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Who says China isn’t innovative?

Writing in Fortune, Michael Elliott questions China's record of innovation to date: "Sure, China can grow, but can its companies innovate? Can they build products that will compete in the global marketplace?"

Elliott seems to suggest that, if growth does not come from private companies, it doesn't count as innovation:

Venture capitalists talk about the sheer thrill of watching Chinese startups, saying it reminds them of Silicon Valley in the garage-lab days. Yet it's worth remembering that China's recent supercharged growth has not been led by innovative private companies. It's mainly the consequence of a government-directed boom in bank lending, much of it to favored state-owned enterprises.

It is true that China has a way to go. China does not have a high proportion of the world's leading global companies. And those that see it as on the verge of challenging the US as the economic superpower are getting well ahead of themselves.

But if anything today, the situation is the opposite of what Elliott suggests: there is an under-appreciation for how innovative China is already, and is becoming. For example, China is criticized for its green-unfriendly coal plants, yet it is in fact ahead of the US when it comes to a number of key new technologies that could address energy issues. Venture capitalist John Doerr pointed this out in an interview in the Wall Street Journal today:

Today, China's cars are more than one-third more fuel-efficient than ours. China is investing 10 times as much as the United States on new clean energy, as a percent of their GDP. China's growth in renewables is, for me, astounding.

In high-speed rail transportation, China will cut the travel time from Beijing to Shanghai from 10 hours to four. That may not be defined as "innovation" by some, but it's pretty damn impressive. And according to news reports today (hat tip: Louis Godena), China is planning to extend its rail network to Europe, all the way to Germany.

Contrast this to the US's attempt to build a high-speed rail system. Christian Wolmar had this to say in his New York Times op-ed today regarding the reality of Obama's "ambitious" plans:

President Obama has repeatedly insisted that there is no reason why Europe or China, rather than the United States, should have the world's fastest trains, and since coming to office he has committed the country to developing a high-speed rail network of its own.

Yet the $8 billion set aside for high-speed rail in his 2009 stimulus package, split among 31 states, includes only two genuine high-speed rail projects - in Florida and California. And even that money will do little more than kickstart the schemes. The rest of the package will go to upgrading the various sections of the Amtrak network.

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