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Will China and India Develop New Technologies?

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July 06, 2005

Will China and India Develop New Technologies?

Peter Coy

With some exceptions, China and India have been "fast followers" in technology rather than innovators. Will either or both of the countries become leaders in technological innovation? And if so, in what fields?

11:38 AM

Imperial China accounts for key inventions(e.g., the compass, the gunpowder) but has failed to develop the scientific foundation that would permit a solid innovation stream. The country is also hampered by its Communist legacy which sought innovation by decree, by an education system which has traditionally encouraged rote learning, and by lack of IPR protection (which reduced the incentive to innovate).

Today, Chinese firms are by-and-large followers and imitators rather than innovators. The country's R&D expenditure of about 1% of GDP is low by developed nations standards (though it buys more given scientist wage levels and grows with the Chinese economy). India's R&D spending is even lower.

On the positive side, the Chinese government is undertaking educational reform and is enticing the best and brightest among its overseas graduates and scientists to return home (India will probably try at one stage to do the same). The Chinese government also continues to provide incentives for the transfer of technology and know-how, and R&D intensity among US China affiliates is three times their global average.

The bottom line: The jury is still out. Success will mean that China may become a global leader in certain technologies; failure will imply continued dependence on the foreign investors who account for the bulk of China's technology exports.

Posted by: Oded Shenkar at July 6, 2005 01:09 PM

It is hard to imagine that either China or India will be a real economic innovator in the next 5-10 years. The innovation has come from developed countries for a long time. China and India have their hands full in building out and capitalizing on the opportunities in mass production of goods and services tha are so plentiful. The path of least resistance in China and India to riches and rewards is in this build-out. The companies that will lead in innovation likely will remain in the developed west.

Posted by: Donald Straszheim at July 6, 2005 07:15 PM

Both China and India are the latest of “late comers” in the modern history of industrialization. Thus both are likely to encounter some kind of “late-comers’ effects:” they have benefited from, and will continue to take advantage of the newest technological innovations available. By leap fogging ahead of the learning curve, the two countries will build their economies first of all as “fast followers,” as Japan and Germany did long ago. In this regard, China is ahead of India, and has displayed substantial vigor and sophistication in dealing with technology transfer and innovation in the past 25 years. Another late-comers’ effect facing China and India is the fact that they were, and to a certain extent still are, at the bottom of the innovations ladder, with a weak technological base, lack of capital input for R&D, short of expertise in all areas, and facing a virtual monopoly of high-tech areas by the advanced industrialized countries. Therefore, they have no choice but to start with being followers rather than innovators.

But that does not mean China and India will stay at the rank of followers forever or even for long. The Japanese development path earlier, and the Chinese experiences recently have demonstrated that it won’t take long for late comers to have a competitive edge in many areas of innovation. The Chinese leadership has been keenly aware of the importance of innovation in its efforts to modernize the Chinese economy and to catch up the West. In the first decades of the PRC, “reverse engineering” was the method to unlock the technological secrets from abroad. From the 1980s, China’s “open-door” policy has become the means of absorbing foreign technology and know-how. The Chinese are especially eager to get technology transfer in their FDI and joint-ventures. The rationale is that unless you have the latest available technologies in a given area, you will not be able to make further innovations. There are clear indications that India is about to do the same.

So one major indicator of whether either or both of the countries will become leaders in innovation is the extent of their engagement of other advanced industrialized countries and the level of FDI they can attract. So far China is doing more than better but India is likely to follow closely. Another major measurement is the level of basic and professional education of its population. While China is much better at providing basic education, India has a strong higher education and with the advantage of English language, although it has a long way to go for its basic education. China, however, has a huge overseas Chinese community and a growing army of overseas students that compensate for its weakness in post-secondary education. While the future is promising, neither China nor India will have much luck in producing Nobel Prize winners in major science categories in the near future. But to put things in perspective, with a per capita GDP of $1,000 or less and so many living in deep poverty, China and India may settle for being “fast followers” if they can maintain a good pace of economic growth to meet the challenge posed by the their huge populations.

