Highlights

Conference Overview

A wide variety of innovators and entrepreneurs descended on Tianjin this week for the Asia Society conference, “Innovation 2013: From Silicon Valley To China” – an invitation-only event that tackled a subject which has fascinated and vexed the Chinese leadership.

China has made innovation part of its national economic strategy, a step towards shedding its reputation as the low-cost assembly line for brilliant products designed by foreigners.  President Xi Jinping was quoted recently as saying “innovation-driven development” will “determine the future of our Chinese nation.” Rightly or not, great models of innovation and top-flight entrepreneurs – from Gates to Jobs to Zuckerberg – are still seen as a largely American phenomenon.

But innovation – and innovative thinking – were on view at the Tianjin conference, which produced three days of frank dialogue and exchange from leading entrepreneurs, business executives, and policymakers from both China and the West.  Asia Society Board Co-Chair Ronnie Chan and newly-minted President Josette Sheeran opened the conference Thursday. “We do not define innovation in a narrow sense,” said Chan. “Many people think of technology.  That’s part of it.  But there is also innovation in manufacturing, and processing.  In venture capital. Banking. And much more.”

Sheeran declared that “Innovation-driven development will determine our future” – and reeled off several remarkable facts about innovation in China: 25% of the global R&D workforce is now based in China; the country spends an estimated $500 on R&D every day; in the last 15 years, China has grown from having 1% of worldwide gene sequencing capacity to nearly 50%; and today China is home to the world’s fastest super computer. As Sheeran put it, “It is no longer a question of ‘if’ China will be a force in innovation, but ‘at what scale?’ Can China adapt some of the things that have allowed Silicon Valley to thrive, including its famed ability to accept failure?”

In a keynote address, Ethan Allen Chairman and CEO Farooq Kathwari – who emigrated to the U.S. four decades ago – told the conference that one American edge involved the opportunities afforded new arrivals to the country. “Most immigrants are entrepreneurs,” said Kathwari.  “They would not leave their home and go far away otherwise.  As an entrepreneur your instincts are: if an opportunity comes, you take it.  Opportunities come to most people, the difference is who takes it.  And of course you have to be lucky.”

Suggestions for Asian innovators came from many corners.  Zensar Technologies CEO Ganesh Natarajan said the world’s best companies “are those that do not curb youth innovation, but allow it to flourish”; the former Taiwanese Finance Minister Christina Liu said that Asian education – while famously rigorous, needed to become more flexible to spur innovation.  And – looking at the power and promise of innovation and entrepreneurship in China, ZhenFund founder Xu Xiaoping said a blending of Chinese knowledge and global ideas was the key.

Participants did not shy away from key challenges to entrepreneurship in China – ranging from a culture that has generally not supported individual innovators, to the difficulty of securing capital for entrepreneurial projects.  The conference also featured full panel discussions on the troubles afflicting the “China Brand”, and issues surrounding intellectual property (IP).

On the brand question, Claude Smadja, President of Smadja & Smadja Strategic Advisors, said Chinese companies suffer “because the image of China is mass production, in many cases deficient quality, whether real or from bad examples.”  Lu Xiongwen, Dean of Fudan University’s School of Management, said it would be “another 20 years” before Chinese brands can go global.

As for intellectual property, filmmaker and Orb Media Group CEO Peter Shiao spoke of being a victim of IP theft, seeing bootleg copies of his movie for sale in China before it was released. “Those of us who choose to be in the IP business have already included thievery as part of our business model.” The solution, according to Shiao: “great product. When you come up with something truly compelling you set a new standard that is very hard for others to emulate.” Wang Ningling – the Shanghai-based Managing Partner of Finnegan, Henderson, Farabow, Garrett & Dunner, offered a stark warning about the absence of clear IP laws, particularly for R&D-intensive industries such as pharmaceuticals in China. “Without IP,” she said, “such industries cannot survive”.

For all the concerns and pitfalls, many are thriving in this space in China – the figures given by Asia Society President Sheeran make the point.  As to the question, “Can China Create Its Own Silicon Valley?” (the title for another conference panel), many were bullish.  A Silicon Valley pro – Silicon Valley Bank Chairman Ken Wilcox – offered this advice: “Venture Capital is the most expensive way to finance innovation, debt is the most risky way.  The two combined is optimal.”  Added Richard Kramlich, CEO of NEA Management: “Innovation is 1% inspiration, 99% perspiration.”

As for the emergence of a Chinese Bill Gates, or Steve Jobs, that, too, may be simply a matter of “when” rather than “if.”  Perhaps, somewhere in the Asia Society gathering at Tianjin – he (or she) was already there.

Panel 2: Is China Making Progress on Intellectual Property?

Can innovation be taught? Does China have the necessary protections to make innovation worthwhile? Setting the stage for a discussion on the future of intellectual property (IP)—a major issue both within China and between China and the West—moderator Orville Schell asked a panel of experts what impediments currently exist to creating an innovative economy in China, and what recommendations they have for creating an environment where innovation is both encouraged and protected.

Former president of Hong Kong City University, H.K. Chang, says that while there are no inherent impediments to Chinese innovation, there have also been no major breakthroughs recently.  Historical, social, and psychological aspects unique to China are all factors in creating an innovative environment. Strong parental influence, for example, is impeding the inventiveness of Chinese children. Wang Ningling, an attorney specializing in intellectual property, also saw the communal view of property in Chinese culture as a factor in current attitudes towards IP.

Kenneth Jarrett, President of the American Chamber of Commerce in Shanghai, was cautiously optimistic on China’s advances in intellectual property protections.  While acknowledging that some progress has been made, he still saw much work left to be done. A rise in patent applications, he cautioned, is not necessarily indicative of progress on the IP front, as issues of stolen trade secrets and cyber security lead to increasing international tensions.

Filmmaker Peter Shiao of Orb Media was himself a victim of IP theft, finding bootleg copies of his yet to be released film for sale in China. “Those of us who choose to be in the IP business have already included thievery as part of our business model,” he said.  “We leverage it.”

When asked how to respond to IP theft, Shiao’s response was simple—“great product.”  “When you come up with something truly compelling,” Shiao said, “you set a new standard that is very hard for others to emulate.”