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China Daily Website

Can innovation be solution to all?

Updated: 2013-09-12 09:27
By Qingfeng Wang (chinadaily.com.cn)

The slow-down of Chinese economy to some extent has caught the attention of the world. Is the China economy slow down too early or going to encounter a hard landing? More explicitly, the slowing down on the GDP growth rate from double digital growth to a growth rate of about 7.5 percent, the decline in consumption, investment as well as foreign trade, the amounting local government's debts and negative growth of central government' revenue all have caused many worries among the business leaders, government officials and scholars around the world. Innovation might be the solution to all.

Premier Li has emphasized repeatedly the importance of innovation in his keynote speech. His speech definitely highlighted the decisive force of innovation in moving China economy forward. The world has witnessed many innovations either in technologies, or in business, in health care, in education or in finance just to name a few. The expectation of innovation in moving the China economy forward steadily is at all time high which is reflected by the theme of this year's Summer Davos - Meeting innovation imperative. Knowing the importance of innovation is not enough, knowing how to implement innovation driven development strategy is the key to success.

Premier Li has been discussing innovation in a specific context. Premier Li assured the world on China's determination to adopt and continue innovative policies to pursue steady and smooth economic growth. We will see innovation in transforming the government function from centralized to become more localized aiming to stimulate the creativity of market players. In the market economy, markets should continue to play a leading role but are regulated to some extent by government in order to correct market failures or to promote social welfare. The decentralization or transformation of government function should serve the needs of the market in order to truly improve government efficiency, eventually to achieve a streamlined administration and optimized government functions.

Innovation in opening up China wide to the world is also on Premier Li's agenda, more specific examples are to steadily opening up the financial market, railway, and telecommunication market to the world. The Shanghai free trade zone is a solid evidence of China's determination of gradually opening up China wide to the world. Deng Xiaoping "open door" policy announced in December 1978 has once transformed China's economy. Four so called special economic zones were set up in southern China with tax incentives to attract foreign direct investments and businesses. Since then, China economy gradually shifted from the planned economy to market economy which has spurred the creativity and innovation of millions entrepreneurs. Deng Xiaoping's "open door" policy is credited with helping China's economic modernization. The world is waiting to see whether or not Li Keqiang's free trading zone idea will transform Shanghai to an international financial center.

From Premier Li's keynote speech, he has set the tone for promoting technological and science innovation in all sorts of industries including e.g., health care and education. This will undoubtedly create huge opportunities for business and entrepreneurs. China is expecting to face population aging. According to the sixth national census conducted in 2010, the population in the age group of 60 and above reached 178 million in China, accounting for 13.26 percent of the total population. China's economic and social structures are still in the reformatory stage and, hence, cannot keep pace with the rising number of elderly people. One child policy had made the situation even worse. With an increase in the number of the ageing population and decrease in that of the working-age people, the dependency ratio of the nation's population will attain an ultra-high level of 0.8 in 2070 based on the United Nation predictions, which suggests that four working-age people will have to support at least two senior and one child. Take health care industry as a particular example, China urgently needs the innovative solutions to solve the particular health care problem due to the aging population; the solutions will either coming from within or from outside world but innovation will play crucial part as the old health care system seems not working properly to serve the rising number of elderly people.

To create a social environment friendly to innovation is another important step which Li Keqiang has laid out to welcome and to help to incubate innovation. China is still to some large extent operating in an environment that doesn't support creativity, being a lack of emphasis on innovation, as well as the society that do not recognize the development of new ideas. Innovation may means to experience lot of failure before a success. Losing face due to failure can be a lasting embarrassment, therefore innovation and ideas are discouraged at the social level. A social environment friendly to innovation is definitely needed but the government determination and policy support might play a vital role.

We are looking forward to the successful conclusion on the theme "meeting innovation imperative" at Davos Summer 2013. We are waiting to see how innovation can partly help to solve some of the challenges China are facing.

The author is with the Nottingham University Business School China.

 
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