"China's Innovation and Entrepreneurship Ambitions
– Issues for European Business and Policy Strategies"
The seminar in Brussels on May 3rd was arranged by the Swedish Foundation for Small Business Research (FSF), the Swedish Agency for Econimic and Regional Growth (NUTEK) and the Swedish Institute for Growth Policy Studies (ITPS).
Introduction by Professor Anders Lundström, President of The Swedish Foundation for Small Business Research.According to studies of Entrepreneurship policy in China, the country ranks 2 nd last in the over-all ranking compared to 14 countries. (Lundström/Stevenson).However, on the brighter side: The Global Entrepreneurship Monitor (GEM) shows that at a given moment, roughly 100 million people are trying to start a business in China.
Photo: Birger Ekerlid, ITPS
Dr R Veugelers
In the early18 th century, China had 30% of the world GDP.
Annual GDP growth rate; more than 10% since1994.
China´s share of the GDP is 15%, the same level as Europe combined.
China is the 3 rd largest exporter and the 3 rd largest importer.
Future targets; annual growth of 7%, sustainable growth, "well-off" society
Future challenges; social and regional inequalities, environmental challenges,
Explaining the boom:
Factors
Chinas sheer size (supply of labour)
Institutional framework, economic reforms towards a "socialist market economy"
Growth accounting
Accumulation of capital through foreign investments
Modest growth-contribution from employment
Modest growth-contribution from consumption
Growing contribution of human capital (education is getting better, etc)
Limited Productivity gains - the gains that exist, come from privatization, export markets and technology imports.
From catching up with others to own indigenous growth?
Will China be able to deliver and drive a economy that is not only driven from Foreign direct investment (FDI)?
Statistics fom 2003.
High % of R&D spending of GDP (Mostly governmentally funded).
Ranks 12 th in patents and 6 th in scientific publications.
There is a policy commitment, a consistent approach to increasing citations, etc.
Challenges:
Macro economic stability, monetary policy, inflation
Refocusing public fiancés
Reforming financial markets (access to capital, etc).
Reforming the state sector (research, education)
Frameworks for development of the private sector
Building Chinese innovation capacity
Labour market reforms
Regional/demographic challenges
Environmental challenges
Political reforms
A systematic approach to these challenges is necessary; they cannot be dealt with individually.
Challenges for the EU? Economic impact on the EU?
China is EU´s 2 nd largest external trade partner
EU´s China policy?
- China is the primarily important fort the EU as a market to source import from
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Deficit in trade structure in China-EU trade.
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Modest FDI outflow from EU to China
In short run, EU needs to adjust and restructure. The growing Chinese economy offers great trading potential and investment opportunities
Present challenges for the EU economy: Implipcations of EU´s new china policy:
- Smooth development is in EU´s interest
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Open Chinese and world markets is important for Chinas´ sustainable development
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Open EU and China markets benefits Europe.
How to build into a win-win?
Policy making on a sound understanding of China
Assist China in its development process
EU need to improve capacity to improve EU competitiveness in the long rung and facilitate transition in the short run.
EU should continue to promote an open world economy
Keep its markets open
The openness should be reciprocal
EU states should cooperate more on China issues
EU policy on china needs to be integrated with Asian regional perspective.
China needs to be taken more seriously by the EU
EU will benefit from Chinese development!
Sara Wramner, Oriflame Cometics
China statistics:
10,7% economy growth
Q1 2007, economy expanded by 11.1
440 million mobile phone users
2,6 million website
123 million internet-users
25% of these are involved in online shopping
800 millon people in the workforce
Agriculture is big, industrial is big, service industry is expanding
What is China facing?
• Environmental challenges (greenhouse gases, 2100 new cars in Bejing, every day)
• Well-being (overweight, smoking, HIV, etc.)
• Aging population
• Widening gaps
• Fast economic growth
• Number of men vs. number of women
• 2008 Olympics
Is China roaring to fast for comfort? 130 million Chinese fall below international poverty limits.
Trends
Innovations as a national priority
Innovative approaches are needed for recruiting developing and retaining staff.
Keep in mind
Size (Beijing is the size of Brussels)
Cultural differences (minorities, etc)
Confucian heritage (hierarchy)
Relationships (on all levels, not only management and officials)
Competition (IPR), (copycats)
Human Resources
Differences vs. similarities (there are similarities as well!)
Success factors
The Chinese market is a moving market. Continuous change is the only to count on
Patience
Flexibility
Long-term thinking
Persistence
"Chinas high-tech ambitions - Standards, high-tech policies" Magnus Breidne, Counsellor Science and Technology, Embassy of Sweden Science Office in China.
China - the challenges
Present day - Chinese innovation system
The quest for the "high-end"
• Protectionism
• Innovativeness
China - the challenges (see presentation for details).
Old Chinese saying; "Science and technology is the solution to all problems"- thusly; investment in R&D and investment in education is important".
This shows an ambition to try to work towards an innovative climate.
Scientific Publications
Patents
High-tech exports
Most attractive global business locations (survey): China
88% of export comes from foreign invested companies
66% by wholly foreign companies
Problem; China is stuck in low margin production:
"Wintel" (its hard to break new ground)
Patents (gives money through licenses)
Licences (50% of cost of production in some cases)
Solution; either the French way (protectionism) or the Finnish way (innovation).
