Innovation Held Hostage in China

I recently made the acquaintance of a researcher at one of China’s highest government bodies. He has given me permission to publish one segment of our conversations, which I found particularly interesting and worthy of a larger readership (with identifying features kept out for obvious reasons). These are all just his opinions and cannot be said to represent the opinions of the Chinese government, but I think it’s appropriate to say that his positions reflects some of the conversations going on at the highest levels of the Chinese state.

Innovation and the government

We were discussing globalization and America’s economic relationship with China. He argued that Chinese innovation was at this point no where near America’s levels, both of existing technological prowess (he was amazed what he saw on one visit to Boeing) and future innovative capacity, and thus he didn’t think that America had anything to worry about from China, though he was disappointed that Chinese intellectual property has not been able to perform better internationally.

His reasoning was what surprised me. He put the blame for the lack of innovation in China squarely at the feet of the government, complaining that the children of China’s greatest entrepreneurs all would rather be government officials than work in the private sector.

I pressed him a bit for more thoughts on “what can be done” in this area, and he specifically mentioned that the government should have less control over the distribution of resources and the country’s state owned enterprises should be “less powerful.” He argued that any redistributive power of the government should be focused on helping private entrepreneurs.

Governmental Reform

But how do you rein in the power of the government? The point he ended up making, though, was that he didn’t think China was capable of handling a democratic government as long as distrust of the court system, and particularly a culture of favoritism, was ingrained in the Chinese way of life. Specifically, he said that no Chinese person would expect a local judge to provide a fair ruling against someone he knew personally, and thus its important to have someone that looks like an independent arbiter (one of the policies that the current government has taken from the imperial bureaucracy is an insistence that provincial officials be appointed outside their home province). He said that once the country built up some trust in the independence of the judiciary that political reforms would be easier, but he also implied that it would be hard to devolve authority as long as most of the corruption goes on at the lower levels of government (he says that central government officials, including himself, have their bank accounts audited on a regular basis).

There has been some concern lately that, after the outflow of manufacturing to China, the innovative jobs would be next. As per usual, the view from within China is somewhat more pessimistic. While China might be able to take over some of the grunt labor involved in programming and testing, real product development and technological innovation is still being held hostage in China by a web of competing interests.