A distorted picture of China’s competitive landscape obscures the real story of innovation and productivity improvements that have radically reconfigured entire industries such as automotive, energy and information technology. Although we tend to focus on the influences of state capitalism and particularly its monumental infrastructure investments, in China, increased competitiveness has really more been a consequence of orthodox and conventional investments in performance and productivity improvement, integration into the global supply chain, the creation of strategic alliances, and relentless innovation at every stage in the value chain.
The impact of these investments has been that China continues to outperform expectations and a far larger number of Chinese firms are now among the world leaders than anyone would have anticipated even 5 years ago. Such firms as the computer maker Lenovo, appliance giant Haier and auto maker Chery are now global success stories that are emblematic of China’s new status as the world’s second largest economy. Because the dominant stimulus for accelerated growth in China has been private entrepreneurship, Western corporations and governments can learn lessons from China’s success. Policy makers would do well to understand how China’s policies have encouraged both rural and industrial entrepreneurship and how its support has been pervasive and ubiquitous.
In the West, the objectives of public policy have been to support a much smaller, elite class of entrepreneurs and, perhaps more importantly, we have managed no substantial government reform or created the suitable institutional arrangements to more effectively support an innovation-driven economy. While in the West we deliver speeches about becoming nations of entrepreneurs and innovators, China consistently continues to deliver on that objective.