Hong Kong, West Kowloon

Train Station, 8 am, and we are about to board the Fuxing ("rebirth" in Mandarin), the brand new Chinese high-speed train, for a meeting in Guangzhou where we will arrive in about 3⁄4 of an hour. The futuristic West Kowloon station (for locals just WEK), built at a cost of 11 billion dollars, is organized like an airport and swarms with commuters and businessmen who can reach Shenzhen in just 14 minutes and Guangzhou in 47. More than 30 Fuxing train pairs carry 80,000 travelers daily, but there is also a direct link that reaches Beijing in less than 9 hours (compared to the normal 24) and that, with its 2,230 kms/1,386 miles of length, is the longest high-speed line in the world, and run by the latest generation of high-speed trains entirely Made in China. High speed is the emblem of China’s innovation today because not only it has transformed the Chinese economy and society but has stimulated the country’s technological development. Just back in 1993 trains in China traveled at no more than 48 kms/30 miles/hour while today they can easily reach 400 kms/250 miles/hour. And the next step is Maglev magnetic levitation technology, currently available in the short-haul 30.5 kms/19 miles path from Shanghai Pudong airport to the Shanghai city terminal. Today the Chinese high speed rail network, with a rail system of 29,000 kms/18,000 miles, is the most extensive and largest in the world, and it will grow by another 9,000 kms/5,600 miles by 2025, reaching 30 of the country's 33 provinces.


Not a coincidence.

For decades the West has considered China as the "factory of the world" and perceived the Chinese product as a cheap and low quality copy. But today, in line with the Made in China 2025 goal of advancing the technological level and stimulating the development and creation of innovative solutions, the Chinese giant has transformed itself into the pole of technological innovation with ideas, research and development and achievements that far exceed any other country.


Made in China is not only produced but also conceived and designed in China.

A first immediate confirmation of this primacy is given by the spread of e-commerce and even more by the 802 million active internet users (57.7% of the Chinese population) of which 98% (786 million) use mobile devices, demonstrating not only the country's Wi-Fi coverage but, above all, how mobile technology has become an indispensable component to the point that 650 million Chinese make shopping and purchases with e-commerce (fashion and electronics in the lead), dedicating an average of 3 hours a day to online shopping via smartphone or tablet.





THE FIGHT FOR GLOBAL SUPREMACY



Innovation is the area where the game of global technological supremacy is played and China is planning to create its own Silicon Valley in the Greater Bay Area of Guangdong province, a megalopolis formally called Pearl River Delta that, in addition to representing the most economically dynamic region of China, includes 11 cities including the financial hub of Hong Kong and the technology hub of Shenzhen (the first Special Economic Zone formally established in 1980), as well as the manufacturing hubs of Dongguan and Guangzhou.


The Greater Bay Area aims at becoming an integrated "world class" region by 2035 where the most prestigious universities and technologically advanced companies will be based, all with the blessing of Chinese President Xi Jinping, and the Communist leadership promoting the investment of resources in this region in order to achieve hyper-fast growth, including the Macau gambling hub destined to become a prime global THL (tourism, hospitality, leisure) center. There are three types of Chinese companies whose innovative development makes it increasingly complex for Western companies to be able to compete in terms of R&D strategy.


And we are not always talking about players such as Huawei (third global smartphone manufacturer, today struggling with the threatened US sanctions), the giants BAT (Baidu, Alibaba and Tencent) and the companies on the Fortune Global 500 list (of which 120 are Chinese and 126 are American).


A research carried out by MIT in Boston has classified the Chinese innovation leaders in 3 macro-categories:

• The Hidden Champions

• The Technological Innovators

• The Creators of Change



THE HIDDEN CHAMPIONS



Hidden Champions are medium-sized innovators in niche markets, with a long-term growth vision, a turnover of up to $ 5 billion, a solid R&D capability that allows for continuous product upgrades, a leaner and more agile business structure than Western competitors.
They are highly specialized companies but not yet recognized globally despite their major role in the Chinese market, and present in sectors ranging from electronics to chemicals to mechanics. These companies are able to customize the product according to a specific demand and use the classic trial-and-error approach to test the market and improve accordingly.
Some examples:
Lens Technology is the largest Chinese manufacturer of optical components for smartphone cameras and a supplier to Apple and Samsung Hikvision produces a video compression card for computers based on MPEG-4 technology, invests 8% of its turnover in R&D and employs 47% of its staff in the Research and Development area.


