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Innovation is now a strategic priority for China

By Huw Andrews and Stephen Kemper  (China Daily)

08:30, February 21, 2013

Since the launch of reform and opening-up policy in 1978, "made in China" products have established China as the world's factory.

However, the high-value work of innovation, design and development tended to originate outside of China. This is starting to change, and while China has a long way to go, its leadership is well aware of the challenge.

"Chinese capacity for indigenous innovation is weak, Chinese industrial technology is at a low level, and both Chinese basic and cutting-edge research are relatively unimpressive," Premier Wen Jiabao said in July 2011.

China's impressive economic development, particularly in the last 10 years, has created the world's second-largest economy. Global corporations inspired both by the increasing wealth in China, and recessions in their key traditional markets, have confirmed China as a strategic market, and often as their top growth priority.

Leading multinational corporations like Siemens, General Electric, Proctor & Gamble, PepsiCo and Nokia have ramped up their China innovation centers, tasking them to create products for both domestic and international consumption. Overall, there are now more than 1,500 foreign research and development centers in China, according to the Ministry of Commerce.

This rapid evolution is also driving Chinese companies to focus management time and attention on innovation. Traditionally, Chinese companies have succeeded by competing on cost, and by rapidly customizing proven product concepts to create products that are copies or incrementally modified versions of the originals.

While this strategy has enabled these companies to grow fast, many are struggling to build leading global brands, and their "follow the leader" approach has resulted in the Chinese being labeled as copiers.

In reality, "fast follower" is a strategy used by all leading corporations. The recent scramble to follow Apple's successful iPad launch in April 2010 is a great example.

Competitors quickly designed and manufactured 30 alternative tablet products, all ready for sale by December of that year. By the close of the following year, there were more than 100 tablets on the market. Samsung, Motorola, Microsoft, Lenovo and many other mighty corporations all followed Apple's lead.

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