There were several panels, shown in the C-span program. This summary only reflects one speaker, in the second panel, Charlene Barshefsky.
‘The theme: China’s Innovation Policy & what it might mean for businesses operating in China. To the initial response, Charlene laid out some general challenges with any developing country: fierce internal competition, lack of transparency, idiosyncratic government decision-making, corruption, state meddling, red tape, etc.
Such concerns are magnified in China because of its size & importance to business, in general; and though extraordinary opportunities exist in China, its challenges have greater & higher risks.
Hence, policies in developing countries matter, & often spell the difference between a successful & unsuccessful venture. And with that, she provided China’s. Its core national objective is to become an innovation economy.
Why? In part, it accelerates domestic growth & it provides China with the value added that’s missing in their chain right now. Note: China is a manufacturer; but, that is not where the money is made. The real money comes on the front & back end.
One, of the marvels, in statements about China is how it creates annually 10 to 13 million net jobs; versus the U.S. doing the roaring decades of the 90s, which created in total 22 million net jobs.
With 6 million college grads each year emerging, it is clear they have no intention of working in factories for a living. As a result, there’s an importance for China moving up the value chain. Low-end manufacturing is becoming more expensive; & the move toward a consumption based model of growth means people have to earn more money so they can spend.
How do you earn more money? You increase productivity. How do you increase productivity? You innovate, innovate, & innovate. And that is why China’s core objective is an innovation policy.
Continuing, she stated a key importance to China’s growth has been muli-nationals. As, they are the single largest contributor to GDP; & export 60% of what is produced in China.
In this regards, what does China see now? The levers of wealth & levers of value added are held by multi-nationals; not held indigenously by China or Chinese firms, typically; point being, it can keep a less developed country less developed.
Consequently, what does China want to be? China wants to lead the 2nd Industrial Revolution; much like what the U.S. was in the 1st Revolution; i.e. the 1st out the box.
This is extremely ambitious & certainly with merit; however, it has execution challenges. Firstly, China is not fundamentally an innovative, 1st out the box, science country; secondly, it will become that again, but it isn’t that right now.
So, there’s a significant gap between China’s aspiration & what it can indigenously produce inside fast enough, in respect to innovation; so as not to slow economic growth as this transition is happening.
What does that mean? For Charlene, the question becomes who fills the gap on innovation, on technology, on intellectual property? The answer reverts to multi-nationals who hold it.
So, in addition to a robust going out strategy by China, entailing an effort to purchase technology, branding, i.e. higher value added components, China has imposed a series of domestic policies measures. They include: mandatory standards, coerced technology transfer, & improving, but weak intellectual property protections.
So, what does it mean for foreign businesses operating in China? It does not mean you should not do business in China; nor does it mean you should not find partners in China;
But, you have to be smart; you have to understand the underlying political state necessity for bridging the innovative divide, & what that might mean for your business, in the context of any particular deal you might do.’
This 2nd panel link is at: http://www.c-span.org/Events/Chinas-Economic-Power-Examined/10737424391-1/; My website is at: http://kmriei.yolasite.com/.