McKinsey - Gauging the strength of Chinese innovation (EXECUTIVE SUMMARY) 5-15min

The events of 2015 have shown that China is passing through a challenging transition: the labor-force expansion and surging investment that propelled three decades of growth are now weakening. This is a natural stage in the country’s economic development. Yet it raises questions such as how drastically the expansion of GDP will slow down and whether the country can tap new sources of growth. ... to realize consensus growth forecasts—5.5 to 6.5 percent a year—during the coming decade, China must generate two to three percentage points of annual GDP growth through innovation, broadly defined. If it does, innovation could contribute much of the $3 trillion to $5 trillion a year to GDP by 2025. China will have evolved from an “innovation sponge,” absorbing and adapting existing technology and knowledge from around the world, into a global innovation leader. Our analysis suggests that this transformation is possible, though far from inevitable. ... To develop a clearer view of this potential, we identified four innovation archetypes: customer focused, efficiency driven, engineering based, and science based. We then compared the actual global revenues of individual industries with what we would expect them to generate given China’s share of global GDP (12 percent in 2013). As the exhibit shows, Chinese companies that rely on customer-focused and efficiency-driven innovation—in industries such as household appliances, Internet software and services, solar panels, and construction machinery—perform relatively well.
1. Customer-focused innovation: The Chinese commercialization machine
2. Efficiency-driven innovation: The ecosystem advantage
3. Engineering-based innovation in ‘learning industries’
4. Science-based innovation: Novel Chinese approaches

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