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Why China Needs to Boost Innovation

Manufacturing will only take China so far.

Yuanqing Yang | Lenovo

Recently I attended the APEC CEO Forum in Beijing and shared my thoughts on what should drive the growth of China’s economy for the next 30 years. These ideas generated a lot of discussion in China’s business community so I would like to share here as well.

It’s probably not far off to say that China has the most advanced manufacturing capability in the world, and by leveraging this strength China’s economy has grown for 30 years. However, will China be able to sustain its growth this way indefinitely? The answer is no. What’s more important now is innovation.

I believe China needs to gradually turn to a new track where businesses become the innovators. Government needs to create fair and transparent market regulations, be able to protect intellectual property, and build a friendly and efficient environment for investors to encourage businesses to innovate. Businesses then will have the backing to invest in innovative products and bring them to the market in the most creative way.

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Innovation is not just about products or technology. It is also about a company’s business model. Alibaba is a great example. By integrating its incredibly successful advertising platform with services like Alipay, it has enabled sellers and buyers to effectively connect and do business.

Nowadays many of China’s internet companies such as Tencent and Baidu are starting to deliver groundbreaking experiences as well.

In fact, another source of innovative ideas came from leveraging the strengths in manufacturing. Actually, many western companies outsourced manufacturing to Chinese companies, so that they could focus on branding and innovation. Gradually, some of them decided to outsource not only manufacturing but also innovation.

When a company maintains a deeper relationship with their suppliers/component manufacturers and close collaboration with them, it will get to benefit from the latest technology of the suppliers.

For example, we get to use the latest glass technology from a key supplier on our products because we work closely with them and know what’s their newest and best thing in the pipeline. This is actually a great advantage that many Chinese companies have and can leverage.

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Will China be able to sustain its growth this way indefinitely? The answer is no. What’s more important now is innovation.

In addition, strong manufacturing and supply chain expertise enables a company to quickly and profitably execute on innovative designs. The manufacturing challenges are considered and respected during the design process, and this gets a company closer to the edge of what’s possible.

We all know China can build. It’s now time for Chinese companies to innovate.

Even better, I believe the future of many Chinese companies lies in this optimized balance between innovation and efficiency, and this balance can be a unique advantage based on China’s years of dedication to “making stuff”.

And the next step is to build global brand awareness and influence. When a company is able to put all three elements together – efficiency, innovation and global brand influence – it’s well positioned in the global markets.goldbrown2

Published in collaboration with LinkedIn

This article first appeared on the World Economic Forum blog on December 2, 2015 and was republished with permission.

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Yuanqing Yang is the Lenovo Chairman and CEO

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