Skip to Content

China’s Challenge

If China wants an innovation-based economy, it will need to make political and institutional changes.
January 2, 2013

Since 1978, the Chinese economy has seen phenomenal growth. Whether it can be maintained is unclear. The country’s export growth is decelerating quickly, and China already annually invests an amount equivalent to about half its GDP in assets and infrastructure—probably a higher proportion than any other country in peacetime. Now that China has completed its once-in-a-decade leadership transition, its leaders should be preparing to replace the rapid-growth model of the last three decades with one that requires less investment and is less reliant on cheap labor to provide a competitive advantage.

Yasheng Huang

In 1994, China could drive growth by copying technology from other countries. Political features such as the rule of law, intellectual-property rights, labor rights, and democracy were less important, even a hindrance. But as a country gets richer, innovation, productivity, and domestic entrepreneurs become more important. The problem is not that China doesn’t value science and technology. There is no shortage of expertise—many Chinese leaders are trained engineers, and the country invests roughly 2 percent of its huge economy in R&D, a level attained by only a few fairly rich countries. But research shows that these massive investments have had far less impact than one would expect.

One reason has to do with the environment in which Chinese research takes place. Universities in China are tightly controlled by the Ministry of Education. In comparison to their fiercely independent counterparts in the West, Chinese professors are like company employees. Research projects are often directed from the top down rather than being initiated by professors and researchers. The dissemination of research findings often has to take a back seat to the political need to maintain “stability.”

Chinese leaders want economic growth to come from innovations based on technology and science—a laudable goal. But it can’t be achieved by simply adding a massive dose of R&D spending to China’s current growth model. Technology-based growth requires protection for intellectual property, freedom to think and challenge authority, and a government with limited reach and power. In other words, it requires Western institutions.

As the second-largest economy in the world, China needs to prepare for this institutional transition. It will require vision, political courage, and more than a tweaking of the existing system. Does the new leadership have what it takes to move the country in that direction?

Keep Reading

Most Popular

A Roomba recorded a woman on the toilet. How did screenshots end up on Facebook?

Robot vacuum companies say your images are safe, but a sprawling global supply chain for data from our devices creates risk.

A startup says it’s begun releasing particles into the atmosphere, in an effort to tweak the climate

Make Sunsets is already attempting to earn revenue for geoengineering, a move likely to provoke widespread criticism.

10 Breakthrough Technologies 2023

Every year, we pick the 10 technologies that matter the most right now. We look for advances that will have a big impact on our lives and break down why they matter.

These exclusive satellite images show that Saudi Arabia’s sci-fi megacity is well underway

Weirdly, any recent work on The Line doesn’t show up on Google Maps. But we got the images anyway.

Stay connected

Illustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at customer-service@technologyreview.com with a list of newsletters you’d like to receive.