By Edward Tse | China Daily Africa | Updated: 2018-02-16
The central government’s blessing of entrepreneurship has created a vibrant environment that began at the grassroots
At the beginning of China’s opening-up and reform 40 years ago, the country’s reform architect, Deng Xiaoping, put forward that “science and technology are the primary productive forces”. At the 19th National Congress of the Communist Party of China in October, General Secretary Xi Jinping proclaimed that “innovation is the primary force driving development”.
Behind both of these statements is the philosophy that research and development as well as innovation results in generating key capabilities for the country. R&D investment is generally viewed across the world as the backbone of a globally competitive and innovation-driven economy
Late last year, the European Commission released “The 2017 EU Industrial R&D Investment Scoreboard”, which covered 2,500 companies from 43 countries that invested the largest amount in research and development last year. These companies recorded a total investment of 741.6 billion euros ($909 billion; ￡657 billion) in R&D, a 5.8 percent year-on-year increase.
Among the companies covered in the Scoreboard report are 376 Chinese enterprises. Their R&D investment grew by 18.8 percent year-onyear in 2016, compared with a 7.2 percent increase by 822 US companies and a 7 percent increase by 567 European Union companies.
While most of the top companies in the report are from the West, Huawei, a China-based telecom equipment and smart device manufacturer, leapfrogged to sixth place, registering 10.4 billion euros in R&D investment. Huawei’s ranking advanced by more than 200 places between 2004 and 2016. Chinese internet giants Alibaba and Tencent also entered the top 100 on the list.
Chinese companies are also well known for tech innovation in such areas as drones, electric vehicles, autonomous driving and artificial intelligence. DJI, a Shenzhen-based company, has a global market share of around 70 percent in consumer drones. NIO, a Chinese electric vehicle startup, developed the fastest electric sports car, the EP9, within 18 months and broke the world lap record at the Nurburgring Nordschleife track in Germany. In terms of AI, a Chinese company, Face++, developed advanced facial recognition technology that is widely used in the financial technology, smart retail and many other industries. This technology, now used in more than 200 countries, processes over 30 million requests each day. SenseTime, a Chinese AI company founded in 2014, focuses on innovative computer vision and deep learning technology. In July last year, the company successfully raised the largest single-round investment in AI globally, at $410 million.
For a long time, China was viewed as a nation that relied on low manufacturing costs for exports. And Chinese companies were labeled “copycats” by the West. Very few people believed that China had the ability to innovate. However, the country’s development over the past decade has proved otherwise.
In fact, innovation is thriving in China. MIT’s Technology Review included nine Chinese companies such as iFlytek, Tencent, Face++ and DJI in its 2017 list of the Top 50 Smartest Companies. So what caused China’s innovation and the entrepreneurship that goes with it to take off? I think it’s because of the following reasons:
1. “Why not me?”
2. Market opportunity provided by the State economy
3. Transformative and intense competition
4. Chinese society’s pain points
5. The rise of technology
6. The massive scale of the Chinese market
7. Capital resources
Against this backdrop, China’s development model plays a crucial role. From the top, China’s central government actively directs the country’s economic development with great results. In this context, the central government has positioned innovation and entrepreneurship as a key national initiative, and with this blessing, a vibrant innovation and entrepreneurial environment began at the grassroots level. In addition, various local governments across China are both competing and collaborating with each other, providing additional impetus for innovation.
The author is founder and CEO of Gao Feng Advisory, a global strategy and management consulting company with roots in China. He is also author of China’s Disruptors.
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