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From Made-in-China to Created-in-China A New Long March

"China is encouraging its business leaders and entrepreneurs to become more modern, more flexible and more innovative, especially in the area of high technology.

There is no better example of anyone answering this call than 32-year-old Chen Tianqiao and Shanghai’s Shanda Interactive Entertainment Limited, which Chen, its CEO, founded in 1999.

Even Chen has expressed amazement at the success that came to him and Shanda after he launched the fantasy adventure computer game The World of Legend in October 2003. He said he never expected that millions of Chinese would one day spend hours playing this or other computer games or viewing the entertainment products that Chen supplies or that Shanda would become China’s most successful Internet gaming company.

But neither Chen nor Shanda have rested on their laurels. The firm raised US$150 million in an initial public offering last year, and it became the best-performing stock on the NASDAQ stock exchange. Then came another bombshell: Shanda jolted the industry when it purchased a 19 percent stake in Beijing-based Sina, an Internet portal that had competed with Shanda by offering its own computer games.

With these moves, and with China’s Internet-using population now second only to that of the United States at 132 million as of the end of 2006 (up from 123 million in June 2006, according to the China Internet Network Information Centre and the Xinhua News Agency), Chen and Shanda have moved to the forefront the world’s e-commerce revolution. Along the way, Chen has become one of the country’s richest men with a net worth of about US$1.6 billion resulting from his ownership of a 60 percent share of Shanda.

Chen’s success is especially impressive when you discover that his background in high technology is extremely limited. The entrepreneur grew up in Shanghai and studied economics at Fudan University. After graduating in 1994, he went to work for a real estate developer. Even today, after six years at Shanda, he admits he’s not much of a techie.

He said, “I don’t understand the technology; I just have a sense of technology trends.” His “sense” of trends will lead Chen and Shanda to offer computer games via television later in 2007, just one among the ways he is seeking to expand Shanda’s business.

Chen epitomizes the kind of high-tech business success and presence the Chinese Government is seeking, but his success also reflects a changed business and regulatory environment in China that made his rise possible, an environment in which 52 million Chinese now have access to broadband Internet access. The increases in Internet users and available Internet technologies are paving a way for rapid growth in China’s online commerce, advertising and computer games industries, the Internet agency said.

Innovation is more than a dream in China these days. The Chinese mainland overtook Japan to become the world’s No. 2 investor in research and development (R&D) in 2006––again only after the United States––according to figures from the Organization for Economic Co-operation and Development (OECD). The Chinese Government has declared that by 2010, China will be an innovation-driven society. Innovation was a major theme at the 2006 session of the National People’s Congress, with the government unveiling its latest five-year programme and calling for big increases in spending to nurture innovation.

China aims to get active in a wide range of sectors, including in some controversial areas such as stem-cell research, gene therapy, and in genetically modified crops. It will also be active in some areas long dominated by the United States such as software and semiconductor development and space exploration. China is also expected to become a leader in emerging technologies such as renewable energy sources ranging from solar and wind power to hydrogen and photovoltic batteries. There is the belief that by 2050, China will have replaced the United States as the biggest player in the world of science.

What is most notable is the rate at which China’s numbers are growing. Its R&D expenditures grew to 1.2 percent of the country’s GDP (gross domestic product) in 2004, up from 0.6 percent in 1995. This represents a growth rate double that of China’s economy as a whole.

The world’s high-tech R&D giants understand the potential in China.

Microsoft, Motorola, Intel and other firms are expanding their mainland research facilities to engage in first-class research. As the government pushes to build an innovation-driven economy, its leaders are looking to these kinds of companies to help clear the way.

When Microsoft started a research centre in China seven years ago, sceptics considered it an impossible mission. Today, Microsoft’s Beijing centre employs 200 people, 40 from overseas, working on advanced technologies. Among the innovations there is a digital pen that allows composers to write their music on paper but with the composition appearing immediately on their personal computers and there is a new type of software that lets computer-game players use a video camera to inject themselves, in real-time, into the virtual world of a computer game.

The German software giant SAP has announced that it will build a Chinese R&D operation in early 2008. Motorola, which already has 16 R&D centres in China, has announced it will open another, focusing on wireless technologies, in Hangzhou, Zhejiang Province.

Intel recently opened a new R&D centre in Shanghai. Its Beijing centre has 80 researchers; it is expected to expand by 20 percent in 2007, according to John Du, director of the Intel China Research Center in Beijing. “Because China is the leading emerging market, China is a very good, strategic place for Intel to understand user model trends,” he said. “Having a lab here provides the huge advantage of access to the local requirements.”

Of course, China faces plenty of obstacles. Real innovation depends on many different, yet interdependent factors. It depends on having talented people––not only scientists and skilled technicians but also entrepreneurial thinkers––who are capable of networking with companies, governments, universities, suppliers, and customers, and who are able to work across disciplines, according to the Council on Competitiveness’ 2005 National Innovation Survey and Going Global reports.

The World Economic Forum’s China Business Summit, held in Beijing in September 2006, was stirring with its talk of innovation and with panellists highlighting sharp increases in Chinese patent applications and discussions about the strength of mainland companies. But there were also some questions. In initial results of the WEF’s own competitiveness survey, China languished in 48th place in measures for innovation. Scores for country’s educational and health systems, higher education and public institutions were also poor, hovering below 60th place. WEF participants, representing a mix of private and public organizations, listed two areas that the Chinese Government and companies need to focus on to boost innovation in China: intellectual property rights and talent management.

But with all the possibilities and suspicions to contend with, is it possible for China to become an innovation-driven society by 2010?

The experience of Chen Tianqiao and Shanda would indicate that it is possible if a suitable business and regulatory environment favouring innovation and development is created. This, the country’s leaders say, is what they intend to do.