A Look Back at Chinese Innovation in 2011
The year 2011 was a bumpy one for the global economy: recovery in the US has been disappointing, and Europe is struggling with its sovereign debt crisis. The Chinese economy has been consistently outperforming the rest of the industrialized world, maintaining a growth rate above 9% even when the government is fighting inflation. The enormous expansion has been supported by industrial innovation, which we at ChinaAnalysis.com, have been watching closely.
In 2011, China’s high-tech exports continued to be dominated by information and communication technology (ICT) products, as the country maintains the global manufacturing hub of computers, cellphones, and most consumer electronics. The flourishing manufacturing activities have helped China to become a world leader in flexible production and process innovation. Yet Chinese capabilities do not stop there. As part of a continued effort to master core ICT technologies, i.e., microprocessors and operating systems, in February the Chinese government renewed its industrial promotion policies on computer chips and software originated ten years ago. The new policy is accelerating the rise of the Chinese fabless industry, while Chinese chip manufacturing now has a decade of experience. These efforts are translating into industrial innovation. For example, in late November, Chinese manufacturer released the world’s first $99 Android 4.0 tablet, running on a Chinese-designed MIPS processor.
While ICT is still the focus of technological innovation, China is stepping ahead in investing in emerging technologies, including renewable energy, electric vehicles, and new materials. In its most recently announced plan in November, China is going to invest $1.7 trillion in emerging technologies in the next five years. Certainly, there are huge risks embodied in these investments in innovation, but China now possesses substantial innovative capabilities in universities, research institutes, and innovative enterprises. For example, in the emerging electric vehicle industry, Chinese companies like BYD are already accumulating sizable capabilities, and even developing their own distinctive ways of innovation.
Since 2009, there have been growing concerns that rising wages will hurt Chinese competitiveness. Indeed, since the financial crisis, massive industrial restructuring has occurred in the traditional export centers of the Southeast coast. Yet overall in 2011, China demonstrated that it has the capabilities to adjust to the transition well. While low wage factories move into the hinterland, industries that choose to stay in the developed coastal area are rapidly increasing their technological complexity and moving to higher-value-added segments. Even China’s inland provinces are now generating more and more innovative companies that are especially good at heavy industry manufacturing.
As we argued in our September issue, China’s growth has passed through the stages of infrastructure investment and technology transfer that have positioned it to engage in indigenous innovation. With new investment coming in and new players coming out, China will further strengthen its indigenous innovation capabilities in 2012. We hope you, our readers, will be watching the exciting news with together with us. Stay tuned.