China’s robust economy has lost some of its pace this third quarter, dipping below state-mandated expectations for the first time since 2009. Chinese President Xi Jinping spoke about the country’s five-year economic plan, citing technological breakthroughs and innovation as key targets.
The long-term plan could spur the economy, even temporarily. The President’s words may be all smoke and no fire in an attempt to invigorate the stagnating economy. It does unmistakably make for headlines.
Innovation. That’s what Chinese President Xi Jinping is going for. Setting a marker for 2030, the 13th Five-year plan (2016-2020) is looking at a “series of strategic science and technology breakthroughs” by the end of the next decade, reports state-run publication Xinhua.
Innovation includes projects that entail aviation engines, deep space and deep sea probes, brain science, health science, intelligence manufacturing & robots, and even quantum teleportation.
Citing the need to “break free from external dominance,” pointing to technologies and innovation in the West, President Xi is looking to usher in an age of home-run innovation rather than relying upon absorbing and even copying existing technologies and ideas from elsewhere.
State-sponsored hacking and cyberespionage of corporate practices and secrets are habits that China has long been accused of. Things came to a head during President Xi’s first stateside visit this year. In the interest of good diplomacy Obama’s administration decided against sanctions and the United States and China signed a cyber-pact to avoid stealing each other’s corporate secrets, even though China has once again been accused of doing so, after the agreement of the pact.
In Xinhua’s report, President Xi directly attributed the Argonne National Laboratory, United States and the Helmholtz Center, Germany as examples of national laboratories tasked for research, science and innovation.
President Xi wants China to move from the stage of “catching up.”
The Chinese Innovation Space
China is home to massive consumer companies that have successfully scaled affordable technology to start a technological revolution in the country. Companies like hardware and networking giant Huawei is seen as a success. Google chose the Chinese phone-maker for its latest flagship Nexus phones and has in the process, opened the doors of the U.S. market to the Chinese company. Chinese e-tailer Alibaba quadruples Amazon’s shipments in scale every day.
A McKinsey stat revealed China to spend nearly $200 billion on R&D alone. That’s 2 percent of the entire country’s GDP and second in the world to spend on research and development after the United States. The Financial Times also revealed that China has more than 835,000 patent applications (a figure from 2013) while the United States has 570,000.
Despite the clear strides made on the surface, there is a counter-argument with critics claiming there really isn’t much innovation going around in China. Or, innovation has predominantly meant copying, so far. The argument even gains merit with President Xi’s latest rallying call for innovation from within the country.
Despite its massive manufacturing capabilities, China still hasn’t built an internal combustion engine that other countries trust enough to import.
The Chinese scientific society and its very culture is burdened with plagiarism, FT adds.
In an article published in the Chinese Ministry of Science website, Chen Jiaer, former president of Peking University wrote:
We often blindly pursue publishing a large number of articles, being cited in the top journals. We don’t really look at what achievements are being made in pushing back the frontiers, or contributing to national economic development.
China’s middle-class is a tremendous resource that has helped the country become the massive manufacturing hub that it is now but low wages poses its own problem during a time of steady inflation. It doesn’t help that the inflation dial is rising primarily due to increased food prices.
China and Bitcoin
The economic situation in China is even fueling a surge in Bitcoin price. Record outflows and an exodus of cash from investors locally and externally has resulted in a total of $669 billion departing the country with the added revelation that China holds less gold than expected in its reserves.
China remains unperturbed. The Central bank slashed its rates and stepped up market reforms along with assurances to home-grown companies despite the vacating money. President Xi revealed innovation and investment into innovation as key indicators to propel China’s economy and well-being further.
Chinese stocks went up four percent following the reveal of the latest five-year plan yesterday. It remains to be seen if China continues to think that a shake-up to the foundation as a means to foster innovation is the way ahead.
Speculation aside, China continues to account for 80% of the Bitcoin transactions in the world and the recent surge in Bitcoin prices attests to China’s influence in the cryptocurrency. Bitcoin adoption is spreading among its people at a time when the Chinese yuan is falling. The Chinese Cyberspace Administration even acknowledged the potential of Bitcoin, revealing that “it can no longer ignore its [Bitcoin’s] revolutionary changes.”
China has a history of innovation on its side. President Xi’s claims may be bold and yet warranted. After all, this is the culture that gave the world the compass, the printing press, gunpowder, and paper among other innovations.
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