New Frontier: Is This Innovation Ground Zero?

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A remote-controlled robotic fish splashes across a kiddy pool. On the other side of the room, a lanky undergrad hovers over a circuit board buzzing erratically (electronic art, he says) while more students watch a wheeling, prong-handed creature navigate an obstacle course.

This is the scene played out at the Inventors Carnival at the Beijing Institute of Petroleum Technology in October – a whimsical, metallic affront to the notion that Chinese university students lack creativity and critical-thinking skills. More surprising though is the conversation their professors were having over lunch upstairs.

“We have the money, but that won’t change the environment,” says one. “But China has a good environment for innovation because it can effect change quickly,” someone counters. “China won’t produce the next Steve Jobs because Chinese kids don’t do LSD,” Shanghai hackerspace founder David Li interjects, quieting the assembled academics. “If you look at early Silicon Valley, all those guys were dropping acid.”

From there the conversation turns to Burning Man – the bizarre week-long festival that brings tens of thousands of artists, nudists and latter-day hippies to the Nevada desert to make art and burn a wooden effigy. How do you recreate that kind of atmosphere in China?

China’s top universities are full of overseas-educated returnees with no illusions about the state of higher education here. At the same time, international headlines are constantly full of bi-polar assertions: either the West has already lost the innovation race to China — as if who-invents-what were a zero-sum game — or China is hopeless and no amount of investment will change the fact it’s a creativity vacuum, populated by IP thieves and copycats. The notion China cannot, will not innovate is false, but it’s also premature to declare the arrival of a Chinese era of invention. In reality, innovation is already happening here on a scale that profoundly affects people’s lives, but it’s not the stuff of glossy Silicon Valley fairy tales. And a growing number of social entrepreneurs, gamers, makers, open-source hardware enthusiasts, sharism proponents and digital artists are laying the foundations for a creative community. The social and legal obstacles they face are real – some have likened the present environment to the Wild West. But that isn’t necessarily a bad thing.

From gunpowder to movable type, China has a lengthy list of technological contributions that changed the world. But in modern times, beset by imperialism and then the turmoil of the 20th century, China offered up little in the way of invention that was novel on an international scale. Sociologists have concluded innovation is most likely to occur in societies that support radical thinkers, outliers and the free flow of ideas.

The Cultural Revolution was the exact opposite of that. Many scientists had unfavorable class backgrounds, were related to land owners or had worked for the Kuomintang government. Meteorologist Zhao Jiuzhang, who established the nation’s weather forecasting service after the founding of the PRC, was paraded through the streets with a placard reading, “Take down the reactionary scientist Zhao Jiushang.” He was barred from working in his field and committed suicide.

In 1986 Deng Xiaoping launched the “863 Plan” aimed at jump-starting science and technology development. Since then the government has made innovation a priority in each five-year plan approved by the National People’s Congress.

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In Shanghai, city leaders are looking for ways to support young talent, especially in Yangpu, where officials hope to retool the industrial district into an innovation hub. Hong Kong real estate tycoon Vincent Lo’s company Shui On Land teamed up with local government to build the Knowledge Innovation Center, a business park inspired by Silicon Valley and the Left Bank in Paris — the pairing of science and art as evangelized by Steve Jobs is decidedly trending.

The Yangpu government offers tax deductions and help with licensing for start-ups, plus there are grants of up to RMB1 million for ventures that meet certain criteria, one being they employ a haigui, a returnee with overseas work or education experience.

The Shanghai government also backs the Entrepreneurship Foundation for Graduates. Founded in 2006, the fund grants RMB300,000 no-interest loans to start-ups. Whereas venture capitalists are primarily interested in payoff, and thus more likely to work with start- ups emulating Western models, government funding and the EFG are non-profit, so more inclined to take a risk on a new idea.

“We just say if you have a good idea and your team isn’t bad – we don’t think about market scale or possibility to IPO – so we fund you,” says funding department executive Cheng Yuyuan.

