Why aren't the Chinese inventing up a storm as they industrialize?

[Sam_Stone]

For a real explosion in innovation and entrepreneurship, you need a lot more than some universities and government research programs. You need:

• Strong protection of intellectual property
• Available Venture Capital
• The ability to keep what you earn, even if you earn a hell of a lot
• lack of political interference in decision making
• A culture of individualism and risk-taking

The U.S. didn’t explode as a country of innovation because it had lots of government support and big national labs. It exploded as a country of innovation because hundreds of millions of people are completely free to chase their dreams and ideas, nutty or otherwise, and to profit from the results. Culturally, the U.S. has made heroes out of people like Henry Ford and Thomas Edison, which has taught generations of young people to chase their dreams and seek their own limits. We learn at dad’s knee that risks are worth taking, that nothing comes easy, that you can’t win unless you try, and other values that cause us to reach out and try new things.

China is still behind on many of these areas. It’s gaining fast, but there is still too much government control, still too much corruption, and still too much cultural baggage that causes people to keep their heads down and toe the line.

[China_Guy]

@Sam Stone

For a real explosion in innovation and entrepreneurship, you need a lot more than some universities and government research programs. You need:

• Strong protection of intellectual property
• Available Venture Capital
• The ability to keep what you earn, even if you earn a hell of a lot
• lack of political interference in decision making
• A culture of individualism and risk-taking.

About the only one missing is IP. There’s at least a beach head of the rest available…

[Siam_Sam]

@astro

You’d think with over one billion bright entrepreneurial people in a rapidly industrializing economy that some Chinese geniuses would have come up with some world beating stuff by now, but I’m not seeing much in the way of Chinese inventions hitting the world market.

Why? What’s the hold up? The Japanese turned heads with the stuff they came out with as Japan ramped up. Why are the Chinese inventors lagging behind?

It seems to be traditional, as historian JM Roberts noted here in 1992.

[gonzomax]

@xtisme

Not surprising that you should fixate on U6 (From Wiki: ‘U6: U5 + Part time workers who want to work full time, but can not due to economic reasons.’) as the ‘real’ rate, but here is the actual U6 according to BLS (seasonally adjusted):

 Data extracted on: July 30, 2008 (2:35:44 PM)

Labor Force Statistics from the Current Population Survey

Series Id:           LNS13327709
Seasonal Adjusted
Series title:        (seas) Total unemployed, plus all marginally attached workers plus total
                     employed part time for economic reasons, as a percent of all civilian labor
                     force plus all marginally attached workers
Labor force status:  Aggregated totals unemployed
Type of data:        Percent
Age:                 16 years and over
Percent/rates:       Unemployed and mrg attached and pt for econ reas as percent of labor force plus
                     marg attached

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Annual
1998	8.4	8.4	8.4	7.9	7.9	8.0	8.1	7.9	7.9	7.8	7.6	7.6	 
1999	7.7	7.7	7.6	7.6	7.4	7.5	7.5	7.3	7.4	7.2	7.1	7.1	 
2000	7.1	7.2	7.1	6.9	7.1	7.0	7.0	7.1	7.0	6.8	7.1	6.9	 
2001	7.3	7.4	7.3	7.4	7.5	7.9	7.8	8.1	8.7	9.3	9.4	9.6	 
2002	9.5	9.5	9.4	9.7	9.5	9.5	9.6	9.6	9.6	9.6	9.7	9.8	 
2003	10.0	10.2	10.0	10.2	10.1	10.3	10.3	10.1	10.4	10.2	10.0	9.8	 
2004	9.9	9.7	10.0	9.6	9.6	9.5	9.5	9.4	9.4	9.7	9.4	9.3	 
2005	9.3	9.3	9.2	9.0	8.9	9.0	8.8	8.8	9.0	8.7	8.7	8.6	 
2006	8.4	8.4	8.2	8.1	8.2	8.4	8.5	8.4	8.0	8.2	8.0	7.9	 
2007	8.3	8.1	8.0	8.2	8.3	8.3	8.3	8.4	8.4	8.4	8.4	8.8	 
2008	9.0	8.9	9.1	9.2	9.7	9.9	 	 	 	 	 	 	 

As far as I know no country uses U6 to determine their ‘real’ unemployment rate (I THINK they all pretty much use U3), however I could be wrong about that. If anyone knows it might be interesting, though it has little to do with the OP.

