This is the thirty eighth part in the series The China Chronicles. Read all the articles here.

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Until recently, the narrative surrounding China’s technological growth was sustained more by responsive adaptation than original innovation. Most of China’s top technology companies had western counterparts. Alibaba, the Chinese e-commerce giant, was a hybrid of Amazon and eBay whereas Baidu, the search engine, was China’s response to Google. Facebook found its Chinese equivalent in Tencent.

Now, we are witnessing a reversal of this movement of ideas. China’s influence now extends across a host of technology verticals around the globe. Imitations of its indigenously developed Meitu application, which beautifies selfies, are emerging all over the world, including in the United States (US). Startups in the US are also replicating China’s model for on-demand bicycle rental. The dating app, Tinder, has taken its inspiration from a Chinese app called Moo. Most recently, China’s QR Code standard has been established as the global industry standard for QR Code payments. Even in India, Chinese smartphones are dominating the scene with a 50% market share. ^<1>

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China’s influence now extends across a host of technology verticals around the globe. Imitations of its indigenously developed Meitu application, which beautifies selfies, are emerging all over the world, including in the United States.

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Additionally, China’s most fascinating online experiments are taking place beyond the borders of its traditional technology sector. Companies from “real economy” industries like banking, real estate, construction, and agriculture are creating new commercial archetypes based on data science and the industrial internet. ^<2> Illustratively, the real-estate giant Vanke is spearheading the assimilation of online-enabled technology and services into digitised societies. ^<3> It is targeting the creation of cities, which provide residents with amenities like parks, safe cuisine, mobility, health and learning services, all through the internet. ^<4>

Several factors have contributed to the growth of Chinese innovation.

First, the liberalisation of the licensing framework surrounding the manufacture and sale of mobile handsets in 2007 catalysed the creation of a burgeoning domestic mobile industry. ^<5> New entrants flooded the market. Additionally, Shanzhai handsets were legitimised. ^<6> Shanzhai mobile phones were low-cost 2G phones that were imitations of the products of well-known brands. ^<7> Consequently, the cost of smartphone handsets dropped dramatically. In 2009, handsets were available for as low as INR 9,761 in 2009. ^<8> As time elapsed, China’s mobile industry expanded to include more players, further dropping the rates for smartphones. Today, Chinese smartphones cost less than half of what they did eight years ago. The meteoric rise of China’s domestic mobile communications industry has put a smartphone in the hands of 75% of its population.

Second, the country’s 1 billion internet users provide the perfect testbed for new technologies and applications. ^<9> Only innovations that can prove their mettle can survive the highly competitive Chinese technology market.

Third, there is a top-down mandate for innovation in China. Its government invests heavily in the technology sector and is open to softening its stance on specific issues if it enables greater ingenuity. In 2012, for instance, China devoted almost 2% of its Gross Domestic Product (GDP) to Research and Development (R&D). ^<10> Finally, China has a wealth of human capital in the technology space. A report by the Organisation for Economic Cooperation and Development states that 55% of Chinese doctoral degrees are awarded in the areas of science, technology, engineering, and mathematics. ^<11> According to the 2015 US News and World Report, which ranks universities around the world on different criteria, China’s Tsinghua University has pipped the Massachusetts Institute of Technology (MIT) to become the top engineering university in the world. ^<12>

China’s technological growth offers valuable lessons for India:

1. Think locally, act globally: Both India and China have developed technological solutions to address domestic issues. However, Chinese tech companies have a much larger global footprint than Indian companies do. Both the public and the private sector should look at ways through India’s tech sector can broaden its global reach. An encouraging development in this regard is that many countries are looking to emulate India’s Unique Identity Database (UID) — Aadhaar.

2. Invest in human capital: Government investment in research and development remains minimal in India. Studies suggest that India only invests about a 0.9% of its GDP on research. ^<13> Additionally, excessive bureaucracy hinders India’s research landscape. ^<14> Most administrators at state educational facilities in India are politically appointed. ^<15> Many of these individuals have no real background in research. ^<16> Moreover, out of every 10,000 people in the country, only four are full-time researchers as opposed to 18 in China. ^<17> With this context in mind, India must take concrete steps to reduce the red tape at its research facilities and chart out avenues for financing research activities in the country.

Though the challenges are significant, India boasts similar advantages to China as it has a large population, decent connectivity rates, and distinctive scientific competencies. Additionally, India has also managed to create innovations that are serving as templates for the rest of the world. Specifically, many countries are looking to construct iterations of its Aadhaar database. India must find ways to export local innovation and reap its demographic dividend, if it wishes be a key player on the global technological stage in the near future.

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^<1> Ojasvi Goel and Yash Bajaj, “Breaking Free of the Digital Dragon: Responding to China’s Growing Control over India’s ICT” (Observer Research Foundation, 2017), https://www.orfonline.org/research/breaking-free-digital-dragon-responding-china-growing-control-india-ict/.

^<2> Edward Jung, “China’s Internet Boom,” MIT Technology Review, June 21, 2016, https://www.technologyreview.com/s/601686/chinas-internet-boom/.

^<3> Ibid

^<4> Ibid

^<5> Shin-Horng Chen and Pei-Chang Wen, “The Evolution of China’s Mobile Phone Industry and Good-Enough Innovation” (Chung-Hua Institution for Economic Research, Taiwan, n.d.).

^<6> Ibid

^<7> Ibid

^<8> Ibid

^<9> “China: Number of Internet Users 2017 | Statistic,” Statista, 2017, https://www.statista.com/statistics/278417/number-of-internet-users-in-china/.

^<10> Reuters Staff, “China’s Spending on R&D Rises to 2.07 Percent of GDP,” Reuters, November 21, 2016, https://www.reuters.com/article/us-china-r-d/chinas-spending-on-rd-rises-to-2-07-percent-of-gdp-idUSKBN13G1NG.

^<11> Alex Gray, “These Countries Have the Most Doctoral Graduates,” World Economic Forum, February 27, 2017, https://www.weforum.org/agenda/2017/02/countries-with-most-doctoral-graduates/.

^<12> “Top Engineering in the World | US News Education,” 2015, https://www.usnews.com/education/best-global-universities/engineering.

^<13> T.V. Padma, “INDIA’S SCIENCE TEST,” Nature 521 (May 14, 2015).

^<14> Ibid

^<15> Ibid

^<16> Ibid

^<17> Ibid

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• China
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