EFG’s greatest success to date is Five Minutes, the gaming company behind the addictive (read: cyber crack) Happy Farm, which some 23 million people play every day. Happy Farm inspired Western spin-offs like FarmVille and Farm Town, which are played by many millions more on Facebook.

“I think we were just pretty fast,” says 27-year-old Season Xu, who founded Five Minutes with two friends. With a team of nine, they built four games in three months – each an improvement on the last. Xu dropped out of the University of Southern California in 2006 when he saw that Chinese Internet business was booming. He didn’t want to miss out. “My mom was really against it. That was a pretty big conflict at the time.”

Social pressure is one of the leading obstacles culling the present generation of would-be innovators. Most young Chinese enter the working world looking for a means to support their parents, if not grandparents as well. So long as owning a house is seen as a prerequisite to serious dating, it seems there’ll be fewer young men inclined to take a big risk on a start-up.

“My wife would like me to go back. We’ll give it one more year, if I can’t make it work maybe I’ll go back to a normal paycheck,” says Nan Hu, founder of instreet.cn, a web company that uses new image-identifying technology to place ads. Still, US-educated Nan distinguishes himself from his business-minded contemporaries. “So many Chinese guys think they need a BMW. So what, it’s just a car, a tool for driving. I really know what I want. I’m not going to compare myself to somebody else.”

Aaajiao (Xu Wenkai), one of China’s foremost digital artists and a proponent of open- source visual programming software, echoes Nan’s sentiments, “My mother and father live in Xi’an and have good jobs. They don’t think I need to earn money for them.” Aaajiao also co-founded Xindanwei, a co-working community in Xuhui District that provides low-cost workspace by the hour, day, week, month or year for people working in social entrepreneurship and creative fields.

“A lot of Chinese kids remind me of my dad,” says Taiwan- born programmer and entrepreneur David Li, who this year founded Xinchejian, a Shanghai hackerspace where hobbyists and tech geeks one-and-all come to make, modify and invent. Li says that when he tells young Chinese about the non-profit project they’re puzzled, asking how he intends to make money, and uninterested in the idea of creating something for the pleasure of it. But if the world’s innovation track record tells us anything, it’s that brilliance is seldom motivated by paychecks.

Thanks to people like Li and places like Xinchejian, there are techy creative vibes afoot in Shanghai. Walk up the poorly-lit staircase into Xinchejian’s concrete workshop and the energy is palpable – lots of young programmers and engineers laboring over pet projects, but anyone is welcome. They have a local retiree who comes to learn about modifying remote- control cars, and 11-year-old Hong Kong-native Gilbert Chan teaches classes there on how to use Lego Mindstorms to make robots.

“I like it because I feel like I’m controlling something,” Chan says.

Li and co-founder Ricky Ng- Adam, who quit working at Google to start Xinchejian,
have a corner of the workshop dedicated to growing hydroponic (soil-less) basil and mint. They’ve toyed with renting a barge off of Hong Kong and starting a small-scale organic herb business.

Ng-Adam is also involved in the 100-year Starship Study. Funded by NASA and the American Defense Advanced Research Projects Agency, visionaries all over the world are putting heads together in the hopes that within four generations an interstellar spaceship can be designed.

“Even the propulsion needs are very dramatic,” Ng-Adam laughs. “It’s 40 years one- way to the nearest star, so we’re waiting on a physics breakthrough.”

While a creative refuge like Xinchejian could prove to be the incubator of truly disruptive ideas, the innovation going on at present across Chinese industries deserves consideration too. A study by Thomson Reuters predicts China will surpass the US and Japan in patent application filings for 2011. Skeptics point out that government incentives to boost patent filings have led to a flood of less-than- breakthrough claims.

Still, as manufacturing continues to move east and local capabilities mature, it’s only natural for companies to move their R&D centers to China too. One reason pharmaceutical companies started doing research in China is that there are simply more scientists. “We decided to go where the scientists are, as talent matters the most,” says Tony Zhang, vice president of global external R&D for Eli Lilly. “I’m very optimistic.”

