As its economy expands, the Chinese government has set out to push the country towards innovation.

As VOA reported last year, companies building or processing goods in China have already begun moving inland and away from the coasts because of rising wage demands and labor unrest.

As part of its efforts to keep pace with new economic realities, Beijing came out in November with a document called "The National Patent Development Strategy." The document sets a goal of two million new patents by the year of 2015.

John Kao, Chairman of the Institute for Large Scale Innovation in San Francisco, believes  China understands it is very important to move from being a low cost commodity factory for the world to being the creator of new products and experiences.

What does this mean for the United States?

Ira Mellman spoke with Dr. Charles Vest, President of the US National Academy of Engineering and past President of MIT, the Massachusetts Institute of Technology.

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The author of Innovation Nation and other books told VOA he thinks China won?t copy the U.S., but rather follow its own path towards innovation.

Kao: I think China realizes that it is very important for its future to move from being the low cost commodity manufacturer of a wide range of goods. China is today the factory for much of the world. It now wants to make a transition to higher value-added, which ultimately has to do with innovation, meaning creating new products, services and experiences that they can own.

Q: Do you think China is going to copy U.S. innovation, such as copying Silicon Valley, or do you think they?re going to try to come up with a system of their own?

Kao: I think every country, by definition, has its own approach to innovation. There?s no such thing as a ?one size fits all? approach. China is interesting because, on the one hand, innovation is very much a part of the five year planning cycle which has its roots in the industrial era in the heyday of the Communist Party following 1949. But at the same time, the forces of entrepreneurship have been thoroughly unleashed. You have clouds of entrepreneurs pursuing their own individual idea of business bliss, so to speak. So China represents a curious hybrid between a top down state driven innovation agenda on the one hand and the traditional independent entrepreneurial ethos on the other. There?s a famous Chinese saying that ?It?s better to be the head of a small chicken than the tail of a big cow.? There?s a curious blending of streams of culture and politics and mentality into what the Chinese system is today.

Q: There is a fear, as I?m sure you?ve heard here in the United States of China taking over just about everything from the United States. Is that valid in this case?

Kao: There is no doubt that the United States, which was alone on the world stage of innovation in the post World War II era now has to share that stage with many countries. To the extent that China has money and talent and willpower and scale and many other advantages it is going to be a big player on the global scene. But America has some elements that the rest of the world is short on.

For instance, we are the most tolerant society when it comes to big, new ideas, when it comes to uncertainty. [Also] when it comes to tolerating the risks of entrepreneurial activity and also [a] forgiveness of failure, which is a hallmark in virtually no other country that I?m aware of around the world. Most countries, even in Western Europe have significant penalties for failure. We all can imagine being an entrepreneur and starting a business but there are no guarantees.

Q: So I take it that you think that China is willing to take on that possibility of failure.

Kao: There are many seasoned entrepreneurs in China who understand that there are no guarantees. What is less clear is the state driven innovation sector and how it will look at failure.


Q&A With Dr. Charles Vest, President of the US National Academy of Engineering and past President of MIT, the Massachusetts Institute of Technology

Q: What is your reaction to China?s decision to try to grow its innovation?

Vest: First of all, I think we should celebrate the fact that around the world, including in China, economies are growing, education is improving and investments in research and development are now spread much more evenly around the world. So, on the whole, this is a good thing. However, it is putting U.S. leadership and the long term quality and vibrancy of the U.S. economy in serious jeopardy, I believe. We are still the most innovative nation on the globe, we still have the world?s leading research universities, we still turn out more good, basic research at the cutting edges and are better at moving them into the marketplace than anywhere else.  However, if you look at the growth in China, the growth in some other countries, unfortunately, the lack of growth, in fact going in the wrong direction in the U.S. in terms of many metrics, I think strategically, we?re starting to get in trouble.

Q: To what metrics do you refer?  Is it education?

Vest: The primary metrics we need to look at in terms of, I believe, to evaluate in which direction the U.S. is moving all have to do with the quality of our education to the extent of our populace being educated and our investments in fundamental research and development. After all, human talent and new knowledge are the things that undergird innovation and economy. So, there are a number of things we might look at.  The U.S. currently ranks eleventh among the 33 OECD countries in terms of the percentage of our young work force that are high school graduates or better. We are sixteenth in that group in college completion rates. We are twenty seventh among developed nations in the proportion of our college graduates who earn degrees in science and engineering and the World Economic Forum, while it?s somewhat qualitative, ranks us forty eighth in terms of the quality of our math and science education at the K-12 level. So these things cannot persist and yet expect us to lead the world in innovation and bringing out new products and new services. The challenge to the U.S. is that it?s kind of a double whammy. Every nation in the world, including China is going to have to compete in the world marketplace. The U.S. is the only country that has to simultaneously compete in the new world marketplace and knowledge age and also have a quality of life like ours to maintain. This is going to be hard work, and it?s going to take an investment in R&D. It?s going to take this nation getting serious about providing a world class education for our women and men and it?s going to mean that we are going to have to increase our investment in R&D and keep our entrepreneurial spirit strong.

Q: One thing that China has done is to build an entire nationalistic movement behind its technological advances. Do you see that here, still?

Vest: I think we have lost that edge. We?ve unfortunately gone through a number of years in the political and public opinion spheres of being very negative and, I think, being very uninspired. I think we just have to start believing in ourselves and our greatness again. It hasn?t gone away; we?re still the same country, we still have free markets, we still have democracy, we still have a diverse population, we still have great higher education, we still have great higher education at the research university level. And I think we have to get ourselves inspired again and do what has to be done. After all, we?re not doing it for ourselves; we?re doing it for our children and grand children. That?s maybe a little different tone than one observed in China today, but I think belief in our own greatness and acting accordingly is what we have to do.

Q: Is there a basis for fear among Americans when it comes to this?

Vest: Well, there certainly is a basis for fear in that, at the moment, we seem to be stagnating for a number of reasons and we look to the East and we see this huge country of China that is on the upswing and I think that ought to send a chill up our spine. But it doesn?t mean that it is something we can?t meet. We?re still on top of the mountain. But we?ve got people chasing us up rather quickly and we have to be sure we stay there.