Do not get impaled on the spikes of China’s success

RICHARD FLORIDA – The Financial Times

Copyright The Financial Times
April 7, 2006
China’s rapid growth in the past decade has brought it front and centre into the global economy. It has become the “world’s factory”, the base for off-shore manufacturing for leading companies worldwide. Now experts believe China will move upstream into design and innovation by expanding its science workforce, improving its universities and attracting the world’s top technology companies.
But China’s remarkable growth is the product of only a handful of propulsive regions, which attract the lion’s share of its talented people, generate the bulk of its innovations and create most of its wealth. To interact effectively with this rising economic star the west will have to recognise that China is the most extreme example of the “spiky” nature of globalisation. Even as globalisation causes economic activity to decentralise – giving rise to the increasingly “flat world” chronicled by Thomas Friedman, New York Times columnist – it simultaneously concentrates innovation, talent and wealth in a small number of peaks or spikes.
Outside manufacturing, China’s most notable achievements have come in technology. In 2004, China’s Lenovo acquired IBM’s ThinkPad brand of notebook computers and a growing number of US, European and Japanese companies have opened Chinese innovation centres. Yet China ranks just 36th of 45 countries on the Global Creativity Index, an indicator I developed to measure a country’s progress on the three Ts of economic growth: technology, talent and tolerance. On technology, China is 28th, on a par with Croatia and Ukraine but behind India. Its technological prowess is extremely concentrated. Just six regions – Beijing, Shanghai, Tianjin, Shenzhen, Shenyang and Guangzhou – produce the majority of Chinese innovations.
In talent, China is equally spiky. It ranks last of all countries measured, with only 1.5 per cent of its population holding a bachelor’s degree or above – compared with 6 per cent in India and about 20 per cent in the US, Europe and Japan. While the top 10 Chinese regions account for just 16 per cent of its population, they house nearly half of its talent-producing universities, according to a study I conducted with a George Mason University graduate student, Tairan Li.
China is incredibly uneven when it comes to the openness of its culture. Shanghai and Beijing are buzzing cosmopolitan centres. Shanghai, an urban agglomeration the size of Los Angeles with 18m inhabitants, is determined to transform itself into a world-class creative centre by investing in culture, fostering a bustling restaurant and nightlife district and establishing a social climate that values individualism and self-expression. In doing so it is pulling further away from its Chinese counterparts. As a nation, China scores among the bottom of the pack, alongside Romania and Ukraine and behind India, on the global self-expression scale of Ronald Inglehart, Michigan University professor. This may prove China’s biggest roadblock to further growth in the creative economy.
Indeed, China is a tale of two economies: innovative, rapidly growing cosmopolitan peaks line its east coast, set apart from a vast, rural interior where more than three-quarters of a billion people toil in pre-industrial conditions. According to Gallup surveys, incomes in China’s top 10 urban regions are more than five times those of the rural sector – and are diverging further every day. A Chinese student of mine summed it up succinctly: “In Shanghai, regular middle-class people live better than in the United States. While in the countryside just outside the city they live in what can only be described as pre-civilised conditions.” Almost half of China’s population lives on less than Dollars 2 a day and 800m farmers cannot afford to see a doctor.
The uneven nature of the Chinese economy is registering in the nation’s politics. China’s countryside was the scene of more than 87,000 riots and demonstrations in 2005, more than quadruple the number a decade ago. The government is now scrambling to develop programmes to spur rural development.
As it readies itself for the future, China must address the uneven nature of its economic advance, allowing growth to continue while responding to the concerns of the millions being left behind. The west must recognise China as the latest expression of globalisation’s spiky side, a phenomenon whose economic, social and political perils are just beginning to manifest.
The writer is the Hirst professor of public policy at George Mason University and author of The Flight of the Creative Class: The New Global Competition for Talent (HarperBusiness)

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