THE CREATORS OF CHANGE



Creators of change are successful companies driven by digital innovation, with young experience and present in the mass market, valued well over a billion dollars, often spin-offs of other companies and with a digital business model applied to traditional sectors and totally focused on end user rather than on the product. They are funded by venture capitalists who invest heavily and in a variety of sectors from media to retail.


One example among many is Toutiao, a Beijing-based company that provides a news and information platform using AI and algorithm models based on the interests of each individual user via smartphone (120 million daily uses). It was founded in 2012 with a loan of over 3 billion dollars and today is valued at over 11 billion thanks to a decidedly disruptive model that has overshadowed the state media system.



TOWARDS THE GLOBAL INNOVATION HUB



The Chinese vocation is to become a global innovation hub and China has in fact already overtaken the US in AI research. And when artificial intelligence meets robotics, let’s meet Xiaoyi, a robot created by iFlytek, an IT company listed on the Shenzhen stock exchange and specialized in voice recognition software. Xiaoyi passed, back in 2017, the Chinese medical practice exam, effectively becoming a practicing doctor as the first automaton in the world.


Today China is also the country that invests the most in renewable energy and has developed the Three Gorges Project, in Anhui province, the largest solar panel plant in the world, capable of powering 94,000 homes. Another example is given by JD.com, the Chinese e-commerce giant (number 181 in the Fortune Global 500 list) that, well ahead of American competitor Amazon, operates a fleet of 40 drones covering a network of 100 destinations and counting in view of a national expansion plan. And talking about drones, the first flight of the passenger transport drone Ehang 284 took place at speeds up to 130 km / hour in Lianyungang in february 2018.


Innovation also excels in infrastructure: the bridge that connects Hong Kong to Zhuhai and then Macao covers the distance of 50 kms/31 miles entirely above the water, with the exception of just 6 kms/3.7 miles of underwater tunnel, and represents the longest marine bridge in the world thus reducing the duration of the journey by land from 4 hours to just 30 minutes.


From earth to space. Chinese technological innovation began in the 1950s with the development of the ballistic missile program, then it evolved in an accelerated manner with increasingly sophisticated objectives: the Chinese Chang'e 4 probe landed on the dark side of the moon on January 3rd 2019 and in the pipeline there’s a Chinese permanent space station in low Earth orbit along with a manned mission to the Moon.


For President Xi Jinping innovation is the main driver for China to grow and remain a player of primary importance in the global area. In this context, the significance of the trade war launched by Trump against China must be considered.


Far from weakening the country, this conflict could even strengthen the Made in China 2025 initiative, with which Xi Jinping aims to transform China from a "factory of the world" to a "global technology leader", ranging from IT to robotics, aerospace, biotech and clean energy to realize his dream of Chinese “national rejuvenation”.



China still on the rise notwithstanding the trade war with the US


With the ban imposed by the Department of Commerce, the Chinese giant Huawei has been placed on the Entity List (a sort of black list) and can no longer buy materials, software and other US technology with the risk of a global confrontation.


One consequence is that Google will no longer license Android software to Huawei, effectively putting the company out of business until an agreement is found.


Obviously the conflict will also have negative effects for Android and other US manufacturers involved such as Microsoft, Intel, Qualcomm and Dolby, which will suffer significant reductions in sales and valuations. Other negative effects could result from a possible retaliation on the sale of Apple products in China (a major market for Apple representing 17% of global sales) or from the prohibition of Foxconn from producing for Apple.


But on the principle that each ban becomes a new stimulus, this ban forces Chinese companies to reduce their dependence on American technology and develop an independent technology.


In fact, Huawei has prepared a Plan B by developing its own operating system OS, initially conceived for the Chinese domestic market of smartphones, which today use Google's Android, and for computers, which today using Microsoft's Windows OS, with launch planned for the autumn.


Chinese President Xi Jinping, on the occasion of the Belt and Road Forum in Beijing on April 26th 2019, stressed that the Chinese economy is now the second global economy by nominal GDP but first by purchasing power, but with still some areas of fragility in innovation.


And he also underlined how China is now ready to face challenges, overcome the frictions of the tariff trade war with the US, strengthen and enlarge state-owned companies, and maintain a leadership position.


Indeed, it should be remembered that, despite the slowdown in economic growth, China still expects GDP to increase by 6.3% in 2019 (6.6% in 2018, the worst performance in the last 28 years), therefore decidedly robust and respectable, if compared with the modest 2.4% forecast for the US economy (3.1% in 2018) and with Italy's imperceptible 0.1% growth.





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