At China’s annual meeting of its state-controlled legislature on Thursday, Premier Li Keqiang admitted that the country’s giant economy faces a “formidable” future. One major reason, Mr. Li said, is that China’s capacity for innovation is still “insufficient.”
Many countries, not just China, are struggling in the face of economic slowdown to boost their innovative entrepreneurs, who need both freedom and resources to come up with ideas that create new markets. In Germany, for example, officials are proposing long-term tax breaks and easier access to capital for start-ups. (Only a quarter of Germans see themselves as potential business founders, whereas almost half of all Americans do.) In Japan, the government plans special zones where foreign and Japanese entrepreneurs can start businesses without much red tape.
The most critical step for innovation is the need to remove obstacles that might hold back those who would invent the next iPhone or Uber or create the next giant tech firm like Alibaba or SoftBank. Often the biggest obstacle is a person’s fear of failure or the potential shame in having a fresh idea squashed from the get-go. Entrepreneurs need to be able to challenge old ways of thinking and make mistakes.
For China, the good news is that its people are embracing values that breed modern-style entrepreneurship. The latest indicator is a study at the University of California, Los Angeles that looked at certain words used in more than 270,000 Chinese-language books published between 1970 and 2008.
It found words like “innovation” and “autonomy” were used with increasing frequency during this period when China moved away from a collectivist society that was largely Confucian and Maoist. In comparison, words like “obliged” or “communal” either declined or rose at a slower rate.
“Of all the values assessed in this study, innovation is perhaps the one with the greatest significance in a market economy,” the authors found.
Yet this shift in values now faces a strong head wind with the revival of state-imposed collectivism under a new leader, President Xi Jinping. To ensure the absolute authority of the ruling Communist Party, Mr. Xi has launched a crackdown on “Western values,” such as freedom of the press and assembly. Professors are being told not to teach foreign ideals (even though communism is one). Textbooks are more tightly screened. More civic activists are being jailed. And despite many successful private firms, the party has reinforced the dominant role of state-run enterprises.
Under this new crackdown, many Chinese are afraid of challenging the status quo, even in business. One Chinese researcher at the innovative bioscience firm BGI, who had also worked in the United States, told the Financial Times: “You can be brilliant here but you can be more brilliant in the US. It’s harder to be creative in the context of the mindset here.”
As the world’s largest and most populous economy, China needs to be a leader in innovation. By creating more fear and less freedom in society, its leaders are only holding back the country’s great potential. Its premier is right that the capacity for innovation is insufficient. But the incapacity does not lie among the people.