ANSWER:
1. Since the initiative of economic reform in 1978, China has enjoyed high economic growth for
three decades. There are exactly 3 reasons why the innovation is essential for sustaining
China’s economic growth.
- The changing of the growth model from investment/export-driven to
innovation/domestic consumption-oriented
China is shifting its growth model to one relying more on consumption and less on investment.
It is also urbanizing, ageing and experiencing dynamic technological change. It should
therefore offer the world’s businesses a gigantic, rapidly growing, but challenging, consumer
market as it evolves from being the “workshop of the world”. This changing of growth model
allow china to gain high productivity which could contribute to the great development of their
economy in the future.
- Climb up the technology ladder (along the global value chain)
Innovation can help China to gain cheaper production of technology. By doing this, it can help
the country to achieve high profit as well as attain all the sophisticated technology. Moreover, it
can also affect Global value chains (GVCs) which refer to international production sharing, a
phenomenon where production is broken into activities and tasks carried out in different
countries. In GVCs, the operations are spread across national borders (instead of being confined
to the same location) and the products made are much more complex than a pin. Therefore, it
could create an efficient production as well as manufacturing procedures.
- Overcome the ‘decoupling’ effect (that hinders technology transfer)
Decoupling is what it's called when the returns of one asset class diverges from their expected
or normal pattern of correlation with others. Decoupling takes place when different asset
classes that typically rise and fall together start to move in opposite directions, such as one
increasing and the other decreasing. In the investment realm, investors and portfolio managers
usually use a statistical measure known as correlation to determine the relationship between
two assets or more. By gaining such an innovation, China can resolve this decoupling effect in
their economy and boost their development of the economy. Moreover, such innovation allow
the decoupling effect to decrease tremendously.
2. Demand side:
• Enormous and rising markets
• Diverse niches in the market
• Demand for rapid, cheap, and sophisticated luxury goods / services
Supply side:
• Human resources
• Education and training facilities
• Funding for works
• Science park and project developments
• Internet infrastructure
• Outward technology transition
• Entrepreneurial spirit
• Elegant supply chain / Ecosystem
3. Customer-focused:
China benefits from the sheer size of its consumer market, which helps companies to
commercialize new ideas quickly on a large scale. Chinese companies have learned how to read
the requirements of their rapidly urbanizing country and to scale up new products and services
quickly to meet them. Manufacturers of appliances and other household goods dominated the
first wave of customer-focused innovators in China, such as refrigerators and TV sets. Customer
focused innovation could reshape large swaths of China’s service sector, where productivity lags
behind that of its counterparts in developed economies. Chinese companies will also to take a
lead in selling to other emerging markets.
Efficiency-driven
In manufacturing, China’s extensive ecosystem has provided an unmatched environment for
efficiency-driven innovation. The country has the world’s largest and most highly concentrated
supplier base, a massive manufacturing workforce, and a modern logistic infrastructure. These
advantages give manufacturer a lead in some important knowledge-based manufacturing
categories, such as electrical equipment, construction equipment and solar panels. Elsewhere,
companies are looking at ways to mass-customize products by combining flexible manufacturing
with the aggregation of a huge internet consumer base – use of robots – which could make
China’s huge pool of semiskilled factory workers more effective.
Engineering-based
China has had mixed success with engineering-based innovation. The best performers are found
in Chinese market where motivated domestic industries are nurtured by national and local gov
that create local demand, push for innovation, and facilitate the transfer of knowledge from
foreign players. China has successfully in high-speed rail, wind power, and telecommunication
equipment. A rapid increase in China’s base of engineering talent and continued high level of
gov investment promise to make engineering-based companies more motivated and effective
innovators in the future.
Science-based
A massive government push to raise R&D spending, train more scientists and file more patents
have yet to give china a lead in science-based innovation. What’s more, despite the large number
of Chinese students trained in scientific and technical fields, companies struggle to find capable
talent.
Underinvestment
There are two ways in which China underinvests in science research. First, despite spending
more than $200 billion per year on research, China allocates only a small percentage about 5
percent of the total to basic research. Second, major Chinese research programs have not had
adequate tracking or evaluation systems, and in 2014 scientists were implicated in embezzlement
schemes
Lack of qualified talent
While China is leading the world in awarding PhDs and graduating more college students with
STEM degrees per year than the next four countries combined, academic institutions and
businesses are still worried about a ability gap. Low pay for China's researchers also encourages
science majors from top Chinese universities to select other than study opportunities.
