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.)
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!