The next phase of de­vel­op­ment In­no­va­tion and sus­tain­abil­ity are the step­ping stones that can up­grade in­dus­tries and ser­vices and ce­ment the na­tion’s fu­ture

China Daily (Canada) - - COMMENT -

China has be­gun the next phase in its de­vel­op­ment as a lead­ing global coun­try. Struc­tural re­forms and par­tial lib­er­al­iza­tion are eas­ing its re­liance on growth through in­vest­ments and net ex­ports mainly driven by man­u­fac­tur­ing. In­stead, a model based more on do­mes­tic con­sump­tion and ser­vices and strongly driven by in­no­va­tion is emerg­ing.

What China will do next to main­tain its eco­nomic vigor and con­tinue spread­ing wealth among all its cit­i­zens will shape its out­look for gen­er­a­tions to come. The chal­lenge is that the fac­tors that have served it so well in the past are dif­fer­ent from those that will help it suc­ceed in the fu­ture.

It is the cul­mi­na­tion of a jour­ney that be­gan in the 1980s un­der the lead­er­ship of Deng Xiaop­ing. The eco­nomic and so­cial de­vel­op­ment he ini­ti­ated, a form of cen­trally steered mar­ket sys­tem, has pro­duced the fastest eco­nomic growth the world has ever seen sus­tained for three decades. It has made China the world’s sec­ond-largest econ­omy and has lifted about 650 mil­lion peo­ple out of hunger and ex­treme poverty.

The model was based on the mass man­u­fac­tur­ing of cer­tain goods, by us­ing mainly brought-in tech­nol­ogy. China has be­come so in­cred­i­bly good at man­u­fac­tur­ing, with its ul­tra-ef­fi­cient sup­ply chains and mod­ern in­fra­struc­ture, that it pro­duces more than 25 per­cent of all the goods made world­wide to­day. In­ter­est­ingly, this was also the case some 200 years ago.

How­ever, China’s de­pen­dency on man­u­fac­tur­ing, in­vest­ments and net ex­port as the main growth model is be­com­ing harder to sus­tain. China’s growth has slowed some­what in re­cent years, although it is still very high. The ex­pected growth rate of about 7 per­cent a year will prac­ti­cally dou­ble the size of its econ­omy over the next decade, ef­fec­tively re­sult­ing in another China. How­ever, this growth will also have an im­pact on the na­tion’s abil­ity to ad­dress its most press­ing longterm needs.

China’s eco­nomic growth is cru­cial, not only to hun­dreds of mil­lions of Chi­nese, but also to the rest of the world, which has be­come in­creas­ingly de­pen­dent on it. But it is es­pe­cially press­ing for those mil­lions of peo­ple in ru­ral ar­eas in the western part of the coun­try, who have ben­e­fit­ted com­par­a­tively less from the coun­try’s eco­nomic growth and pros­per­ity.

In this con­text, a sus­tain­able so­cial bal­ance and na­tion­wide sta­bil­ity are im­por­tant el­e­ments to con­sider as well, given that ma­jor de­mo­graphic shifts are ex­pected to con­tinue. As more ci­ties face ur­ban pol­lu­tion re­lated to en­ergy con­sump­tion de­rived from fos­sil fu­els, there is an ur­gent need to de­velop cleaner en­ergy sources that are more sus­tain­able in the long run.

In­ter­est­ingly, it is via in­dus­tri­al­ized farm­ing that per­haps some of the big­gest op­por­tu­ni­ties can be cre­ated for sus­tain­able en­ergy and ma­te­ri­als sources. The waste gen­er­ated by a mod­ern Chi­nese agri-food business would open the door to sec­ond gen­er­a­tion ad­vanced bio­fu­els and bio-based ma­te­ri­als on a grand scale while sus­tain­ing food pro­duc­tion. The lat­est bio-waste con­ver­sion tech­nol­ogy can process agri­cul­tural waste, in­stead of the edi­ble car­bo­hy­drate com­po­nent of the plant, and there­fore presents no com­pe­ti­tion in the food sup­ply chain. A large-scale Chi­nese bio­fuel in­dus­try is an area where China could one day claim lead­er­ship, as its waste will only in­crease with fur­ther ur­ban­iza­tion.

But at the heart of the op­por­tu­ni­ties to ad­dress the prob­lems aris­ing from China’s eco­nomic growth and con­se­quent ur­ban­iza­tion lies a fun­da­men­tal shift in the way the na­tion gen­er­ates its wealth. To find new routes to growth and so­lu­tions to the chal­lenges it faces, China must move grad­u­ally, but de­ci­sively, to­ward be­com­ing an econ­omy in which in­no­va­tion is at the cen­ter.

To some ex­tent, this is al­ready be­gin­ning. Chi­nese univer­si­ties are de­liv­er­ing large num­bers of sci­en­tists and tech­ni­cians. An in­no­va­tion-driven ap­proach im­plies a trans­for­ma­tion in mind­set that can pre­vent es­tab­lished ways of do­ing things from sti­fling change at ev­ery level. A shift to an eco­nomic growth model with in­no­va­tion as one of the core driv­ers im­plies sev­eral ad­just­ments. It will re­quire China to embrace a con­cept of open in­no­va­tion via strong in­ter­na­tional and pri­vate-pub­lic part­ner­ships.

This will also de­mand stronger and more en­force­able patent laws to pro­tect the com­mer­cial value of China’s in­no­va­tions. Al­ready to­day there are ar­eas in which China is is­su­ing more patents, even at the Euro­pean Patent Of­fice, than all Euro­pean coun­tries com­bined, such as in cer­tain ar­eas of biotech­nol­ogy. Greater re­spect for patents is now very much in China’s own best in­ter­est.

China’s lead­er­ship has been coura­geous enough to un­der­stand that it can­not rely on its ex­ist­ing strengths to de­ter­mine the na­tion’s fu­ture. It is al­ready tak­ing the bold steps that are needed to in­still a cul­ture of in­no­va­tion and sus­tain­abil­ity at all lev­els. Th­ese will en­able it to con­sol­i­date its re­mark­able gains and reap the op­por­tu­ni­ties that lie ahead.

China is en­ter­ing its fourth phase in its mod­ern eco­nomic de­vel­op­ment after Deng Xiaop­ing opened up the coun­try. In the first phase, China was seen as a po­ten­tially huge mar­ket to sell prod­ucts. In the sec­ond phase, China started pro­duc­ing prod­ucts and be­came a strong com­peti­tor. In the third phase, its man­u­fac­tur­ing po­si­tion was fur­ther strength­ened byWestern com­pa­nies pro­duc­ing in China as well. In this fourth phase, in­no­va­tion will be added to the na­tion’s strength in man­u­fac­tur­ing. Feike Si­jbesma is CEO and chair­man of Royal DSM and Cheng Si­wei is dean of the School ofMan­age­ment at the Univer­sity of Chi­nese Academy of Sciences and for­mer vicechair­man of the Stand­ing Com­mit­tee of the Na­tional Peo­ple’s Congress.

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