China’s Innovative Sea Turtles Are Coming Home to Lay Golden Eggs

Wednesday, February 20, 2008 15:43
Comments Off on China’s Innovative Sea Turtles Are Coming Home to Lay Golden Eggs

China is better known as the manufacturing floor of foreign designed goods, than as an originator of all things innovative. It is a stigma that Beijing has been trying to shake for sometime now, and I for one have been a big proponent of the fact that the Chinese are very innovative… it is jsut the system in which that talent is incubated that actually has been the barrier.

One of my primary arguments/ theories is that firms like GE which hold title to large amount of patents will often have Chinese scientists behind much of the research, and that what GE does so well is incubate.

Following this line of though, the Washington Post has released a fantastic article on the phenomenon by which many of China’s foreign trained scientists are coming back to China, with the skills developed in foreign universities and companies, and are being given a lot of support to continue their growth and bring new technologies to the market.

In the article, Ariana Eunjung Cha, looks at this trend closely and I highly recommend everyone read it as there are things in this report that show just how much Beijing see value where others don’t.

Lured by grants, tax breaks, looser regulations and a scientific environment more open to certain types of experiments, China’s long-lost scientists are coming back in droves. As the NIH and other U.S. research institutes complain about the tightening of in the nation’s scientific budget, China has announced that it will double its research-and-development spending by 2010, to about $69 billion.

The returning scientists are reversing a trend that began in 1978, when Communist China first allowed students to go abroad. It used to be that when they left, they left for good. But in recent years, more than 275,000 have come back.

Where this becomes important, besides the fact that the Chinese already own the low cost manufacturing market, is that China will find further stability and growth in the high value market. Through inproved knowledge bases, it will not only build continued wealth by being able to charge higher premiums, and it will also help them to wean off the dependency they feel on foreign companies to provide technology into the system.

for anyone that read the Motorola HBR case that studied their entry into Penang, moving up the value chain is only a matter of time. When Motorola first moved their, skill bases were low, and products manufactured were 2nd and 3rd generation. However, ith time, the skill base and wages of Penang rose so fast that Motorola had to move some operations to other areas to remain cost competitive, but then they raised the bar at the Penang site.

Something, you can expect to see in China, and if you look at how many firms are now looking to place 2nd and 3rd investments in the second tier cities, I would even say it is already happening.

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