Knowledge economy - with Chinese characteristics
Jinfo Blog

By Tim Buckley Owen

Item

As the financial crisis grinds on, western governments look enviously but unsuccessfully towards China as a potential source of fresh capital. But with demand for Chinese goods set to decline in the beleaguered west, China has its own urgent need for investment to enable it to move from a purely manufacturing to an innovation economy.

The planned transformation from “made in China” to “designed in China” was vividly illustrated by Bob Stembridge of Thomson Reuters in a presentation at last week’s Online Information show (outline here). Published Chinese patent applications have increased by almost 17% a year since 2006 to nigh on a third of a million in 2010; between 2006 and 2010, it moved from 13th to eighth in global citation rankings; in 2008 it was investing 1.52% of its rapidly increasing gross domestic product in research and development, but its goal for 2015 is 2.2%.

In 2010 Thomson Reuters’ Dave Brown warned that many Chinese patents were of dubious quality (LiveWire coverage here), but it seems now that quality is marching forward with quantity. China’s restrictive credit reporting practices have also raised eyebrows in the past (more LiveWire comment) – but Joachim Bartels of the Business Information Industry Association has recently noted China’s commitment to the development of transparent credit rating agencies and the general enhancement of its commercial credit system.

China’s knowledge economy is in fact rapidly becoming a force to be reckoned with. China technology watcher Analysys reports a year-on-year increase of 65% in the country’s internet search market, based on third quarter 2011 figures – while Beijing-based social networking leader Renren has reported almost 60% year-on-year revenue growth for the same quarter, with continuing momentum in its mobile business.

With an eye both to a potentially troubled economic future and the need to continue building its customer base at home, China’s main search engine Baidu is to invest 3bn yuan (about $470m) by the end of 2015 to help 2 million small and medium sized enterprises expand their businesses. As Reuters comments, China is the world’s largest internet market but, with penetration hovering around 36%, the potential for growth is huge.

And then there’s China’s premier e-commerce site Alibaba. As Penny Crossland noted on LiveWire recently, it was reportedly interested in buying the troubled Yahoo! – and now Bloomberg Businessweek has confirmed that Yahoo! shares rose dramatically recently on news that Alibaba and venture capital firm SoftBank are indeed in advanced talks about making a bid for the whole company.

So – rapid developments at Renren (China’s Facebook), Baidu (China’s Google) and Alibaba (China’s eBay). How long before the tables are turned and the industry is defined by China’s internet leaders and not those of the west?

« Blog