CHINA AS AN INNOVATION

ECONOMY: LESSONS FOR EUROPE AND

BEYOND

SMART MANUFACTURING MEETUP, DORPAT CONFERENCE CENTRE, TARTU,

4 NOV, 2019

Francesco Grillo UIBE (Pechino)University of Oxford

MAIN MESSAGES

•THE INNOVATION PARADOX AND THE BATTLE FOR GLOBAL DIGITAL LEADERSHIP

•THE FLIGHT OF THE DRAGON (AND ITS VULNERABILITY)

•10 IDEAS FOR EUROPEAN (INDUSTRIAL AND POLITICAL) LEADERS

2

THE INTERNET REVOLUTION IN A (STEVE JOB’S) LIFE

CAPACITY

PRICE

16 GB128 KB

3,000 (IN 1984 USD)

800 (IN 2016 USD)

3

AN I-PHONE 6 COULD RECEIVE, TRANSMIT AND ELABORATE 120,000 TIMES MORE INFORMATION THAN A

MACINTOSH 128K AND COST 28 TIMES LESS

1984

2016

2,41%

1,84%

1,71%

1,37%

0,57%

0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

3,00%

1971-1979 1980-1989 1990-1999 2000-2007 2007-2016

PRODUCTIVITY GROWTH RATES (OECD, %)

THE PARADOX OF INNOVATION (AS GREATEST SIGN OF DECLINE OF THE WEST)..

SOURCE: OECD

You can see computer everywhere but in the productivity statistics(R. Solow, 1986)

4

.. WHICH DOES NOT EXIST CHINA

5

-5,00%

-2,50%

0,00%

2,50%

5,00%

7,50%

10,00%

12,50%

15,00%

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

G7 Cina

Fonte: “Democracy and Growth in the 21st Century” (2019) su dati OCSE

PRODUCTIVITY GROWTH RATE (IN USD 2010)

CHINA GDP GROWTH: 88% productivity; 12% workforce. G7 COUNTRIES: 29% productivity; 71% workforce. In the last ten years of relative slow-down, China has doubled its economy (+102%) employing the same number of individuals (757 million people).

THE BATTLE FOR GLOBAL DIGITAL LEADERSHIPFIRST TEN CORPORATIONS FOR MARKET CAPITALIZATION (LEFT) AND DISTRIBUTION OF UNICORN (START UP WHOSE VALUE IS HIGHER THAN ONE BILLION USD) PER COUNTRY (RIGHT)

6

Cina; 130

USA; 100

India; 24

Corea SUD; 8

UK; 8

Switzerland; 3 EU; 7 OTHERS; 13

SOURCE: “Lezioni Cinesi” (2019) ON Bloomberg AND TechcrunchDATA

1. APPLE 851

2. ALPHABET (GOOGLE) 719

3. MICROSOFT 703

4. AMAZON 701

5. TENCENT 496

6. BERKSHIRE HATHAWAY 492

7. ALIBABA 470

8. FACEBOOK 464

9. JP MORGAN 375

10. Industrial and Commercial BANK of CHINA

344

MAIN MESSAGES

•THE INNOVATION PARADOX AND THE BATTLE FOR GLOBAL DIGITAL LEADERSHIP

•THE FLIGHT OF THE DRAGON (AND ITS VULNERABILITY)

•10 IDEAS FOR EUROPEAN (INDUSTRIAL AND POLITICAL) LEADERS

7

692

81 55

600

331244

292

423

412

319

218

172

1990 2011 2015

1904

1052

883

China

Southern Asia

Sub-SaharianAfrica

Rest of the world

692

81 55

600

331244

292

423

412

319

218

172

1990 2011 2015

1904

1052

883

China

Southern Asia

Sub-SaharianAfrica

Rest of the world

692

81 55

600

331244

292

423

412

319

218

172

1990 2011 2015

1904

1052

883

China

Southern Asia

Sub-SaharianAfrica

Rest of the world

8

BEYOND ECONOMY: THE FIGHT TO POVERTY..

Fonte: “Democracy and Growth in the 21st Century” (2019) ON UNDP DATA

NUMBER OF PEOPLE LIVING UNDER THE POVERTY LINE (2 USD PER DAY)

9

… AND THE IMPROVEMENT IN WELL BEING OF PEOPLE

40

45

50

55

60

65

70

75

80

85

90

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

SOUTH AFRICA

JAPAN

INDIA

USA

CHINA

RUSSIA

BRAZIL

Source: “Democracy and Growth in the 21st Century” (2019) ON OMS DATA

LIFE EXPECTANCY, YEARS

IN TERMS OF DISABILITIES ADJUSTED LIFEEXPECTANCY (DALE) A CHINESE CHILD ISEXPECTED TO LIVE LONGER THAN A US ONE

0

10

20

30

40

50

60

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

CHINA

USA

INDIA

WORLD

SOUTHKOREA

SOURCE: “Democracy and growth in the 21st century” (2019) ON WORLD BANK DATA

EXPORTS ON GDP (%)

IT IS NOT ABOUT JUST “GLOBALIZATION”…

.. IT IS THE ENTREPRENEURIAL STATE..