-XT

Not surprising you would be fixated on U3. But U6 is a more realistic meter. U3 provides comforting numbers for those who do not want to see the handwriting. But I agree it digresses from the theme.

[XT]

Well, I’m NOT actually fixated on U3 as the be all end all…I just happen to think it’s a more accurate measurement of the true state of a nations unemployment level. I concede that it’s debatable and also that this sub-discussion is not relevant to the OP…feel free to start a new thread on the subject if you like though.

On a good note you actually used a quote box AND discussed what was said in that quote box in your post…so, at least SOME progress has been made! Good show!

-XT

[Dr.Love]

About U3 vs U6: From Wiki on Unemployment (already cited by xtisme)

@Wikipedia

Eurostat, the statistical office of the European Union, defines unemployed as those persons age 15 to 74 who are not working, have looked for work in the last four weeks, and ready to start work within two weeks, which conform to ILO standards.

<snip>

[For the United States] U3: Official unemployment rate per ILO definition.

so it does seem that U3 is the international standard.

Still, it might be the case that U3 and U6 pick up on functionally different things. However, according to this plot of unreasonably perfect data, they don’t. Aside from a vertical shift, U3-U6 look nearly identical. The plot came from this left-leaning blog, and the actual BLS data can be retrieved here.

[clairobscur]

@JThunder

I’m not saying that every single Chinese person is like this. I’m not saying that they are a nation of “one-billion rip-off artists.”

That’s what used to be said about Japan. During the 70’s, Japan still had such a reputation of imitating instead of innovating that there were plenty of jokes about it.

China currently doesn’t have much of an incentive not to violate copyrights besides
giving it lip service. But I don’t believe for an instant that it will last. IMO, within 15 years, they’ll be cranking up new products like there’s no tomorrow. And then, they’ll be very interested in copyright protection.

[JThunder]

15 years? I think it’ll take a lot longer than that.

[tomndebb]

@gonzomax

Every month the the Labor Statistics Bureau releases 6 unemployment metrics. (cfalled U1,U2,U3 etc. )he news media releases U3 which is the narrowest def of who is eligible. Years ago the U6 was also reported. It no longer hits the news, A few years ago when 4.5 was reported the U6 indicated 8.3. In the last 10 years U6 has ranged from 6,3 to !0.4 . 10,4 is most recent.

So, in contrast to what you originally claimed, the “Adims” are not actually withholding anything at all. The USBoLS is releasing all the information (along with explanations regarding the categories) for anyone who wishes to look at. Instead, it is the public media (probably driven by the apathy of the public) that chooses to re-publish only the numbers with which you take issue.

[mazinger_z]

@Dr. Love

About U3 vs U6: From Wiki on Unemployment (already cited by xtisme)

so it does seem that U3 is the international standard.

Still, it might be the case that U3 and U6 pick up on functionally different things. However, according to this plot of unreasonably perfect data, they don’t. Aside from a vertical shift, U3-U6 look nearly identical. The plot came from this left-leaning blog, and the actual BLS data can be retrieved here.

Thanks for the cites. I’ve been told in school that U3 is the international standard. Everyone else that thinks that they have some new method of calculating unemployment has an obvious agenda. The current method is about as neutral as one can report it. It doesn’t stop people from trying to misinterpret it, though.

[gonzomax]

Nor does it stop it from being distorted. House committee reports long term unemployment is greater than any time during the last 30 years that it was measured. Those who have exhausted unemployment which are in the millions are not counted. Why is that?Do they not need work? No it is an excuse to quit counting them. People who are just depressed and give up active working do not count either. Get a part time job without benefits. Poof ,you no longer count. Are you looking for better?Sure but a part time job will take you off the unemployed list.
The numbers are undercounted. that is a fact. The committee says March 2008 ,rate was about 9.5.

