On Geopolitics

In China, Innovation Cuts Both Ways

Matthew Bey
Senior Global Analyst, Stratfor
Oct 24, 2017 | 07:59 GMT
Jack Ma, chairman of China's Alibaba Group, speaks at the 2015 CeBIT expo in Hannover, Germany.

To stay competitive and drive the kind of economic growth that Beijing is after, China's tech companies will need to stay on the cutting edge of innovation. But innovation requires more flexibility -- and less government oversight -- than the Chinese government is comfortable with.

(SEAN GALLUP/Getty Images)

China is in a bind. The heavy industry that propelled the country's economy through three decades of dizzying growth has reached its limits. To escape the dreaded middle-income trap, China will need to shift its focus from low-end manufacturing to other economic industries, namely the technology sector. Beijing has put tech at the center of its long-term economic strategy through campaigns such as Made in China 2025 and Internet Plus. But these initiatives alone won't push the Chinese economy past its current plateau. The tech sector is notorious for relentless innovation. And innovation requires flexibility. For the Chinese government, flexibility is an unsettling prospect. Giving tech companies the leeway they need to keep up with -- and, ideally, get ahead of -- their competition is the only way Beijing can achieve its goals for economic growth and development. However, granting tech firms and their influential leaders the autonomy required to compete...

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