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Rising Like A Star
Innovation In China
2017/12/23

(CG Lu Xu's Keynote Speech at CCC Dinner on Dec. 8, 2017)

(Introduction of Lu Xu by Paloma, Consul General of Mexico)

Thank you Paloma, for your beautiful words. And thanks to all the Executive Members for organizing such a wonderful dinner and inviting me to speak, which makes me feel inclusive by the CCC family. This definitely means a lot to me.

My husband and I and A-bu are going to have our first ever Christmas in Calgary. This is A-bu in her Christmas dress. She seemed not to be very happy probably because I didn’t treat her a biscuit before photo shooting (PPT).

Besides this lovely creature, there is another one who is obsessed by almost everyone in China. It is a cat, a black cat, an artificial figure and a logo of a B2C online shopping bazaar created by Alibaba and Jack Ma. I don’t know why Jack Ma likes a black cat. But this black one eventually brought him big fortune and luck. The cat's name is Tmall. she has been pooling nearly 200 thousand Chinese and international sellers this year. Like Thanksgiving day vs Black Friday, Christmas vs boxing day, Jack Ma chose Nov. 11, i.e. Double 11 going parallel with Tmall as the date of marketing event held annually. Let's see how he made a promotion for Double 11 (Video).

Alibaba's triumph has been breathtaking. Double 11 was born in 2009 with $8m transaction volume reached within 24 hours. 8 years later, the transaction volume increased up to $26 bn and 1.3 bn parcels were produced just within one day. More than 200 nations and regions took part in this shopping carnival. The Argentine Ambassador and Consul General of Australia, New Zealand and Brazil in Shanghai even served as deliverymen to deliver parcels ordered from their countries to the local customers (Video).

E-commerce in China is sweeping the board. Last year online sales in China hit $366 bn, almost as much as in America and Britain combined.

The rise of companies like Alibaba was powered by hundreds of millions of increasingly well-off Chinese coming online, huge capacity of logistic operation, and advanced high-speed rail systems and flight networks. It takes no more than 5 days to deliver a box of tropical fruit from Hainan to the icy city of Harbin. I would like to show you next is how thousands of parcels are sorted at a logistic center (Video).

The success of e-commerce in China is also supported by digital payment systems, for example Alipay, that hold a buyer’s money until he receives his order and is happy with it. Alipay is now used by about 520m people, not just to shop on Tmall but to pay bills, buy lunch or send money to family. When most of the Western consumers are sticking with their credit cards, Chinese have jumped over into the era of virtual. Last year Alipay had 2.5 times as many users as PayPal and more than 11 times as many as Apple Pay.

This year, The Economist published special reports three times a month focusing on the phenomenon of Double 11 and Alibaba, saying the company leading this transition, has seeped into consumers’ lives in ways not yet seen in America or Europe. Westerners should picture a combination of Amazon, Twitter, eBay and PayPal, but broader.

Another giant basket of everything and tough competitor of Alibaba is Tencent and its App called Wechat. It's famous for turning itself a social media into something almighty. Let's see how this going to work (Video).

Alibaba and Wechat are not the sole examples to show how China wants to use technology to reform its industries, which can embrace and support hundreds of thousands of SMEs on the basis of cloud computing and "data-driven infrastructure”, to have the innovative capacity to raise productivity, create more value-added jobs, and achieve its economic aspirations.

Actually, China's new inventions are way more than e-commerce, e-life or e-plus. An online survey for more than 10 thousand people from 22 major economic entities conducted by Chinese Central TV this October revealed that, 36% recognized high speed railway, 19% recognized manned spaceflight and 16% recognized supercomputer as the representatives speaking on behalf of China's ability of innovation. The upcoming biggest competitors of German cars, American semiconductors, and Japanese robots will come from China.

Counterpoint Research recently published the statistics showing that Chinese smart phones have been on the top of the global market share since 2014. 40 out of 100 smart phones sold all over the world are Chinese brands. How smart is it? By reading the face, the phone can tell in a minute whether the one is its owner or not. The tech is called facial recognition and began to use widely in traffic monitor, bank account opening in China. Perhaps it won't take so long to pay the bills by face. But it may not be the good news to those constantly having face surgeries to become more beautiful. As some Silicon Valley insider said, China is no longer a factory hub lacking imagination. It has become a hotbed of crazy innovation.

China spent more than $241 billion on research and development in 2016, the second-largest investment by any country in absolute terms and about 2 percent of GDP since 2014. Its universities graduate more than 1.2 million engineers each year. China also leads in patent applications with more than 1.3 million in 2016.

Also in 2016, China unveiled the National Strategy of Innovation, aiming to build China into an innovative nation by 2020, an international leader in innovation by 2030, and a world powerhouse of scientific and technological innovation by 2050.

Nine key sectors included are: information, intelligent manufacturing, agriculture, energy, eco-environment protection, ocean and space, urbanization, public health and service industry.

To carry out this strategy, China has established a capital foundation for emerging industries, esp for small & medium enterprises, with total investment up to $15 billion. The gov also encourages private funds to diversify the financing channels for SMEs. The results are fruitful. In the first half of this year, there were nearly 3 million newly registered enterprises in China, with an average of 16,000 each day.

The beneficiaries are more than Chinese enterprises. During 3 quarters of 2017, around 23,000 foreign-invested enterprises were newly opened in China, with a year-on-year growth of 10% and a total investment volume of nearly $100bn. Statistics shows that nearly 70% of the Canadian companies are making profits in China, more than 80% of them are planning to broaden their business there.

What makes the Chinese gov to be so concentrated on innovations? The answer lies in the report to the opening of the 19th National Congress of the Communist Party of China (CPC) delivered by President Xi Jinping, illustrating that, people's ever-growing needs for a better life foster the strongest impetus for development. The cohesive relationship between gov and individuals in China not only enables the government to enjoy the support from overwhelming majority, but also enables individuals to release their potentials in innovation to the greatest extent.

Innovations are also guaranteed by Chinese way of doing things. There was a video show on YouTube about the repair of Beijing Sanyuan Bridge in 2015. Over 1,300 tons of new surface of the bridge was transported to the construction site and replaced the old within 43 hours. The speed had amazed more than one million viewers of the world. Some said "Time is gold but simply China doesn't waste it".

One thing interestingly observed is that in the industries where innovation requires original inventions or engineering breakthroughs, such as branded pharmaceuticals, China might have small shares of global markets. But in industries where innovation is about to meeting customer needs or driving efficiency in manufacturing--appliances and solar panels, for example-- China is flourishing. China's massive consumer market and unmatched manufacturing ecosystem give it unique advantages in these sectors.

A report published by Mckinsey Global Institute in July 2015 called The China Effect On Global Innovation said, the research, based on an impact-driven view of innovation, concludes that China does have potential to become a global innovation leader. Under the right circumstances, Chinese companies can be global competitors in both engineering based industries and science-based industries. With the right policies in place to support entrepreneurship, encourage market-based competition in more industries, and make China more attractive to top science talent, China can succeed in all forms of innovation.

For us, one thing must be borne in mind: Timing is critical. With slowing international economic growth, an aging population, and declining returns on massive fixed investments, we must find ways to raise productivity. Innovation is key to this sustainable growth path.

That is all for my view over China’s innovations.

Thank you.

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