[Imasquare]

@BrainGlutton

Sore memories of Japan kicking our economic ass in the '80s.

Maybe so but where is Japan now? The US is still the most important economy despite fears in the 80s that Japan would take over.

[gonzomax]

Japan is no2 or 3 after a down period. But Japan actually competed. China has a natural advantage. We have moved our industries over there for cheaper labor and short term profits. They did not have to invent. They did not have to improve . They just had to work cheap and we were willing to move all our technology and put it under their control We actually gave tax breaks to companies that were willing to move their operations abroad. Smart huh?

[XT]

@gonzomax

Smart huh?

Yup…very smart actually. Oh, I know you are clueless and don’t get it…but it’s why the US still has the number 1 (instead of 2, 3, 4, etc etc) economy in the world.

As for China…we’ll see. As they become more affluent it is inevitable that the price of wages will increase…as well as the price of their own currency. If it doesn’t then they will have one set of troubles…if it does they will have another. That and the fact that them manufacturing and power infrastructure is based on older technology, their political system is ultimately unstable (IMHO of course), and that they are currently subsidizing their fuel and energy costs (as well as the environmental damage they are doing to their own nest of course…oh, and a bunch of other problems I’m just glossing over) means that there are several walls out there they can and probably will be hitting sometime in the future.

It’s not going to be the easy lope to becoming the number one economic power in the world that you and others seem to think it will be. Manufuacturing really isn’t the be all and end all that it used to be…

-XT

[gonzomax]

You read. I am sure you have seen arguments . not about if China will be number one. but when.
When we build a new plant in China to manufacture ,we build a brand spanking new up to date one. The old ones are still here. Inefficient and outdated.
When Japan and Germany became the fore runners of technology and accuracy after WW2. it was mostly due to the fact they had brand new factories and up to date machine tools . That gave them an edge. If you actually knew anything about manufacturing in America ,you would be aware that we keep tools and factories operating as long as we can. They become dated and less accurate. They get replaced slowly. China is starting off with the newest and best. They will appear to be so talented as a result.

[XT]

@gonzomax

You read. I am sure you have seen arguments . not about if China will be number one. but when.

And I’ve read the counter arguments that say that this is not a given, by any stretch of the imagination.

When we build a new plant in China to manufacture ,we build a brand spanking new up to date one. The old ones are still here. Inefficient and outdated.

We aren’t a manufacturing super power anymore. What of it? Manufacturing isn’t the be all and end all of economics anymore. So what if the Chinese have state of the art shirt manufacturing plants…or even state of the art toy manufacturing plants? Even if we are talking about plants to manufacture first class TV’s, DVD players and other electronic…what of it?

Do you not understand that it’s not the age of our manufacturing plants but the price of our labor that makes it so hard for US companies to compete?? Why is this so hard for you to get? The things the US DOES manufacture are mostly high end products or one’s that we have a niche market for…or that are cheaper to manufacture here for the local market than to bring in from abroad. The reason we don’t have state of the art shirt manufacturing plants (or whatever) is because we can’t compete in that market due to labor costs…so why would we build them exactly?

BTW, you are wrong that China has shinny new manufacturing plants across the board, or that it’s US companies building them for the Chinese. Oh, you could make a case that US CAPITAL helps build them…but it’s the Chinese investing in this segment that is building these plants, and they are by no means uniformly state of the art. In a lot of cases China is building yesterdays technology to meet a demand for cheap products and services that most first world countries don’t choose to compete in (for similar reason to why the US doesn’t choose to compete in these markets).

When Japan and Germany became the fore runners of technology and accuracy after WW2. it was mostly due to the fact they had brand new factories and up to date machine tools . That gave them an edge.

Why aren’t they competing against the Chinese in these industries then?? They should have bright shiny new plants after all. Why have they moved on to more niche oriented manufacturing (like the US), ehe? Why does Japan and Germany outsource manufacturing like the US if they have this ‘edge’ you speak of?

