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Issue 37, August 2011

This newsletter is a monthly supplement to ChinaAnalysis.Com, a new website that aims to promote knowledge sharing in China-related analysis. This newsletter contains original content and may not be reproduced without exclusive written permission. If you have any questions, comments and suggestions, please email support@chinaanalysis.com.

ChinaCompass - the Role of the Government in Developing Electric Vehicles

What is the role of the government in developing new technologies? Conventional wisdom would say that the government should fund basic research, and let the market take care of the rest. It is believed that business people, motivated by profits or competition, are best suited to commercialize new technologies developed in the labs. Yet history tells many different stories, and the development of electric vehicles (EVs) is about to be one of the latest.

So far, powerful national governments, including American, European, Japanese and Chinese, have all launched programs to develop and deploy EVs. The United States is investing billions of dollars in EV manufacturing and R&D. The Chinese New Energy Vehicles program is said to be backed by RMB100 billion in central and local government investment over the next ten years. Even the British have allocated some £300 million to EV R&D and infrastructure.

These EV programs are big because they are targeting several policy goals: from coping with climate change to ensuring energy security; from reducing urban congestion to simulating job growth. What then have these programs done in developing EV technologies?

Governments have been making investments in manufacturing and R&D capabilities. Through its Advanced Technology Vehicle Manufacturing Incentive program, the United States is providing $25 billion in loans to EV makers, and an additional $2 billion in grants for batteries. The Chinese efforts so far are focusing on developing superior battery technologies through industry-university collaborations.

Governments have been assisting in setting standards for the emerging EV-related technologies, particularly the EV charging standards. The United States is promoting a J1772 plug developed by the Society of Automotive Engineers, which supports 120V and 240V charging. Europe has selected a different standard called Mennekes plug, which supports 240V and 360V charging. The Japanese TEPCO standard, which can go as high as 500V, has been accepted by many Asian countries. Last but not least, in 2010 China announced that it would develop its own national standard.

Governments have been making investments in infrastructure. The US government has allocated $100 million to a pilot infrastructure project called the 5-City EV Project. In most parts of the world, city governments take the lead in the deployment of charging infrastructure for EVs. Paris, as the European leader, has announced a plan to invest $2.5 billion in public charging stations. Chinese cities, such as Beijing, have been innovative in developing rapid battery exchange systems for public fleets.

Governments have been creating markets for EV makers through purchasing early products. China has been particularly active in government procurement for EVs. In 2009 China initiated the Ten Cities, Thousands Vehicles Program, aimed at deploying at least 1,000 EVs in each city. The early adoptions have focused on public fleets with predictable driving patterns, such as buses and garbage trucks. The program has been expanded to another ten cities in 2011.

Governments have been subsidizing the industry through granting consumer incentives. The US government has instituted a $7,500 consumer tax credit for the purchase of a new EV. In China, the central government has introduced a comparable RMB 60,000 incentive for EVs that is in addition to subsidies from city governments.

If the case of electric cars tells anything about the role of the government in developing new technologies, it is that some governments have not done enough. The US government, for example, has invested too little in infrastructure. Like any new technology, the development of EVs requires the government to make low-cost resources available to innovative companies. We should not view this government support for innovative enterprise as an example of “market failure” but rather as a foundation for “organizational success”.

Top News of Last Month
Jul 01 CPC stages grand gathering marking 90th anniversary
Jul 03 China pulls back indigenous innovation policies
Jul 06 China central bank raises benchmark interest rate
Jul 07 China says local debt poses risks, calls for attention
Jul 09 China's CPI growth hits three-year high of 6.4 pct in June
Jul 11 China eyes lead in international space race
Jul 14 China eyes higher global ranking for innovation over next five years
Jul 23 ASEAN, China adopt East Sea rules
Jul 23 High-speed bullet train collision in eastern China kills 35
Jul 27 China boosts naval power with carrier program: sources
New Books
American Wheels, Chinese Roads: The Story of General Motors in China

By Michael Dunne

“How could one company—General Motors—meet disaster on one continent and achieve explosive growth on another at the very same time? While General Motors was hurtling towards bankruptcy in 2009, GM’s subsidiary in China was setting new sales and profit records. This book reveals how extraordinary people, remarkable decisions and surprising breaks made triumph in China possible for General Motors. It also shows just how vulnerable that winning track record remains.” – from Wiley, July 2011


By Tomasz Mroczkowski

“In The New Players in Life Science Innovation, Tomasz Mroczkowski explains how emerging economies and companies are rapidly achieving leadership in the global biosciences industries, and thoroughly assesses the implications. Mroczkowski discusses the sophisticated innovation strategies and reforms nations like China and India have implemented, including strategies that complement markets with aggressive state intervention. He previews the emerging global “bio-economy,” in which life science discoveries will be applied pervasively in markets ranging from health to fuels. As R&D in the West becomes increasingly costly, he introduces new options for partnering with new players in the field, beginning with globalized clinical trials and contract research. Offering examples from China to Dubai to India, he carefully assesses the business models driving today’s newest centers of innovation, offering up-to-date coverage of bioparks, technology zones, emerging clusters, and other approaches. He also presents realistic assessments of global R&D collaboration strategies such as those of Eli Lilly, Merck, Novartis, and IBM, including both operational and long-term strategic challenges. The New Players in Life Science Innovation will be an indispensable resource for every R&D decision-maker, investor, and business leader in the life sciences, and in many industries with deepening links to the biosciences, such as information technology and energy. ” – from FT Press, July 2011
Leverage Innovation Capability: Application of Total Innovation Management in China’s SMEs’ Study

By Qingrui Xu, Jin Chen, Y Yi Shou, & J J Liu

“This book studies the strategy and mechanism of leveraging innovation capability in China’s SMEs by applying the theory of Total Innovation Management (TIM), which is the new paradigm of managing innovation in enterprises developed by the Research Center for “Innovation and Development” (shortly RCID) of Zhejiang University, China. According to Eric von Hippel, MIT, RCID is the Top 10 Innovation Management research institutes in the world. Leverage Innovation Capability probes the strategy and mechanism of leverage the innovation capability in the firm, especially in China’s SMEs. It analyzes how the SMEs utilize all the innovation elements in the firm, including Strategy innovation, Tech innovation, marketing innovation, organization innovation, culture innovation, innovation networking, learning and knowledge management, high involvement innovation, cooperation innovation, etc. to leverage innovation capability.” – from World Scientific Publishing, July 2011
Upcoming Events
Aug 12 - Aug 14 The 5th International Conference on Management and Service Science
Aug 17 - Aug 20 Shanghai International Conference on Social Science 2011
Aug 23 - Aug 25 Control China: Trade Fair for Quality Assurance
Sep 08 - Sep 11 China International Fair for Investment & Trade
Oct 06 - Oct 07 Workshop on “Chinese Ways of Innovation”

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