is based on intellectual property theft, cost-cutting as an end unto itself, and outright fraud. Nothing more.

Honda Motors began in 1946 literally from rubble to design and build tiny gasoline engines to be strapped onto bicycles. By 1975 they had beaten Detroit in meeting U.S. emission standards and the rest is history.

Anybody who thinks China has or will put the same effort into producing a quality vehicle is, to paraphrase my own tagline, either lying or insane.


5 posted on 03/08/2010 7:39:56 AM PST by jiggyboy (Ten per cent of poll respondents are either lying or insane)
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To: Brookhaven

“We should be focusing on innovation at home, and why OUR free market is not working as it should.”

Our country’s problems began when we stopped ferreting out every Communist here and blacklisting them. All of them should have been deported. Now Communists are entrenched in every facet of life and we wonder what is going wrong. In education they have polluted the minds of our young people for generations. Half the populace is politically and economically ignorant. They have a entitlement mentality. In government the Communists have passed enough laws to kill business. Nothing short of a revolution will straighten the mess out.


6 posted on 03/08/2010 7:42:48 AM PST by TexasRepublic (Socialism is the gospel of envy and the religion of thieves)
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To: SeekAndFind

Although China was having an 8% increase in GDP, most of it came from real estates and infrastructure. This may not be good coz’ they are not sustainable. It might be a problem much more terrible for the country.


7 posted on 03/08/2010 7:42:56 AM PST by LeCash
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To: UCFRoadWarrior
No doubt that supporting Free Trade with Communist China means that you are a Communist. The state still owns the means of capital and production

And the US doesn't? FDIC, Freddie/Fannie, bailouts, GM, Chrysler, etc. Having set up and run companies on four continents in 5 countries (US, Belgium, Chile, China, and now Thailand), I can tell you that the US is about the most restrictive when it comes to business regulation and economic control...

8 posted on 03/08/2010 7:48:33 AM PST by PugetSoundSoldier (Indignation over the Sting of Truth is the defense of the indefensible)
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To: SeekAndFind

China - like most of Asia - will never innovate at the level of the US. It’s a cultural thing. There’s a reason most Asian companies leverage US innovation!

Innovation takes not just an agile and well trained mind, it takes a willingness to play outside the “rules” of current design and development. It requires conflict (telling others - including your boss - they’re wrong). It requires ignoring a good part of tradition and history.

Asia is highly steeped in tradition, in rules, and in obeying your superior regardless of your own belief in it being right or wrong.

Simply put: China won’t start innovating for at least 3 generations, as first you must eliminate the cultural memory of strict adherence to the rules and your superiors. You’ll have to wait until the kids of today - those raised and steeped in these traditions by their grandparents - pass on, and their grandkids loosen culture to the point to allow innovation.


9 posted on 03/08/2010 7:52:49 AM PST by PugetSoundSoldier (Indignation over the Sting of Truth is the defense of the indefensible)
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To: PugetSoundSoldier
"The reasonable man adapts himself to the conditions that surround him... The unreasonable man adapts surrounding conditions to himself... All progress depends on the unreasonable man."

-- George Bernard Shaw

10 posted on 03/08/2010 8:02:47 AM PST by AustinBill (consequence is what makes our choices real)
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To: SeekAndFind

R&D follows manufacturing because manufacturing profits pay for it. The U.S. was creative because there was profit to be made. If you’re not manufacturing, then who needs innovation.


11 posted on 03/08/2010 11:01:02 AM PST by DoughtyOne (If we as Republicans can't clean up our house, who can or will? Just say no to MeCain(D).)
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To: DoughtyOne
If you’re not manufacturing, then who needs innovation.

Apple can design, develop and code their iPhone here in the USA and then mass produce them elsewhere can't they ?
12 posted on 03/08/2010 11:02:51 AM PST by SeekAndFind
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To: SeekAndFind

Yes they can. Others can do the same thing. The fact is though, that China will obtain a slice of that pie. And sooner rather than later, that pie will be mostly China’s and less of the U.S.’s.

As our standard of living drops, and don’t kid yourself that it isn’t dropping here, and these corporations find that Chinese people are the new cash cows, watch what happens to innovation in the U.S.?


13 posted on 03/08/2010 11:08:01 AM PST by DoughtyOne (If we as Republicans can't clean up our house, who can or will? Just say no to MeCain(D).)
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To: DoughtyOne

The vilification of Science in America, the drop in students pursuing hard sciences, a hen and egg type of situation, is the prime culprit.


