China’s Incredible U-Turn: Can It Be Done?

By Shlomo  Maital    


 I’ve just returned from a Workshop at the huge Shanghai Zhangjiang Science Park, in Pudong, Shanghai.  This massive park houses some 200,000 workers (2/3 have college degrees), thousands of companies, many startups, several incubators, and generates $30 b. in GDP.  With the help of 21 experts, I ran a Workshop to map the park’s innovation ecosystem. 

   The scale of the place is amazing.  It could house all of Israel’s R&D workers, with room to spare.  It has deep pockets, with the backing of the national government.  The incubator building where the Workshop was held is spanking new, with a lovely atrium, parquet floors and 12 stories of offices. 

    In a remarkable coincidence, the two biggest economies in the world chose their leaders, within two days (America, last Tuesday; China, last Thursday).  China’s next President Xi Jinping, and probable Prime Minister,  Li Kequiang,  will attempt to implement a major U-turn.  After the current leaders Hu Jintao and Wei Jaobao led China through the global crisis, with only a minor slowdown, the next leaders will try to move China up the economic food chain, toward Created in China and Innovated in China, as China’s wages rise making “Cheap China” more and more expensive.  This is a difficult goal.  China’s society is rule-based.  China’s ruling elite holds the place together by a massive public security operation (which costs more than the external defense spending).  How can you get an entire society to be more innovative, when it is taught to follow the rules from an early age?  Yet, it is happening. I met entrepreneurs at ZJ Park, who are no different from Israeli or American startup youths. 

  China’s scale is mind-boggling.  China created 39 m. new college grads in the past decade, and now produce 6 m. every year. 8.9 per cent of the population have college education, (or 117 m. people), up from 3.6% in 2000.  According to the BBC, by the end of the 2020 decade four of every 10 college grads in the world will be Indian or Chinese.  China is also aiming at producing 22 m. vocational school grads, building its vocational education system to supply well-trained factory workers.  By 2020, 29 per cent of the world’s college grads will be Chinese , compared with 11 per cent for the U.S.   This massive quantity of college grads will in itself generate quality – with that many college-educated people, at least some of them will doubtless be highly creative and enterprising.

    America focuses on China’s cheap manufacturing as a threat.  It should focus instead on China’s enormous historically-unprecedented effort to shift from low-cost manufacturing to high-value innovation.  We will watch the two new leaders closely, as they lead China in an incredible unprecedented U-Turn toward creativity.