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China has ambitious goals. It wishes to upgrade its economy and create industry champions in key future-oriented sectors by 2025. From new energy vehicles and renewable energy equipment to medical devices and industrial robots: Chinese companies aspire to become market and technology leaders, first in China, then on a global scale. The Chinese government has spent large amounts of money to boost indigenous innovation and intelligent manufacturing. For German companies this development offers many business opportunities in the short term, since their cutting-edge high-tech products and engineering solutions are in high demand to support the upgrade of the Chinese economy. Still, the more and the faster Chinese companies are able to master innovative technologies themselves, our economic cooperation gradually shifts from complementarity to competition.
Many of the ten key sectors of the „Made in China 2025“ strategy are strongholds of German industry. It is therefore no surprise that Chinese companies' equity investments and takeovers targeting German high-tech firms have triggered a public debate and some suspicion. It has also rekindled the discussion about the transfer of technology that many companies have to agree to if they wish to gain access to the Chinese market or want to grow their business. Industry insiders tell us that they are not so much concerned about regulation forcing technology transfers but about the informal pressure imposed by state-owned joint venture or other business partners that leaves foreign firms no option but to play along or not play at all. This is what happened in the high-speed railway sector, for example. Clearly, these issues need to be tackled. This debate, however, must not make us blind regarding the much bigger challenge that lies ahead for German industry: the tremendous increase of innovation capacity of many Chinese companies.
The transition of the Chinese economy from low-cost to high-tech and quality production is already in full swing. In a recent survey of the German Chamber of Commerce in China, 40 per cent of German companies express the view that they expect their Chinese competitors to become innovation leaders within the next five years. The number of innovative Chinese companies is rising steadily that have become household names not only in China but also abroad. Firms such as Lenovo, Haier or Huawei are good examples. Internet and tech companies like Alibaba, Baidu and Tencent are the new heavy weights of the Chinese economy. Protected from their overseas rivals, their business has flourished. Within a few years, they have become rich in cash and data and they are a catalyst for digitizing the economy.
Alibaba and Tencent are also among the biggest investors in Chinese startups. From face recognition to biotech and brain-inspired processor chips, new companies are mushrooming in China. Some of them are so advanced in their field, that several big German corporations have already invested money and forged partnerships with tech-savvy innovation labs like Mobvoi, Momenta or VR51. Could this possibly be a blueprint for new cooperation models in areas like artificial intelligence?
More than a quarter of the world’s “unicorns” - start-ups with a market evaluation of more than US $1 billion - are private Chinese companies. This is no accident. First and foremost, Chinese innovators are backed by hundreds of government funds each worth billions of US dollars like the National Integrated Circuit Fund (US $100-150 billion). Secondly, they have a huge home market to develop, test and sell new products. Thirdly, Chinese consumers are much more excited about new technology and less concerned about data protection than is the case elsewhere.
During recent company visits, I could experience first-hand the drive and ambition of young Chinese start-up entrepreneurs. Many of them are graduates from top universities and used to study and work in Silicon Valley – America’s innovation hub which Europeans admire for its extraordinary culture of openness, creativity and entrepreneurship. When I asked the Chinese start-up innovators why they have returned to their home country, they tend to reply in a similar vein: the availability of plenty of capital for doing research and building a business, a hands-off approach to regulation – provided you do not fall foul of political sensitivities - and a greater willingness to pursue new ideas against all odds. More money, more freedom, more adventurousness – that is not necessarily what you expect from a state-capitalist system.
To be sure, there are also potential pitfalls, ranging from overly restrictive cyber regulations to security-driven roadblocks for research cooperation. For instance, when I asked a Chinese startup boss what he would do if he were to lose access to Google to conduct research, he was unambiguous: “I would be gone”. Right now, however, it seems that China’s innovation drive is succeeding. If Europe doesn’t want to lose its innovation edge, it needs to wake up. We need to further increase our efforts to urge China to turn its promises into action and open up its market and reduce barriers for foreign companies.
Most importantly perhaps, we must not lose sight of our own innovation capacities. There are quite a few things we can learn from China, just as China has learned from Europe in recent years. The Chinese leadership has followed a consistent and coherent strategy to foster home-grown innovation in key areas that comprises funds, preferential policies and a supportive business environment. We may not like some of the methods that China applies in the context of “Made in China 2025”, we nonetheless need to find new ways to unleash our own innovation potential.
Veröffentlicht in chinesischer Sprache: http://www.ftchinese.com/story/001077773