10,00

15,00

20,00

25,00

30,00

35,00

40,00

45,00

50,00

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

China Germany India Italy Japan Russia UnitedStates

SOURCE: “Democracy and growth in the 21st Century” (2019) ON WORLD BANK DATA11

INVESTIMENTS ON GDP (%)

CHINA34%

USA10%

JAPAN6%

UK4%

GERMANY3%

ITALY2%

INDIA3%

RUSSIA4%

SPAIN3%

SOUTH KOREA6%

OTHER COUNTRIES

25%

CHINA64,2%

JAPAN7,3%

SOUTH KOREA2,1%

TURKEY1,7%

FRANCE6,6%

GERMANY4,0%

ITALY2,3%

SPAIN7,0%

UK0,3%

USA1,8%

OTHERS2,6%

SOURCE: “Democracy and Growth in the 21st Century” ON UIC (Union International des Chemins Fer) and International Association of Public Transport DATA 12

… THE INFRASTRUCTURE …DISTRIBUTION OF KM OF SUBWAY (dx) AND HIGH SPEED TRAIN (LEFT), WORLD (2016)

CHINA34%

USA10%

JAPAN6%

UK4%

GERMANY3%

ITALY2%

INDIA3%

RUSSIA4%

SPAIN3%

SOUTH KOREA6%

OTHER COUNTRIES

25%

CHINA64,2%

JAPAN7,3%

SOUTH KOREA2,1%

TURKEY1,7%

FRANCE6,6%

GERMANY4,0%

ITALY2,3%

SPAIN7,0%

UK0,3%

USA1,8%

OTHERS2,6%

13

.. THE REGULATIONS ..THE CASE OF AVS - CHINESE FIRMS ARE TAKING A DIFFERENT ROUTE TO DRIVERLESS CARS: THEY MAY WIN (THE ECONOMIST, 12TH OCTOBER 2019)

.. AND A DIFFERENT APPROACH TO “TIME”

14

Fifteen years oldchinese students score535 in maths and theyare second in the worldafter SINGAPORE(Germany score 506;USA 470)

Source: OCSE-PISA

DEBT OVER GDP FOR OECD COUNTRIES:264 (2007)258 (2017)

29,6 33 35,4 38,2 44,2 46,4

105,5109,3

113119,4

128,1134,9

15,516

38,636,4

36,6

37,5

0

50

100

150

200

250

2012 2013 2014 2015 2016 2017

Households Companies Government

SOURCE: “Democracy and Growth in the 21st Century” (2019) su dati FMI 15

VULNERABILITIES -THE COST OF GOING TOO FAST FOR A TOO LONG TIME… EVOLUTION DEBT OVER GDP (CHINA, 2012–2017)

16

10

60

110

160

210

260

2013 2014 2015 2016

Delhi

Xi’an

Pechino

Teheran

Milano Londra

Città del Messico

AIR QUALITY, AVERAGE PM10 AND PM2,5 PER M3

Fonte: “Democracy and Growth in the 21st Century” (2019) su dati OMS

HANERGY, SHENZEN, THE DIGITAL ROAD, THE PROTOTYPE

.. THE ENVIRONMENT BOMB AND TURN PROBLEMS INTO OPPORTUNITIES

MAIN MESSAGES

•THE INNOVATION PARADOX AND THE BATTLE FOR GLOBAL DIGITAL LEADERSHIP

•THE FLIGHT OF THE DRAGON (AND ITS VULNERABILITY)

•10 IDEAS FOR EUROPEAN (INDUSTRIAL AND POLITICAL) LEADERS

17

1

1. DEVELOP INNOVATION AS PORTFOLIO OF KNOWLEDGE MANAGEMENT SYSTEMS LED

EXPERIMENTATIONS

2. DESIGN CORPORATE VENTURE CAPITAL CAPABILITIES

3. SHORTEN GLOBAL VALUE CHAINS AROUND THE 3D PRINTED IDEA AS DISPLACER OF OLD

4. PROMOTE EUROPEAN DIGITAL PLATFORMS AND/ OR EU REGULATION OF THE NOT EU ONES AS

PRIVATE – PUBLIC PARTNERSHIP

5. DEVELOP PARTNERSHIPS WITH PLACES TO HOST DISRUPTIVE TECHNOLOGIES (CITIES, SCHOOLS,

HOSPITALS)

