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How China is becoming an innovation dynamo
September 24, 2015, 7:11 AM IST
Forget China’s slowdown for a moment. A recent report in The Economist, based on research by McKinsey Global Institute and PwC, confirms China’s transition to a global innovation powerhouse. The private sector drives innovation in China, going by the ability of companies to expand revenues and raise profits as proof of successful innovation, rather than the number of patents filed. A PwC survey also shows that Chinese companies are increasing investments in R&D faster than competitors in any other market. It debunks the notion that Chinese companies are mere copycats, capable only of incremental improvements. Data shows that Chinese companies compare with Silicon Valley firms in innovation.
China is an innovation heavyweight due to its massive catch-up in R&D investment and education. World Bank data shows China’s R&D spend at about 1.98% of GDP in 2012. It wants to eventually match the R&D spend in the US, at 2.8% of GDP. That’s huge compared to India’s paltry 0.9% of a much smaller GDP. Indian companies spend minuscule sums on R&D and often pass off market research expenses as R&D outlay to get a tax break. The best R&D should happen in Indian universities and companies, not just India-based R&D centres of multinational companies, if India is to excel in manufacturing.
Huawei spends about $5 billion a year on R&D, on par with Ericsson, and is in the forefront of research in 5G mobile communications. There is no Indian player in this space. WeChat, developed by Tencent, is seen as a good example of Chinese innovation. Chinese firms also adapt new technologies to the mass market quickly. To get there, India needs to build on its own strengths. It should align research with teaching institutions, instead of R&D being consigned to specialised state-run laboratories. This will enable industry to commission serious research projects to university departments. Indian companies also need to be more imaginative, and that requires quality education. The government must push reform, and not just aspire to gain from China’s pain.
How China is becoming an innovation dynamo - ET Blogs
September 24, 2015, 7:11 AM IST
Forget China’s slowdown for a moment. A recent report in The Economist, based on research by McKinsey Global Institute and PwC, confirms China’s transition to a global innovation powerhouse. The private sector drives innovation in China, going by the ability of companies to expand revenues and raise profits as proof of successful innovation, rather than the number of patents filed. A PwC survey also shows that Chinese companies are increasing investments in R&D faster than competitors in any other market. It debunks the notion that Chinese companies are mere copycats, capable only of incremental improvements. Data shows that Chinese companies compare with Silicon Valley firms in innovation.
China is an innovation heavyweight due to its massive catch-up in R&D investment and education. World Bank data shows China’s R&D spend at about 1.98% of GDP in 2012. It wants to eventually match the R&D spend in the US, at 2.8% of GDP. That’s huge compared to India’s paltry 0.9% of a much smaller GDP. Indian companies spend minuscule sums on R&D and often pass off market research expenses as R&D outlay to get a tax break. The best R&D should happen in Indian universities and companies, not just India-based R&D centres of multinational companies, if India is to excel in manufacturing.
Huawei spends about $5 billion a year on R&D, on par with Ericsson, and is in the forefront of research in 5G mobile communications. There is no Indian player in this space. WeChat, developed by Tencent, is seen as a good example of Chinese innovation. Chinese firms also adapt new technologies to the mass market quickly. To get there, India needs to build on its own strengths. It should align research with teaching institutions, instead of R&D being consigned to specialised state-run laboratories. This will enable industry to commission serious research projects to university departments. Indian companies also need to be more imaginative, and that requires quality education. The government must push reform, and not just aspire to gain from China’s pain.
How China is becoming an innovation dynamo - ET Blogs