Unlike in industries like tech, it’s much harder to produce a rip-off pharmaceutical because the State Food and Drug Administration won’t approve it. In the last decade there were some 3,200 molecules patented in China, according to Greg Scott, founder of biotech consultancy ChinaBio. The vast majority weren’t novel on an international scale. Still, many of the world’s leading biotech companies have offices clustered together in Zhangjiang Hi-Tech Park, in an area nicknamed Shanghai Pharma Valley.

Opportunities abound in the executive ranks of the life science industry for Western- educated returnees. Up north, the Beijing Genomic Institute has become one of the world’s leading genomic sequencing centers. The National Institute of Biological Sciences is less than a decade old, but has already become one of Asia’s top institutions. And last year American serial biotech entrepreneur John Oyler founded BeiGene, a drug development company that has attracted top Chinese scientists, along with some foreign talent, and already has in-licensing agreements for two clinical-stage oncology compounds.

“Five to ten years from now the only city that will surpass Beijing [in pharmaceutical development] is Boston. I strongly believe this,” Oyler told us via email.

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Innovation is often thought of in terms of new inventions that dramatically alter the way things are done. But there’s a less visible form of innovation that’s been going on in China for years. Last month in an interview with China Daily, Bill Gates announced he has high hopes for his foundation’s partnership with China’s Ministry of Science and Technology. He believes that together they’ll be able to innovate in ways that alleviate poverty through agriculture and health care.

China has been engaged in this kind of innovation for years – the kind that tweaks existing technology and makes it easier to produce and more affordable for consumers. A perfect example of this is the solar water heaters, the metal cylinders found ubiquitously atop rural Chinese homes.

Solar water heating technology originally came from the US, but over the last 30 years, Chinese manufacturers have refined it so that the best solar water heaters in the world are now made domestically. Solar heating is the cheapest option for hot water, not to mention the most environmentally conscious.

Developments like this are often overlooked in the raft of finger pointing at China’s copycats. It’s much more difficult for entrepreneurs to get venture capital funding if they aren’t chasing a Western model (China’s LinkedIn, China’s Groupon, China’s Instagram).

Investors and entrepreneurs both know that a good idea that gains traction has a high probability of being copied by one of the heavy hitters – Baidu, Alibaba, Tencent or Sina – with zero payout to its originators.

In the US, a company like Twitter can, and did, raise tens of millions in funding without first establishing a clear path to making money. That model just isn’t viable here, which is why dominant local microblog services are found under previously-established web companies, like Sina.

Speaking to entrepreneurs and venture capital-types at the Silicon Dragon tech event at the Portman last month, seasoned investor Gary Rieschel of Qiming Ventures cautioned the room not to overestimate the power of BATS (the four major Chinese Internet companies). He recalled attending a tech talk in Silicon Valley in 1999 where the speaker warned entrepreneurs against going after anything under the purview of Yahoo, AOL or Microsoft – advice that’s resoundingly outdated a decade later.

In defense of copycats, proponents of open source hardware point out that all the fake Apple products spun out in Shenzhen are produced by hackers that pounce on the latest Mac rumor. These are skilled engineers showing they can do it faster and cheaper and may in the future extend those skills beyond the knock-off racket.

The country’s biggest tech incubator is Innovation Works up in Beijing, founded by ex-Google China president Lee Kai-Fu with the stated goal of funding young talent and fostering a creative environment. A common complaint in the tech community (that no one was willing to be quoted on) is that the bulk of Innovation Works’ start-ups are chasing Western models instead of novel projects.

Innovation Works co-founder and Shanghai native Wang Ye, who is now the CEO of the world’s leading mobile gaming company, Doodle Mobile, disputes the swipe, citing his company as an example. Doodle Mobile has 50 million users, raised US$10 million in funding and is primarily concentrated on attracting users with top-notch games, instead of rushing to monetize.