Posted by: Wenran Jiang at July 7, 2005 03:16 AM

Yes, it seems unlikely that major new, world-changing, technologies will come out of either India or China in near future. However, what is crucial for defining our place on the world stage is the intensity of technological innovation at the ground level, in harnessing renewable resources for fuels and dispersed industrialisation that generates livelihoods.

China appears to have an advantage in this sphere. It was able to tap its polytechnic network to design and maintain small, mobile wind based electricity generators in the 1970s. It has created brilliant modern applications of its bamboo resources.

Similar technological talents are plentiful in India but they are mostly expressed in local level initiatives that are not up-scaling in a serious manner. A serious infusion of social venture capital, with supportive government policies, could proliferate innovative technology initiatives and transform India's social and economic base. This would make it a still bigger market and more competitive economy

Posted by: Rajni Bakshi at July 7, 2005 07:33 AM

Though India and China have been adaptive and not innovative, my sense is that we will see a change in that. First of all, we will witness a substantial amount of process innovation coming from these two countries - some of these will have global impact. We will also see a lot of business model innovation. This will be followed by product and technology innovation with a lag. Large MNCs setting up their own center and the flow of VC money will create a potent generation in five years time.

Meanwhile, we are beginning to see the spirit of innovation coming in from a whole bunch of non-traditional folks. Today Indians make films and write books or design dresses with a global audience in mind and they are selling. Heard about Monsoon Wedding? Bend it like Beckham? Jhumpa Lahiri or Arundhati Roy or Ritu Beri? I think, these are important as "proofs of concept". These are coming from a bunch of next-gen folks who are not given to incumbency. I see this as a key directional indication because innovation always happens within an eco-system. When we see a certain pattern in which flora is getting influenced in a rain forest, it is an indication of how we will soon see changes in the surrounding fauna as well. We seem to be on the cusp of things - Indians are getting in touch with the right brain.

A very fundamental requirement for the spirit of innovation to work is in the creation, nurturing and celebration of diversity. Different countries in the region will embrace that reality differently. As a result we will see degrees of innovation as we go along.

Posted by: Subroto Bagchi at July 7, 2005 09:37 AM

I am cautiously optimistic that India and China will become leaders in technological innovation over the next 10-15 years – they certainly have the right DNA. Clearly some of the best minds come from these two countries and they have been immensely successful outside of their countries, and have been at the front end of technological innovation from microprocessors to software. This would indicate that if India and China were to create similar environments, and more importantly markets, the intellectual capital these countries produce could become the innovators in their own countries. Of course, this is a lot easier said than done.

India and, in particular, China have a rich history of innovation which is well known – cotton production, iron casting, gunpowder, printing, porcelain, ship building to name but a few – but in more recent times they have been content to adopt and build on western technology.

Deloitte research has shown China is emerging as a key player in shaping technology standards – standards that could define the nature of global competition in the TMT sector for years to come. From operating systems and software applications to storage media, wireless comms and satellite positioning; Chinese government agencies and companies are looking to break the hold of the west on standards and are working to shape new technology standards.

In India, a number of technology companies from Motorola, Texas Instruments, GE, Intel and others have already established R&D bases besides software giants like Microsoft, Oracle and SAP. India is also rapidly becoming a key player in high precision automotive parts. Multinational corporations are increasingly relying on professionals in India for greater contribution higher up the value chain than they did even two years ago. This trend represents the start of India potentially being a leader in technological innovation.

Manoj Singh


Deloitte Asia Pacific

Posted by: Manoj Singh, CEO Deloitte Asia Pacific at July 8, 2005 02:43 AM

I am confident that China will become a leader in technology innovation in the 21st century. China has a history of innovation, peaked during the Ming Dynasty and started to decline. China has reached a new phase and is on its rise to prosperity.

Chinese has a background in research and innovation. In fact, Chinese researchers and scientists have contributed significantly to technological innovations in the west in the past century. China now has the economic power to support extenstive R&D, should be able to attract talent back and develop a new pool of talents. What China needs is a whole support system to ensure the inventions can be successful in the market place. Inventions need to be partnered wtih the right marketing approach (translating it to the right product, the test market, the right price, the right distribution etc) and the right management. With the growing sophistication and growing size of Chinese companies, I believe we will see China starting to lead in technological innovations in the 21st century. It is a natural and necessary evolution if Chinese companies are to become global and market leaders.