6. REDEFINE OWN INDUSTRY ON THE BASIS OF THE “RELATED VARIETY” CONCEPT

7. PARTNER WITH NOT BUSINESS KNOWLEDGE HOLDERS

8. REDEFINE CSR AND SUSTAINABILITY AS HOW TO USE CORE COMPETENCES TO DELIVER SOCIAL

VALUE

9. NURTURE DIVERSITY AS DRIVER OF INNOVATION

10. ANTICIPATE CHANGE (NO “WAIT AND SEE”)

TEN IDEAS FOR THE 21 ST CENTURY BATTLE

www.thinktank.vision

francesco.grillo@vision-forum.org

BACK UP

20

Fonte: “Democracy and Growth in the 21st Century” su dati Banca Mondiale e The Economist Intelligence Unit

THE PUZZLE OF LIBERAL DEMOCRACY

21

CHINA

ESTONIAITALY

RUSSIA

AUSTRALIAGERMANY

UK

US

CANADA

NORWAY

JAPAN FRANCE

BRAZIL

CUBA

UAE

LOW GDP GROWTH HIGH DEMOCRACY

QATAR

HIGH GDP GROWTH HIGH DEMOCRACY

HIGH GDP GROWTH LOWDEMOCRACY

LOW GDP GROWTH LOWDEMOCRACY

+ 8,0%

INDIA

- 10,0 %

+ 5,0

- 5,0

YEARLY GDP GROWTH vs WORLD AVERAGE

DEM

OC

RA

CY

IND

EX v

s W

OR

LD

AV

ERA

GE

Correlation: -0,45Correlation (OECD): - 0,36

Correlation (not OECD): - 0,61

GROWTH RATES (1996–2016; differences versus average) and DEMOCRACY (THE ECONOMIST’S DEMOCRACY INDEX (2015; differences versus average)

INDUSTRIAL REVOLUTIONS COMPARED –INTERNET, GUTENBERG, THE EXPLOSION OF INFORMATION AND REALLOCATION OF GEO POLITICAL AND ECONOMIC POWER

22

1455 1517

1969 2019

?

23

KUBLAI, MARCO, AND THE NEW SILK ROAD: FROM DEAL MAKING TO ENGAGEMENT

INDUSTRIAL REVOLUTIONS AND SHARE OF WORLD GDP OF MAJOR ECONOMIES

TO SUM UP.. MODERNITY AS BACK TO HISTORY

24

PREVIOUS TECHNOLOGICAL REVOLUTIONS

INTERNET REVOLUTION

.. AS THE RESULT OF A CONTROL SYNDROME

25

LIMITS – THE GAP OF CULTURAL INFLUENCE AND AMERICANEGEMONY ..

G7 Asia Eastern Europe Africa South America Middle East

1989 - 2016 1,9% 5,3% 2,1% 2,5% 2,7% 2,2%

1900 - 1988 2,2% 0,8% 2,0% 1,6% 1,8% 2,2%

1850 - 1900 1,4% 0,3% 1,5% 0,6% 0,8% 0,5%

per capita income in 1850 1.960 909 1.398 1.199 841 1.192

IT CAN NON BE JUST A «CATCH UP»..

27

FONTE: Maddison Project Database, versione 2018. Bolt, Jutta, Robert Inklaar, Herman de Jong and Jan Luiten van Zanden

REAL INCOME PER HABITANT, GROWTH RATES (IN USD 2011)

12

11) THE ROADMAP: TURN THE 20TH CENTURY DREAM INTO A LAB OF A 21ST CENTURY DEMOCRACY

DO LESS, DO IT BETTER, AND SOLVE PROBLEMS

REDRAFT A NEW SOCIAL PACT WITH EUROPEAN CITIZENS BASED ON RESULTS, RIGHTS AND RESPONSIBILITIES

GO BEYOND THE OVER- DEPENDENCE ON STATES

REFOCUS EUROPE

EXPAND THE METHOD TO OTHER POLICIES

CONSOLIDATE THE UNIONS OF EUROPEAN PEOPLE, CITIES AND STATES

THE NEW FRONTIER: FROM INNOVATION TO A VISION OF THE FUTURE (WITH CHINESE CHARACTERISTICS)

29

1 700

1 031 1 142

2 107

979

1 906

1 021

2 614

THE SYMBOLIC GAP (2)… WHICH HAS GOT IMPORTANT ECONOMIC IMPLICATIONS

Number of Tourists from Germany, France and Spain to Selected Asian Countries (Mio, 2017)