Rodney Johnson - Without Warning

China is easy to praise, and equally easy to dismiss. Over the past decade they’ve become the go-to country for everything from textiles to the manufacturing of hi-tech gadgetry. And of course, they’ve also been the source of numerous product recalls. Generally speaking, China has been the place for low cost products. However, China has bigger plans, and a huge desire to move up the food chain, so to speak.This week, Business Week ran an interesting article titled The China Hype suggesting that China is coming up short when it comes to innovation - the catalyst for its new future. It states:

As the West struggles to recover, China is on track for 8% growth this year and is about to overtake Japan as the world’s No. 2 economy and Germany as the No. 1 exporter. Now the mainland is charging ahead in new industries, unveiling homegrown airliners, electric cars, and high-speed trains. But delve beneath the muscular statistics and hype about advances in strategic industries, and China doesn’t seem so prepared to catapult into a role of global economic leadership. Experts familiar with highly touted Chinese achievements such as commercial jets and high-speed trains say the technologies that underpin them were largely developed elsewhere. There is no Chinese Sony, Toyota, or Samsung on the horizon

By Beijing’s own admission, the economic model that has powered China for three decades can no longer be counted on to move it forward. The mainland has prospered largely through construction and by exporting all manner of consumer goods churned out in low-wage factories; workers parked their savings in state-run banks, which then loaned the money to companies to make more stuff. But technology and managerial knowhow came mostly from multinationals, and the costs—pollution, decaying social services, and a yawning gap between the urban rich and rural poor—were largely ignored. Though that model has fueled phenomenal growth, Hu and others now call it “unbalanced” and “unsustainable.”

I find it interesting that a similar scenario played out 20 years ago, except then it was Japan. Japan became an economic giant following World War II. Names like Sony and Panasonic and Toyota emerged. Large trading groups formed. Management philosophies were developed and implemented. Japan was the country to fear, because it appeared they had it all.

Over the past decade, China has become the new Japan. They have cheap labor. They have a growing economy. They have… But behind it all, China has a multitude of challenges. And as the article points out, they’re simply not an innovation culture and this will be difficult to change. As I stated in an earlier entry, China feels like its a constant Without Warning event waiting to happen.