14 posted on 03/08/2010 11:10:50 AM PST by swarthyguy
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To: PugetSoundSoldier
Well, this guy invented a cell phone that runs on soda.

A small example, but it demonstrates that innovation is not just about upsetting the existing order, but about the spirit of play. A lot of web sites and IT innovations generally came from geeks goofing off. I suspect the Chinese will get better at that, as the Japanese did before them.

In addition, America may be going where Britain went before them - toward a society interested in protection against life's rough edges, and not in achieving great things. The grandfather builds the giant company from nothing, the father becomes a mid-level manager or bureaucrat, the son becomes a guitar player or a mixed-media artist. Where, one wonders, are we now? One virtue of immigration is that it keeps renewing our energy this way, and one great danger of the social-welfare mentality that so many of our leaders want to impose is that it dulls our ambitious edges.

The Chinese may tend to be deferential to authority, but many of them also hunger for greatness, and know that it comes from hard work. (Which is not to say they don't have major problems too.)

15 posted on 03/08/2010 11:15:47 AM PST by untenured
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To: PugetSoundSoldier

>>as first you must eliminate the cultural memory of strict adherence to the rules and your superiors. You’ll have to wait until the kids of today - those raised and steeped in these traditions by their grandparents

Uh, all that happened, back in 1949 with Mao taking over and then reinforced by the excesses of the Cultural Revolution. Not even the Russian or the French Revolutions came close to approaching the wholesale destruction of the Past as happened in China.

Your 3 generations have come and gone.


16 posted on 03/08/2010 11:20:29 AM PST by swarthyguy
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To: PugetSoundSoldier
Asia is highly steeped in tradition, in rules, and in obeying your superior regardless of your own belief in it being right or wrong.

Asian proverb: "The nail that sticks up gets hammered".

17 posted on 03/08/2010 11:28:47 AM PST by Oatka ("A society of sheep must in time beget a government of wolves." –Bertrand de Jouvenel)
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To: swarthyguy

Spend some time in China and you’ll find that the traditions and culture of absolute respect for any superior or elder - even if they tell you 2+2 = 5 - is still absolute. If anything, Mao’s Cultural Revolution reinforced the attitude of fealty to anyone or anything of power, and to not think independently or question the status quo.

I live and work about half my life in China, and this is the biggest challenge for lao wai’s to learn. If you ask for an opinion about a technical issue, you get silence. It’s not because they’re dumb, but because they simply do not have the cultural conditioning of questioning the assumptions. Of trying something different.

You want to try something different? You’re immediately told “no - cannot do that”. When you ask why, you’re told “you just can’t”. You learn it’s because it hasn’t been done before, so rather than trying it, the Chinese - Asian-wide, actually - cultural response is to simply not try it.

To succeed in China you must use your identity as a lao wai and to play your technical and intellectual superiority to the hilt. Simply state what you want, and then ram it through. Do not expect enthusiasm to try your new ideas; expect resistance! It’s not because they’re lazy or stupid, it’s because culturally they simply do not accept any change.

Mao’s revolution set China back, rather than moving it forward. Just like it took 2 generations for Japan working hand-in-hand with the US to really start working towards a culture of innovation (and they still significantly lag the US), it will take China at least that long as well.

For China, it really started in the early 90s when Deng Xiao Peng opened up the East to investment; we’re just now getting a few middle and upper management and business CEOs and owners who will dabble with a bit of innovation and freedom for their employees (meaning allowing the employees to make decisions independently). It will take another generation until the second wave of such white collar workers raise up, and really start letting the lower ranks expand.

Additionally, the breaking down of the traditional Chinese family - parents work, children raised by the grandparents - will foster this as well. As children more and more live with their parents rather than their grandparents, they will be exposed to the rough-and-tumble of daily life of working guardians, rather than the more sedate, governing life of a retiree.


18 posted on 03/08/2010 11:34:39 AM PST by PugetSoundSoldier (Indignation over the Sting of Truth is the defense of the indefensible)
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To: swarthyguy
The vilification of Science in America, the drop in students pursuing hard sciences, a hen and egg type of situation, is the prime culprit.

