Lessons from China

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Lessons from China

His judgment was clear-cut. U.S. capacity for innovation has waned, leaving Silicon Valley as the only surviving hotbed of innovation. China, on the other hand, is the best candidate to take the world forward in innovation. The wise man was Noble Prize laureate Edmund Phelps, a professor of economics at Columbia University, with whom I had a chance to engage in conversion during the Boao Forum for Asia held last month on China’s resort island of Hainan. Will China outpace the U.S. in innovation? That, he said, will depend on the U.S.
The Chinese government, which still controls much of the economy, has incorporated entrepreneurship and innovation as an important part of state affairs. Every March, China holds two important political events: meetings of the country’s top advisory body, the Chinese People’s Political Consultative Conference (CPPCC), and of the legislature, the National People’s Congress (NPC). Otherwise known as the “two sessions,” the agenda for the future is discussed, decided, budgeted, and made into laws. In last month’s sessions, corporate entrepreneurs were invited to speak their minds.

Li Yanhong, chairman and CEO of Baidu, the country’s largest Internet portal, called for speedy deregulation and legal grounds to allow automated vehicles on Chinese roads in an address to the opening session of the CPPCC. Lei Jun, chairman and CEO of Xiaomi Technology, called for a better environment for start-ups and innovation in his address to the NPC. Ma Huateng, the founder and chairman of Tencent Holdings, expounded on the so-called sharing economy. His company runs the largest taxi-hailing and car-sharing app, Didi Kuadi. Corporate leaders were demanding attention from policymakers and lawmakers to help their business. What can barely be imagined in our capitalist society played out smoothly in China’s Communist Party platforms.

The 2015 sessions were attended by 36 out of the 100 richest Chinese, of whom 15 were NPC members and 21 CPPCC members. It makes one wonder if this was the same Communist Party that once championed blue-collar workers and farmers. The Wall Street Journal declared “Defying Mao, Rich Chinese Crash the Communist Party” in an article in December 2012, noting that some of the richest people in the country were occupying coveted seats in the Great Hall of the People. Billionaires now are gratefully offered seats in the party that once stood entirely for the poor and working class and for never-ending revolution.

The tipping point in the Communist Party of China were the so-called Three Represents declared by Jiang Zemin in March 2000. Jiang proclaimed that the Communist Party in the 21st century must represent the socially productive forces and interests of the overwhelming majority — including businessmen and intelligentsia — and not just workers and farmers. The new ideological line raised an uproar from hard-liner, who said the party was betraying its socialist roots to serve the rich and the elite. Be that as it may, China has started to stand for economic innovation. It is now the second largest economy of the world.

China was humbled by the humiliating foreign invasions of the 19th and early 20th centuries and a crazy Great Leap Forward and Cultural Revolution in the second half of the last century. While its colossal neighbor went nowhere fast, Korea’s economy progressed at a staggering pace with security support from the United States and technological assistance from Japan. Chinese President Deng Xiaoping chose South Korea as an economic partner by normalizing diplomatic ties in 1992. Once it had gotten back on its feet, China roared. It is now Korea that has to rely on China for its development.

It may be foolish to expect innovation from the Korean government. We see none of the “animal spirits” — as described by John Maynard Keynes — among third or fourth generation leaders in Korean family-run conglomerates. One corporate chief said executives dislike change and they are simply happy to keep the company running and collecting fat checks. When asked about Korean innovation, Phelps said it can be found in a select group of enterprises. That’s a big difference from Korea’s heyday, when animal spirits were the norm in Korean enterprises at all levels.

The general election is just a week away. Voters grumble that they cannot find a representative or political party that best represents their interests from the available choices. We could fall under the influence of self-justification by deluding ourselves and turning blind eyes to the need for innovation and drive. We should shake ourselves out of our stupor before a sense of defeatism builds to a collective rage.

JoongAng Ilbo, Apr. 6, Page 31

*The author is the chief editorial writer of the JoongAng Ilbo.

Lee Ha-kyung
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