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Innovation Next Step for China

With its vast low-cost labor force and a consuming 20-year thirst for economic growth, China was a natural to become the world's factory. Now its central government faces the new, vastly more difficult challenge of making China a global innovator.

BEIJING — With its vast low-cost labor force and a consuming 20-year thirst for economic growth, China was a natural to become the world's factory. Now its central government faces the new, vastly more difficult challenge of making China a global innovator.

Beijing has stated that it intends to make China's economy innovation-based by 2020. Government experts have said the change will be essential to maintaining China's economic health and improving the living standards of its people. Intellectual property rights protections, improved product quality and safety and a more competitive global economic base would result, and a manufacturing economy is not entirely sustainable in the long term, they say.

China has maintained its rapid economic rise on making the products that other nations have created and designed, often in violation of intellectual property protections. Now the downsides of low-cost mass manufacturing have begun to manifest themselves, with last year's global scare over product safety in toys and complaints at the World Trade Organization over wholesale intellectual property theft. These developments have turned the focus even more on China's capacity to innovate rather than just manufacture.

While 13 years is a long time for China to evolve, given its current rapid pace of change, analysts and experts are skeptical that the nation can accomplish its innovation goal without changes that reach into the very fabric of society.

"People don't become innovative because of government policy, they become innovative because they develop creative minds," said Fraser J.T. Howie, a China economic analyst and author of "Privatizing China: The Stock Markets and Their Role in Corporate Reform." "What's important has to do with educational systems and teaching people to think for themselves."

A long-held criticism of China's educational system is that it depends on rote memorization rather than free thinking and individualism. Howie said that, because of such ingrained societal challenges, along with China's one-party system and the market dominance of state-owned firms, he sees little hope for innovation. Development of the private sector remains essential to creativity. Most innovation happens in the private sector, he noted, and China's private sector remains woefully far behind.

"I don't think they're going to be able to do enough quickly enough," he said.
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