Some people will argue that America is a DYNAMIC country. If we can't perusade students here to pursue the hard sciences, we can WELCOME the best to come here and pursue the hard sciences AND THEN BECOME AMERICAN CITIZENS.

Count them -- Albert Einstein, Werner Von Braun, Andy Grove, etc. were all foreigners who became Americans.
19 posted on 03/08/2010 11:37:45 AM PST by SeekAndFind
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To: untenured
A small example, but it demonstrates that innovation is not just about upsetting the existing order, but about the spirit of play. A lot of web sites and IT innovations generally came from geeks goofing off. I suspect the Chinese will get better at that, as the Japanese did before them.

I agree. It took Japan a solid two generations after WWII to really "get" innovation on an economic footing. China will take the same amount of time, at a minimum (if for nothing else Chinese tend to be even more obstinate and stubborn).

They really started down the path - tentatively - towards a culture of innovation in the early 90s, and didn't get going in earnest until the end of the 90s. I figure there's another 30-40 years in China before the cultural trends change enough that innovation will really start to blossom.

It takes time to build a culture where questioning your superiors, and where conflict isn't immediately attacked, but the strength of the positions are considered independent of the persons offering such positions. Right now in China if your boss says to do something wrong, well, you do it anyway because he's your boss and even if it's wrong your own opinion isn't worth as much because you're the worker.

Having the ability to say no to a superior - and not being immediately fired - takes some time to build culturally. China's just starting down that path, give them time!

20 posted on 03/08/2010 11:39:46 AM PST by PugetSoundSoldier (Indignation over the Sting of Truth is the defense of the indefensible)
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To: PugetSoundSoldier

Well, thank you for that reasoned and edifying post.

Your experience in China points out the shortcomings of my viewpoint I espouse from afar.

But isn’t some of that simply bureacratic reticence, something we see in large organisations everywhere......

But, even you do anticipate a change in this Confuciun/Maoist mindset.

Anyway, thanks again.


21 posted on 03/08/2010 11:43:57 AM PST by swarthyguy
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To: swarthyguy

I agree that is part of the problem.

What we have is a multi-pronged problem that is contributing to rendering the United States irrelevant.


22 posted on 03/08/2010 11:46:34 AM PST by DoughtyOne (If we as Republicans can't clean up our house, who can or will? Just say no to MeCain(D).)
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To: swarthyguy
But isn’t some of that simply bureacratic reticence, something we see in large organisations everywhere......

No, it's actually cultural. Whether dealing with the Chinese Government, or a huge business, or a one-man operation you'll find the same immediate rejection of anything new. It's really ingrained in the culture of the people to resist change, and it's been that way for a few thousand years.

But, even you do anticipate a change in this Confuciun/Maoist mindset.

Yes, I do. If anything, the resurgent popularity of Buddhism will help, as Buddhists tend to be much more open minded and tolerant of new viewpoints! :) But coupled with the economic gains of Eastern China, and the influence of Western culture we'll see it change over 2-3 generations.

The Maoist period was really the anomaly with China; China has always had a very free-wheeling economy much more aligned with classical free enterprise than communism! The 50 year experiment of Mao and Communism is over. On a scale of absolute libertarianism/free market operations to full Soviet-style communism, the US and Western Europe are closer to the Soviets than China is!

Really, China is reverting back to what it always has been: a small group of well-connected political families who pull a lot of the strings for the big picture items, and 99% of the population just doing what they want to do, trading and selling and building and buying.

Realistically, China's a semi-fascist oligarchy; I say semi-fascist in that not all industries are controlled by the Government (really it's just banking and steel any more). Oligarchy in that 2000-3000 families "run the show" in Beijing.

China's always been an oligarchy with emperors arising from that small group of families, but with a pretty dynamic trade and economy. It's moving back towards the way it was before Mao. However, this time it will take with it the ever-increasing spirit of Western independence (which the Chinese have almost always had), and innovation. Curiosity will become a norm to be prized, and that is when we'll see innovation explode in China.

I'd say come on over to China for a week or so; several other FReepers have come through and learned a lot about this amazing country. It's got a LOT of ways to go to become truly free, but in many regards they're way past the US in terms of some freedoms. It's pretty eye-opening, and it's not at all like the "ChiCom" stereotype you hear about so much inside the US.

23 posted on 03/08/2010 12:46:12 PM PST by PugetSoundSoldier (Indignation over the Sting of Truth is the defense of the indefensible)
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