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  • GEORGE S. YIP: OK.

  • Thanks for coming along to this.

  • So it's based on this book.

  • There are still some free copies left up front if you want them.

  • So I was doing the research on this book when

  • I was based in China at the top business school there, China

  • Europe International Business School, from 2011 to 2016.

  • And the subtitle is really the theme of my talk,

  • "From Imitation to Innovation."

  • You used to hear about how China is about imitation, now

  • it's about innovation.

  • In the early days, of course, China was just copying.

  • From 1978 onwards, they were copying products were illegal,

  • sometimes were called shanzhai which mean mountain bandit.

  • You see here a product called the Blockberry endorsed

  • by President Obama, probably without his knowledge.

  • On the right, something that surprise you,

  • this is not a cigarette packet pretending to be a cell phone;

  • it's a cell phone pretending to be a cigarette packet.

  • Just to show you how different the Chinese can be,

  • they actually love smoking so much some of them

  • wanted to pretend their cell phone was a cigarette packet.

  • So then China starts moving from copying to fit for purpose.

  • So in the earlier days--

  • 1980s, 1970s-- China was poorer, lower per capita income.

  • So for practical innovations, such as Guangdong crane

  • moving from double welded to single welded,

  • so a lot of process innovations.

  • China, of course, makes more solar panels than anybody else.

  • And the critical innovation there, self-cleaning.

  • Because if you have a dusty solar panel,

  • then that's a massive problem.

  • So in the beginning, these are not

  • rocket science innovations but typical Chinese innovations.

  • They are pragmatic and profitable.

  • Then you start to see-- and I'll talk a bit more later on about

  • Alibaba, Taobao--

  • these online systems where we start seeing innovation online.

  • Haier, one of their biggest and probably

  • the most international company in major appliances, now

  • the world's biggest major appliance companies.

  • Lots of initially small innovations, like early on they

  • found that their washing machines were getting

  • clogged up in rural areas.

  • They discovered it was because the farmers were

  • using them to wash potatoes, rather than just clothes.

  • Now, a Western response might have

  • been put a label saying, do not wash crops.

  • Instead, their innovation was they changed the filter system

  • and added a label saying, suitable for both clothes

  • and crops.

  • Refrigerators, when they first moved to the US market,

  • they went at the lower end, such as college dorm rooms.

  • And they realized that college dorms were small,

  • so they added a folding tabletop to double up

  • as a desk, a trivial innovation.

  • Today they have a more significant innovation,

  • technical.

  • They have innovated the world's first three temperature

  • compartments refrigerator.

  • The third compartment is designed

  • to store the food that is the most important to Americans.

  • What food is that?

  • No, not pizza.

  • Anything else?

  • Ice cream.

  • What's wrong when you take the ice cream out of the icebox?

  • It's too hard.

  • And Americans don't like to wait.

  • So it took a Chinese company to have

  • this insight and then typical of Chinese innovation

  • to invest the R&D money and to be able to manufacture it

  • in an economical way.

  • So this is a typical innovation.

  • But they are now moving beyond this.

  • They're moving toward waterless washing machines, for example.

  • So genuine technological innovations.

  • Chinese are very customer-focused, as well.

  • I'll just talk about the bottom ones.

  • We visited a number of start-ups.

  • So Suzhou Nano-Micro, world class nanoproducts; SVG

  • Optronics, they make security films over ID cards

  • and so on that are higher than the quality you find in the USA

  • or in the European Union.

  • I'll talk about some of these other companies in a moment

  • as well.

  • The entire ecosystem for Alibaba I'll talk more about.

  • GoodBaby makes 80% of the world's baby carriages.

  • A typical innovation now, you hold the baby

  • in one arm and one button that you press folds

  • up the baby carriage.

  • Again, a typical Chinese innovation.

  • You have to invest in it, requires

  • significant manufacturing capability.

  • Now they start to make things that are a bit more technically

  • advanced, so Tencent, social networking, instant messaging

  • service, online gaming, and so on.

  • Medical devices are very big in China, aging population.

  • And then the intersection of online and medical devices

  • are going to be a very big sector in China as well.

  • Xiaomi, the mobile phone company,

  • sends out software upgrades every week

  • based on input from its millions of customers.

  • And then the bottom, Newsoft, an example

  • of integrating medical devices and information technology.

  • And these are organized to relate to each other.

  • So of course, with the solar panels,

  • we have the wind energy.

  • The third one, they're now experimenting

  • with roads using solar power to recharge

  • the bus as it drives along.

  • That also is a typical Chinese innovation

  • in that it requires a top-down government

  • to put in that kind of innovation.

  • Can you imagine trying to do that

  • in the streets of Cambridge, Massachusetts,

  • putting in a system like that?

  • On the top right, Huawei, the telecoms company,

  • now the largest telecoms equipment company in the world,

  • genuine innovation, creating a product

  • that ran 2G, 3G and 4G in one product.

  • Again, typical Chinese orientation to the customer

  • because this was more practical for the customer

  • to have only one machine.

  • And now investing more and more in R&D.

  • It has R&D centers around the world.

  • For example, outside Milan, Italy,

  • it has a microwave research technology center

  • hiring Italian scientists, keeping them

  • in the local ecosystem.

  • The middle row, high-speed trains, of course

  • initially copied.

  • The Chinese train company was sued by Siemens and Hitachi

  • but has breezed through that.

  • China, of course, has more high-speed rail tracks

  • than anywhere else in the world.

  • I don't think the US has a single mile of high-speed rail,

  • nor does the United Kingdom.

  • And of course, this means they also

  • build more trains that they're now innovating with and selling

  • all over the world.

  • In the middle, aerial drones.

  • China did not invent the aerial drones,

  • but most aerial drones are now manufactured in China.

  • And this is a product that's classically

  • suited for Chinese innovation in that innovation

  • for this product happens better next door to the factory.

  • Why?

  • Because innovations are to add more rotors,

  • to change the carrying capacity, make it bigger,

  • make it smaller.

  • There's now a Chinese one that can carry a person.

  • Good luck traveling in that yourself one day.

  • And this is opposed to say something like a mobile, a cell

  • phone, where you do the innovation in California

  • and you have it manufactured in China.

  • So also, this is a product that is based on metal, plastics,

  • and some electronic combination, again

  • ideal for the lower cost Chinese engineers and scientists.

  • And on the right, this is the mid-sized jet

  • that China has just test flown.

  • It's going to go up against Boeing and Airbus.

  • Why is it able to do that?

  • Because China buys more new jet aircraft

  • than any other country in the world.

  • It already has 500 advance orders before it is proven.

  • And of course, most of those advance orders

  • are coming from Chinese airlines who

  • have to buy from this state-owned manufacturer.

  • Initially copying, but with innovations

  • that they're going to add and with enforced technology

  • transfer from the West, which is why

  • we have this tariff war that's just started in the last week

  • or so.