John Pomfret reports for the Washington Post on China’s efforts to foster innovation in the export sector:
Last year, China overtook Germany to become the world’s largest exporter, and this year it could surpass Japan as the world’s No. 2 economy. But as China gains international heft, its lack of global brands threatens its dream of becoming a superpower.
No big marquee brands means China is stuck doing the global grunt work in factory cities while designers and engineers overseas reap the profits. Much of Apple’s iPhone, for example, is made in China. But if a high-end version costs $750, China is lucky to hold on to $25. For a pair of Nikes, it’s four pennies on the dollar.
“We’ve lost a bucketload of money to foreigners because they have brands and we don’t,” complained Fan Chunyong, the secretary general of the China Industrial Overseas Development and Planning Association. “Our clothes are Italian, French, German, so the profits are all leaving China. . . . We need to create brands, and fast.”
The problem is exacerbated by China’s lack of successful innovation and its reliance on stitching and welding together products that are imagined, invented and designed by others. A failure to innovate means China is trapped paying enormous amounts in patent royalties and licensing fees to foreigners who are.
