China: innovative, but not in the right way – Arthur Kroeber

There is no lack of creativity in china, says economic analyst Arthur Kroeber in the Wall Street Journal. But that overwhelming creativity does not translate very well into business. And the internet censorship does not help.

The Wall Street Journal:

What China lacks, argues economist Arthur Kroeber, founder of the research firm Dragonomics, is innovation that can translate to business with the outside world.

“What’s sad is the amount of creativity you see in China is phenomenal,” Mr. Kroeber says. “But it’s not always directed in ways that are ultimately productive.” It’s one thing to figure out how to fix a car that needs parts no longer available on the market. It’s another to create “innovative solutions which are scalable throughout the entire world.”

Speaking at a panel discussion for the Beijing Bookworm’s Literary Festival on Sunday, Mr. Kroeber laid out a relatively optimistic case for China’s future growth as long as the country can find a way to reform the financial sector and tax system, trim the unfair advantages enjoyed by state-owned enterprises and address an aging population.

Potentially the biggest obstacle to China’s continued economic growth, Mr. Kroeber argued, is its Internet filtration system, otherwise known as the Great Firewall. The big question, he said, is whether the Chinese can “ever accept a political system that is open enough to allow the open-knowledge networks that are required for truly modern innovative post-industrial economy. Right now I don’t see it.”

The best innovation in the post-industrial world comes from “the sharing of knowledge and information across a variety of fields,” he said, adding: “Innovation comes when you take knowledge in one area and it migrates over to another area and someone comes up with a new way of using it. China seems to have a political system that mentally at its core is opposed to those networks ever becoming viable.”

The Internet limitations have also meant that Chinese companies have struggled to expand overseas, although that’s less important in a country with such a massive domestic market. “You have to invest a lot in figuring out how to make a go of it here,” which means less investment in figuring out how to operate globally, he said. But Chinese companies can profit in the enormous domestic market without a global expansion. “So, who cares?” Mr. Kroeber asked.

More in the Wall Street Journal.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

The China Weekly Hangout discussed innovation in China on October 11, 2012 with political scientist Greg Anderson, China veteran Janet Carmosky and moderated by Fons Tuinstra, president of the China Speakers Bureau.