China Changes under an Innovative Economy


THE Central Committee of the Communist Party of China and the State Council jointly issued on March 23, 2015 the “Certain Opinions on Deepening Institutional and Mechanism Reforms and Accelerating Implementation of the Innovation-driven Development Strategy.” How to make innovation the main engine of China’s development, therefore, has once more become the focal point of all walks of life. In fact, China has been moving in this direction since the turn of the millennium, having presented and implemented the strategy of building an innovative country. China has made a quick technological catch-up in certain fields, and is now a pace setter in some of them. And the mushrooming of new industries, new businesses, and new types of operation over past years has improved people’s livelihood, enriched their choices, and significantly increased productivity. Innovative economy has thus greatly changed China.

China lags far behind the developed countries in certain mature technological fields. But the gap is less obvious in certain emerging technologies; China even leads the field in certain areas. Technological innovation opportunities are apparent in the areas of mobile Internet, new energy, and new-generation communications, where China’s innovation forces are mainly concentrated.

Most Proactive Innovation Forces

“Internet plus,” as a new economic form, is reshaping the Chinese economy and lending strong momentum to it under the “new normal.” The impacts of the “Internet plus” will be felt in three aspects:

First, development of the Internet economy has synthesized the Internet and traditional industries, so greatly improving the latter’s efficiency and gaining it new development space.

Second, innovations to the mobile Internet, Internet finance, big data, 020 (online to offline), and e-businesses have given rise to new industries, new businesses and new types of operation, and also promoted the upgrading of and changes to traditional industries. Internet finance, for instance, has almost completely reshaped the landscape of China’s financial sector.

Third, it brings producers closer to consumers, so expanding the scope of consumption and enriching consumers’ choices.

In the new round of industrial revolution, for instance, the development of mobile Internet has set the pace for comprehensive upgrading of China’s information and communications technology (ICT). In 2014, China’s mobile Internet market reached RMB 200 billion, with 557 million users. Sales of smartphones exceeded 400 million, and four Chinese enterprises entered the top 10 Internet businesses with the highest market value worldwide. China is now fundamentally synchronized with the world as regards wearable devices, smart hardware, the integration of mobile Internet and the Internet of Things, and mobile big data.

Under the backdrop of rapid development of biotechnology worldwide, China has made bioindustry one of the strategic emerging industries to be fostered. It has hence ratcheted up support in R & D input, policy, and talents. Biotechnology and bioindustry have courted the attention of Chinese firms, and hence become the most innovative sectors of the Chinese economy. Their R & D strength and market scales have obviously grown in recent years. The Beijing Genomics Institute, for example, ranks sixth on China’s innovation list. The genetic data it produces annually makes up over half of the global market share. The institute’s National Gene Bank is geared to multiple emerging industries, such as biomedicine and new-type agriculture, providing raw genetic data for healthcare, biopharmaceuticals, and high-efficiency cultivation. It has the potential to create a RMB trillion-class market.

The technological development and industrialization process of China’s new-energy automobiles has exceeded market expectations. China lags behind in traditional automobiles, but its enterprises have shown great potential as regards the new-energy types. As a result of intensified resource and environmental constraints, greater environmental protection awareness, state policy support, and auto manufacturers’ R & D, new-energy automobiles have developed rapidly in the country, and shown great vitality. For instance, in February 2015 China’s automobile production declined 28.65 percent and the sales 31.31 percent compared to the previous month, and respectively 0.38 percent and 0.22 percent lower than the same period of last year. But the production of new-energy automobiles rose almost five-fold compared with the same period of last year.

Chinese enterprises have shown growing innovation capability and competitive power in certain emerging industries and technological fields. For instance, drones produced by Shenzhen-based DJI-Innovations are now a highlight of China’s innovative economy. Its products have been cited by Time magazine as one of the top 10 sci-tech products of 2014, and hold a third ranking. At present, DJI-Innovations takes up more than half of the global small drone market share. In the past three years, its sales volume expanded almost 80-fold, and its work force from just four to around 2,500, so becoming a global pioneer of aerial photography and videography systems. The company has clients in more than 100 countries.

Coexistence of Opportunities and Challenges

Generally speaking, because the industry is still in its infancy the technology in emerging technological fields remains imperfect; the intellectual property barrier has not formed, a monopoly has not been established, and the business model is not set yet. All this provides rich development opportunities for Chinese enterprises, and these fields have become hives of innovation. They include smart grid, new energy, new materials, smart traffic, and intelligent cities.

Moreover, Chinese enterprises also pay great attention to business model innovations. Such innovation gives them a sharper competitive edge via modification of their market orientations, reforms to their marketing and profit models, and restructuring of supply chains. Chinese enterprises place equal emphasis on both technological and business model innovations, so nurturing a flourishing innovative economy. New industries and new types of operation have invigorated the economy, improved the quality of people’s lives, created jobs, and contributed to social stability, making mass entrepreneurship and innovation possible.

Meanwhile, China has also acknowledged the realities of insufficient motivation force towards innovation. China is deepening reforms to scientific research and education systems, especially the distribution and management of scientific research funds. It will better protect intellectual property rights, create necessary institutions to support technological breakthroughs and industrialization of scientific research results, and foster a market environment of fair competition. China will also rally cultural and social forces to encourage bold experimentation, innovation and tolerance of failure, so making innovation the main driving force of China’s development under the new economic normal.