Sun, May 08, 2011 - Page 9 News List

Can China’s billions spur the next
big technological breakthrough?

Innovation is an obsession for China’s central planners, but political constraints, a closed society and lack of funding for --start-ups are drawbacks. In addition, many companies do fine churning out existing products faster and cheaper than competitors

By James Pomfret and Don Durfee  /  Reuters, BEIJING AND DONGGUAN, CHINA

Illustration: Yusha

If innovation is about dreaming up the next big idea, then the black box devised by Guangdong East Power probably doesn’t qualify.

The 2m tall stack is a power supply system, a machine designed to ensure the smooth, uninterrupted flow of electricity to computer servers and medical equipment.

The design isn’t entirely original. The company’s engineers, working in stark white laboratories at the heart of China’s Pearl River Delta, spent three years pulling apart rivals’ products and imitating them.

However, they made some important design changes, producing a machine that is more energy efficient and slimmer, allowing users to squeeze it into smaller spaces. It is also cheaper: The system sells from 30 percent to 40 percent less than comparable products from Western competitors.

The strategy is the brainchild of He Simo (何思模), an amiable former soldier who started the company in 1989 with just 3,000 yuan (US$460) in capital, and once resorted to selling his own blood and bicycle to make ends meet.

Through imitation, tinkering and steady improvement, Guangdong East Power is now one of China’s leading producers of power supply systems and increasingly a competitor for the global market leaders, Schneider Electric’s APC and Emerson.

“The company I most admire is Apple,” He said, sitting in an office off the factory’s humming production line. “God’s hand sometimes gives them an idea and they come up with a completely new product. I don’t think we are anywhere near that stage yet, but I always say a product is never perfect — it can always be improved.”

Innovation is an obsession for China’s central planners, who have showered billions on state-owned businesses and research institutes in an effort to make the country a creator of — rather than a mere user and copier of — intellectual property.

It’s an effort that has had Western multinationals up in arms, fearful that such a policy favors local companies and forces foreign companies to transfer their best technologies to China.

The government is seeking major breakthroughs — scientific discoveries and new technologies that will set the standard for companies around the world. The effort hasn’t been a success.

“You can’t really point to an individual firm or area where the Chinese are currently leading,” said Adam Segal, a senior fellow with the Council on Foreign Relations and author of a book on innovation in Asia.

“Some people point to nanotechnology and some say nuclear. Otherwise, it’s hard to figure out if there’s going to be any breakthrough in China. I just don’t see it on the horizon,” he said.

However, seen another way, innovation is thriving in China. Thousands of companies in the country’s lively and unruly private sector have built money-making businesses based on their ability to take existing technology and products and make them better and cheaper.

“Chinese companies have been doing wonderfully by being on the cusp of the latest available technologies developed elsewhere and then being able to work on it,” said Dan Breznitz, a professor at the Georgia Institute of Technology.

“It’s a strategy that’s basically against the central government’s push, but those innovation capabilities are probably going to maintain Chinese growth for the next 15 years,” he said.

That is, added Breznitz, if the Chinese government’s thirst for big, state-directed projects doesn’t undermine its privately owned companies.

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