Protectionist China:
* More domestic standards
* Less dependence on foreign technology
* Government procurement, favouring innovative domestic companies.
Innovative China:
* No the pace of innovations, the distribution is the important thing.
* High-tech
* Driven by producers rather than consumers
15-year plan.
Indigenous innovation, self-innovation - important
Enterprise centred innovation, company owned.
Public procurement
Standards
Goal: in 2010:
Reduce dependence on foreign technology by 30%
Increased number of Chinese invention patent grants
Citation from scientific journals up
15-year plan for policy instruments.
16-key projects (among them)
• Large aircraft
• Manned space-craft
The ecology of innovation:
Necessity-driven innovation (real and pervasive, but not exportable)
Technology based innovations (requires accumulation of people, money, technology)
China will become innovative when:
Companies pay more attention to customers
Quality in design and engineering improves
Engineering graduates gain more experience in problem solving
When managers put more emphasis on innovation.
"Innovation in China - Strengths, weaknesses and challenges"
Sylvia Schwaag Serger, Senior Advisor Asia, ITPS and Swedish expert in OECD project, Chinas National Innovation System
180000 highly trained returnees coming back to China.
In 2010; more PhDs in Science and Technology than the US
R&D and knowledge is internationalizing
Academic research, higher education is improving.
International mobility of highly skilled labour force and returnees
Developing countries are becoming an increasingly important source for knowledge resources
"China has the resources to become the of the most innovative countries in the world" Human capital, R&D and Firms are key for the Chinese innovation system.
What we know-innovation system
Increase in R&D
Importance of research institutes
Publications/citations
Many foreign firms are establishing R&D in China.
BUT:
Very little basic R&D
Few citations
Low R&D intensity in high-tech industries
A closer look:
Increasing foreign corporate R&D in China (1000 foreign R&D centres)
Trend; from product development to more strategic R&D
Knowledge spill-over through people, pro competitive effects, attracts overseas Chinese to China.
Limitations to innovation?
SME´s and private firms are starved of human capital
Hierarchy, corruption - hamper innovation and lead to suboptimal allocation of resources.
Low expenditure on education compared to other countries
There will be progress and transition -.it just takes time
Focus on knowledge rather than learning
Significant progress and significant challenges
An unique benefit/asset - overseas Chinese population
"Regional Models in Entrepreneurship and Innovation in China"
Dr Zhong-Ming Wang, professor, Executive Dean School of management, Director, Global Entrepreneurship, Research Center, Zhejiang University
The development of Chinese economic reform and entrepreneurship
• 1970s traditional start-ups
• 1980s individual entrepreneurship
• 1990s technology entrepreneurship
• 2000s strategic entrepreneurship and global entrepreneurship
5 key issues through regional strategic analysis;
Talent, policy, systems, sustainability, global
6 strategies needed to understand Chinese business. Each region has its own conditions and requires its own strategy.
* West china development strategy (infrastructure, environment, local industries)
* Northeast China revitalization strategy (restructuring key industries and enterprises)
* Yangtze River Delta strategy (capability and self innovation)
* Pearl river strategy (business alliances)
* Central china support strategy (energy, raw materials, advanced manufacturing)
* Going Global (Hr, culture, leadership and learning, mergers and acquisitions)
-Talent issue: from attracting and retaining towards building and developing competent leadership (high demand for business leaders).
-Entrepreneurship policy
-Innovation systems (Innovation strategy; self-innovation)
-Sustainable development University-industry-Government alliance
"Zero distance centres"
Problems with globalization: trust, culture, human resources,
Can a geographical model be successful in training entrepreneurs?
Towards a globally oriented, group-oriented, entrepreneurship
Networking capability
Panel
Q: Fundamental difference depending on size of company when doing business in China?
Sara: Definitely, larger companies are often better prepared and more equipped, smaller companies are more trying to feel their way, not always sure what their business plan and strategy is. Information is crucial.
Peter: Small details are important, making it easier for SME´s
Dr Wang : Identifying partnerships is important
Q: China used as a place for production, not a market. Production and market-place in one?
Dr Wang: Privately owned companies, auto-component companies, clothing companies are examples of such. Business regulations and laws are crucial for these companies. Many need to learn how to be rule-based.
Q:144 Chinese projects in the 6 th framework programme -is this good? Should EU be more active?
Magnus: Yes, the EU needs to do it. It should be more equal though, more co-operation is required. The US thinks more strategically, EU is more open-minded, initiatives are taken from researchers, not governments - policy initiatives are needed.
Presentations for download:
"China, EU and the World: Growing in Harmony?" Prof. Dr. R. Veugelers, KULeuven and EC-BEPA >>> Presentation (.ppt)
”China’s High-Tech Ambitions – Standards, High-Tech Policies and Self-Innovation”
Magnus Breidne, Counsellor Science and TechnologyEmbassy of Sweden Science Office (ITPS), Beijing >>> Presentation (.ppt)
"Regional Models in Entrepreneurship and Innovation in China"
Dr Zhong-Ming Wang, professor, Executive Dean School of management, Director, Global Entrepreneurship, Research Center, Zhejiang University >>> Presentation (.pdf)