Posted by: Viveca Chan at July 9, 2005 03:38 AM

I believe China would be able to become a leader in technology innovation in the foreseeable future. The more than 300,000 engineers graduated every year, the so many high education schools across the whole country, the numerous emerging high-tech companies and enterprises, the heavy R&D investment from international corporations, and the huge market requirement are some of the strong bases that I can list here. For example, I am working in a research lab of Microsoft in Beijing, Microsoft Research Asia. We published about 10% of the total papers of the most influential conferences in IT industry, e.g. ACM SIGIR, ACM SIGGRAPH, and ACM Multimedia last year. Although the IP belongs to Microsoft, the people who did these belong to China. The innovation and its ability will finally spread and penetrate to the IT industry of China. Besides, the IT industry of China has also been making innovation in the adaptation of new technologies, in creating new user experience, and new business models. For example, the so popular use of mobile devices and the so hot short message service exhibit China's business innovation beyond the rest of the world. After all, the Internet, the most famous innovation in the modern society is innovative user experience of networks.

Posted by: Jiang Li at July 10, 2005 07:50 AM

Path-breaking innovations do not occur everyday and for those infrequent ones, both India and China have to go through their own learning and development process. Also both countries have too many low hanging fruit that they could pick purely on the basis of their low cost for them to really focus on technology that sends man to moon! The Chinese haven’t needed to anything path-breaking to be world leaders in toys. The critical drivers were low price points, scale and variety and the Chinese delivered these boundlessly. On the other hand, the Indian’s have done remarkably well in generic pharmaceuticals where critical drivers were high chemistry skills and quality manufacturing at low cost. Thus the point to take home here is that there is enough that they can do easily for them to start focusing on path-breaking innovation, just yet. They also need to go through their natural development process cycle and when they do, they will have their set of technological innovations. Meanwhile there is already some visibility of what might come in the years ahead from India.

Tata Institute of Fundamental Research (TIFR), India, has one of the world’s largest groups working on cutting edge research in String Theory.

India is among the six countries in the world with knowledge to build and launch satellites.

Texas Instrument’s Bangalore centre is responsible for over 30% of TI’s global patent filings.

About 600,000 students from India have been enrolled in US universities for higher education in the pat 20 years.

At current pace of growth, this would be over 2m in next 20 years. 9 Indians were among the top 100 innovators under the age of 35 in 2004. – Technology Review MIT’s magazine on Innovation.

Telecommunication and Networking group ( TeNeT) at IIT Madras has developed an ATM machine costing $1100 as against $10,000 for ATM’s supplied by global giants such as NCR and Diebold.

India is among the few countries in the world to build a Supercomputer - Param with peak power of 100 GFLop.

According to the American Association of Physicians, 35,000 of its members are of Indian origin and 14 of every 100 researchers in U.S. pharmaceuticals laboratories are from India.

Over 20 nanotechnology patents are filed from India annually. Indian nanotechnology scientists are working on nanotechnology applications including cancer treatments, heat reflective glass coatings, aerospace materials, TV screens etc.

Institute of Bioinformatics at Bangalore has identified 43 genes which never predicted by any group globally.

Centre for Cellular and Molecular Biology has developed an Indigenous gene mapping system.

With a headcount of over 2000, Intel’s India development centre has now overtaken Israel which has 1700 people.

Posted by: Madhav Bhatkuly at July 13, 2005 06:26 AM

The general consensus from the discussion above appears to be that both China and India may not be in the forefront of immediate and dramatic new technologies but will given their historical tradition innovate around "appropriate" and "relevant" technology. This is inevitable.

Take drugs. With dramatically lower costs of R&D the hub of research is shifting here. Take Technology. This is a given in India and China. With increasing production of tech products especially in China the inevitable innovations will occur.

Both India and China have developed several low cost technologies such as medicines, agricultural methods/implements, IT/Tech products, albeit with collaborative support from the outside world. But then in in interdependent world is that not the way forward ?

The key question is will India and China provide breakthrough technology solutions based on R&D in the near to medium term given the economic and social imperatives of development.

Posted by: Saurav Adhikari at July 15, 2005 03:26 AM

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