“I believe if you build the best product and you can serve users well, you can make money in the later stage.” says Wang. Wang also worked at Google and credits the company’s people-first, teamwork-focused culture with preparing him for entrepreneurship. “I believe in the long term, not in the short term, there will be a Steve Jobs that grows up in China.”

How long that will take may largely depend on how long it takes to change education practices. There’s wide understanding of the problems in Chinese university education, but enacting a comprehensive solution is more difficult. Instead, professors like Ben Koo of Tsinghua University – who organized the Inventor’s Carnival in Beijing – are trying to enact change in their own classrooms.

“I was declared useless at 15,” Koo laughs. He did poorly in high school and wound up at a polytechnic school in Taiwan. He got a second chance in the US, eventually receiving his engineering doctorate from MIT.

Koo has a story he likes to tell to illustrate the problem with Chinese higher education: Once he was looking for a secretary and a software engineering graduate from Peking University (the nation’s top school) applied. She’d received top marks and was number one in many of her classes. He gave her some numbers and asked her to make a pie chart. Half an hour later he checked and she hadn’t started. She told him she didn’t know how to use Excel. He asked how come and she replied, “I’m not very familiar with computers.”

Koo is an advocate of education that encourages pragmatism. He looks for ways to make his students think, and has established “Toyhouses” at several universities – spaces where students can go and create in a socially competitive environment. Leisure as learning. He plans to put on a Shanghai Inventor’s Carnival this spring.

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Professor Xu Min, director of the Institute of Automotive Engineering at Shanghai Jiaotong University, worked for GM and Ford in the US for years, and was a vice president of Chery Automotive, one of China’s biggest auto manufacturers. Now his office at Jiaotong has display cases full of mini model cars.

“One of China’s biggest potential problems is tech innovation and talent,” says Xu. “I’m more useful in a university.”

His classes are hands on. He has undergrads take apart and put back together engines – something students who are meant to study engines might not have the chance to do at many Chinese universities.

“I try to teach my students to be like a surfer – we want to be on top of the wave,” Xu says. “Don’t be afraid to fail.”

Xu is working on new energy solutions for cars – including one where coils can be buried under roads to recharge electric batteries as cars pass over.

Fellow Jiaotong professor Xu Yuhong (the two aren’t related), who is working on using electric pulses for drug delivery, also encourages her students to think outside the box, something she excels at – she once painted several friends’ houses with a solution she first began developing as part of a drug delivery project.

“The Chinese education system is very tight. I try to loosen them up.” she says. “I like to play with things.”

Before turning to Chinese academia, Xu spent years in the US working on an HIV vaccine delivery project. She wanted to be out of industry, in an environment where not everything was project-driven, and returning to China meant she wouldn’t have to go through the stress of trying to get tenured at an American university.

Xu likes the freedom she has to explore, and there’s never a shortage of lab assistants, but she’s not optimistic about the overall campus environment. She sees her students under more social pressure to become earners than when she was in school in the 80s.

“Now we have more money and can do more things.” She says, “but that was a good time in terms of freedom of thinking.”

Back in Beijing at the Inventor’s Carnival, one student voices parallel concerns. American digital media artist An Xiao Mina is giving a talk on global creative collaboration through social media when a member of the audience asks a question: “In China, we can’t access YouTube, or Facebook or Twitter, so how can we make our ideas known?” Mina pointed out that Sina Weibo is launching an English-language version – small concession for missing out on so much of the wider conversation. The topic was abandoned thereafter.

There’s no question, innovation happens in China. It’s coming out of Chinese companies set on producing products that better satisfy the local market, and also in the increasing ‘global village’ environment that sees corporations setting up R&D centers here. It’s popping up in nascent creative enclaves, inhabited by people brave enough to buck social trends and turn down stability to chase a dream. But money doesn’t make creativity, culture does. And how far China will go to foster an innovative environment remains to be seen.

 

That’s Shanghai, 2011
Photos by Nicky Alamasy

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