Walking through Beijing’s Tiananmen Square, I was approached by a student who invited me to see her art school’s exhibition inside China’s National Art Museum. I figured, Why not?

Though much of the student work was technically accomplished (yes, it was all for sale to tourists), nothing grabbed me. Then I saw a provocative sequence of boldly colored, sharply angular paintings that looked like nothing else. I bought one. By chance, the young artist was there. His English was good, so we talked about his work and ambitions.

Trying to be helpful, I suggested he post his work on the school’s Web site so that potential collectors from around the world could get a taste of his talent. The fellow shook his head and stared at me as if I were an idiot. “If I post my pictures on the Internet,” he said, “everybody will then see my style and copy it.”

That comment reveals everything one needs to know about how aspiring innovators think in cultures where copying is a legal, social, economic, and creative norm. China is a country whose economy doesn’t suffer from “not invented here” syndrome. To the contrary, the Middle Kingdom is a plagiarist’s paradise. Imitation is not just the sincerest form of flattery; it’s China’s industrial-development business model.

So you’ll find the latest in pirated DVDs hawked by sidewalk peddlers loitering near Beijing’s better hotels. Street vendors provide the finest counterfeit brand-name merchandise from all over the world for pennies on the dollar. Indeed, China’s burgeoning “gray market”-unauthorized production runs and off-the-books sales of otherwise legitimate quality goods-enjoys seemingly irrepressible growth.

But perversely, its cavalier regard for intellectual property is precisely why the world’s most populous nation is destined to become a global innovation juggernaut. This overwhelmingly copycat culture is rapidly developing an infrastructure for innovation that stealthily but sturdily complements its evolving world-class manufacturing infrastructure.

“We’ve all become so dependent on Chinese manufacturing that we’ve lost the ability to threaten lawsuits for loss of business when they get around to going into business against us,” Haysun Hahn, a consultant at trend-spotting firm Futuremode, recently told a conference of U.S. outdoor-apparel companies. “Right now, they’re making minor changes in the ideas they’re ripping off from you. In three years, those changes won’t be so minor.They want to innovate. They may not be ready to launch their own global brands, but some of the manufacturers I’ve met are ready to redefine yours.”

More than any other country in the world, China is about the diffusion of improvements in production processes rather than improvements in end-user technology. Chinese industrialists-and postindustrialists-are on a long march to turn low-cost manufacturing capacity into faster-growth innovation capability. This doesn’t mean cutting-edge Chinese companies will mimic Western industrial history and adopt billion-dollar R&D budgets; after all, neither does Dell. Breakthrough inventions may require expensive research, but innovations that make products cheaper and easier to sell anywhere in the world do not. By tapping into the educated but underemployed work force in China’s countryside, for example, leading domestic cell-phone manufacturer Ningbo Bird builds nearly as many handsets in China as foreign competitors like Nokia and Motorola-and at lower cost.

China desperately needs advances that generate jobs as well as profitability. Remember, China has a huge demographic Damocletian overhang of unemployed young people. Officials predict that in the next three to five years, Chinese cities and towns will have to provide job opportunities for some 22 to 23 million new workers annually. In other words, unlike Japan and the Asian high-tech “tigers,” China has to exploit its economies of scale in ways that will soak up the tidal wave of human capital that threatens to flood its labor marketplace. Can that be done with an industrial base that overwhelmingly defines itself by how well it emulates the innovations of others? I don’t think so. Neither does a single Chinese PhD I’ve spoken with in Beijing, Shanghai, or Singapore.

Innovators and entrepreneurs who think of China as a “build to order” hub of the global supply chain aren’t wrong; they’re just being overly simplistic. Demographic, industrial, economic, and, yes, technical trends all point to a China whose economic growth is dependent not just on its low-cost appeal but on its accelerating ability to tweak, enhance, and build upon the innovations of others.

Tomorrow’s best brands may not be Chinese, but the most intriguing brand extensions-and brand competitors-won’t just be “Made in China”: they’ll be designed in China, as well. How will we know? Because we’ll be copying them.