China, the beast of innovation

China, a nation that has dominated the world several times over the past thousand years, is on track to repeat history once again. Economic reforms introduced by Communist leader Deng Xiaoping in the late 1970s pushed China to become a country now considered worthy of challenging the U.S. for the No. 1 title. In 2030, China averaged an annual growth rate of 10% from 1999 to 2008, and in recent years has ranged from 6-8%. With the recent drive for technological innovation, we could record growth in numbers and ultimately, the prestige of being the world’s largest economy.

“China has long been one of the richest, or one of the most fertile, best cultivated, most industrious and most populous countries in the world.” Quote from Adam Smith magnum opus “The Wealth of the Nation”. Indeed, over the past few years, China has taken concrete steps to achieve this. In 2015, China published “Made In China 2025”, a strategic plan that describes in detail the necessary steps to equip and transform the nation with local technological innovations and sets the Chinese equivalent of the Fourth Industrial Revolution. In 2017, Chinese spending on research and development amounted to 1.76 trillion US dollars (279 billion US dollars), which is an increase of 14% compared to last year. In fact, the term was coined to describe China’s unified innovation policy and its ability to drive innovation and technological advancement within its geographical boundaries. Named “Indigenous Innovation,” China has set itself up for the world’s next capital of innovation and technology. Below are some of the reasons why China is capable of or rather overthrowing the US from power in the next decade or so.

1. Size matters. China is a huge nation, regardless of geographical size or population. While China and the United States are equally large at 9.3 million square kilometers and 9.1 million square kilometers, respectively, China is the trump card (without the intention of a play on words) of the United States with over 1.4 billion citizens, more than 4 times that of The United States has a high rate of population adoption for technology as well, because its closed ecosystem has created a perfect environment for the growth and development of Chinese companies. With over 772 million Internet users, China is a haven of data. Furthermore, Chinese citizens have long been known to be more lenient in sharing their personal data, in stark contrast to Western countries where personal data policies and regulations are strictly enforced. The recent Cambridge Analytica saga about user data on Facebook highlighted the importance of storing private data, but we may never see that in China. However, reports of ‘emotional tracking’ where brainwaves of employees at military sites and state-owned enterprises are monitored have crossed the line in their latest efforts to monitor their people.

2. Support from the Chinese government. Policies such as China’s 13th Five-Year Plan (2016-2020) and Made In China 2025 are strong evidence of China’s ambitious plans to establish itself as a world leader in technology leader. Subsidies, low-interest loans and tax breaks are some of the support expected from technology firms as part of China’s plan to boost research and innovation within the state. Furthermore,

Instead of Western companies such as Google, Facebook and Twitter advancing, the Chinese government has nurtured domestic firms through protectionism and huge subsidies. Local technology giants such as Baidu, Alibaba and Tencent, commonly referred to as BAT, were able to grow in a protected environment and have an entire Chinese pie to themselves. Since then, these companies have expanded overseas through acquisitions and the establishment of research and innovation centers, a move considered by many countries to be a blatant act of “technology import”, called technology transfer.

3. And finally, it is simply pure ignorance of China. Indeed, many who know little about today’s China would still see it as a “copy-cat” country advancing in the production of counterfeit goods and “Made in China” products for the outside world. The fact is that they are now producing leaders in innovation and need to be defeated. The primary example is Shenzhen, which has evolved on its way to becoming its own hub for innovation. Considered the Chinese Silicon Valley for hardware products, there are many companies in Shenzhen that produce the technology product we see today, from DJI drone maker to Foxconn iPhone maker. It has positioned itself as a hardware and IoT hub for many electronics manufacturers and a focal point for Chinese technology startups. Ignorance used to be a bliss when one can freely enjoy the low cost of production in China; ignorance is now a threatening takeover threat.

“China has a pretty deep awareness of what’s going on in the English-speaking world, but the opposite is not true.” Quote from Andrew Ng, co-founder of Coursera and one of the pioneers in artificial intelligence.

The future will be dominated by technology, and China has prepared to be a part of the future. President Xi Jinping knew the difficulties of sustaining China’s economic growth and understood the potential of technology expanding to millions of businesses and removing inefficiencies while benefiting end consumers.

However, it will be naive to conclude that China will overtake the US simply on the basis of cutting-edge technology. The possibility of a trade war between the US and China only benefits China because it has the advantages of economies of scale and a single, independent market. The continuing trade surplus with the United States is evident in the fact that the U.S. relies on Chinese goods, and a trade war will only harm the country by rising prices for consumer goods. The trade surplus for the first quarter of 2018 grew by almost 20% and reached 58.25 billion dollars, citing the possibility of a trade war. Furthermore, China is expanding its economic and political influence with the Belt and Road Initiative (BRI). It is expected to cost more than a trillion dollars and affect 60% of the world’s population, BRI is the biggest undertaking of the Chinese since the Great Wall of China. All the signs point to the fact that China has the money, technology and influence to take over the world.

All in all, China has evolved from a nation of imitation to innovation, from product production to invention. China is an elephant in a room that Western colleagues have chosen to take for granted for decades and ignore its rise. Maybe it’s time for the world to take a good look at China and ironically replicate what they’re doing now. For the US, cooperation could be the best and only way to progress.