If you actually knew anything about manufacturing in America ,you would be aware that we keep tools and factories operating as long as we can.

And if you had a clue as to what you were talking about it might be an interesting discussion. However, it’s clear you don’t have a clue what you are talking about so it’s not very interesting.

China is starting off with the newest and best.

Horseshit. IOW, lets see a cite that China’s manufacturing (or anything else) is ‘the newest and best’. I will await said cite with bated (or baited) breath…

They will appear to be so talented as a result.

They appear to have chosen a market they are suited to compete in. Nothing wrong with that…but it’s not going to turn them into a world beating economy in and of itself. Unless they diversify they will eventually hit a wall (several actually), namely as they become more affluent their own labor costs will start to rise which will not only make their products cost more but will drive up the value of their currency…which will also make their products cost more. Which will mean that those theoretical bright, shiny new bestest manufacturing plants evah will start to be shut down and moved to some other country that still has cheap labor (or of course the Chinese could choose to remain in this market and automate).

This doesn’t even talk to all the OTHER problems China faces (government, environmental, quality control, disregard for intellectual property rights, etc etc etc).

-XT

[Dr.Love]

I’ve posted some cites on US manufacturing before, but I think it might be time to do it again. Here is some data from the Federal Reserve on the current and past US industrial output and capacity. I call you attention in particular to this graph which shows the industrial production in the United States over the past 40 years, split amongst total and that excluding high-tech industries., and to this graph, which splits it between manufacturing production and total industrial production. Note that all of them: total industrial production, production excluding high-tech industries and manufacturing production have grown steadily over the past four decades, with the exception of recessions where production fell somewhat along with the general economy.

Lets move to some other data. What about cross country comparisons? Well, according to this (World Bank is credited as the source) the United States holds an entirely predictable lead over the rest of the world in terms of value-added manufacturing. If this surprised you, take a moment to think about why it might be the case. If you still don’t know, here is a big hint. Here we can look at manufacturing value-added per capita, where Japan enjoys a sizable lead. After that it’s a slow decrease down to the US which sits comfortably at #6. China? Down at #51. I suspect that this figure isn’t entirely helpful: useful data would give figures per manufacturing worker, not per capita, but I can’t seem to find that data immediately. If I find something useful (or if anyone else finds it) I’ll try to work something out and post it up here.

I see absolutely no reason to worry about US manufacturing or industry.

[gonzomax]

@Dr. Love

I’ve posted some cites on US manufacturing before, but I think it might be time to do it again. Here is some data from the Federal Reserve on the current and past US industrial output and capacity. I call you attention in particular to this graph which shows the industrial production in the United States over the past 40 years, split amongst total and that excluding high-tech industries., and to this graph, which splits it between manufacturing production and total industrial production. Note that all of them: total industrial production, production excluding high-tech industries and manufacturing production have grown steadily over the past four decades, with the exception of recessions where production fell somewhat along with the general economy.

Lets move to some other data. What about cross country comparisons? Well, according to this (World Bank is credited as the source) the United States holds an entirely predictable lead over the rest of the world in terms of value-added manufacturing. If this surprised you, take a moment to think about why it might be the case. If you still don’t know, here is a big hint. Here we can look at manufacturing value-added per capita, where Japan enjoys a sizable lead. After that it’s a slow decrease down to the US which sits comfortably at #6. China? Down at #51. I suspect that this figure isn’t entirely helpful: useful data would give figures per manufacturing worker, not per capita, but I can’t seem to find that data immediately. If I find something useful (or if anyone else finds it) I’ll try to work something out and post it up here.

I see absolutely no reason to worry about US manufacturing or industry.

If those graphs are showing production on the right ,are measured in inflating dollars, it needs serious adjustment.

[Dr.Love]

The plots both say “Ratio scale, 2002 output = 100”. Methodology information is found here, where it says

@Federal Reserve

Source data. On a monthly basis, the individual indexes of industrial production are constructed from two main types of source data: (1) output measured in physical units and (2) data on inputs to the production process, from which output is inferred. Data on physical products, such as tons of steel or barrels of oil, are obtained from private trade associations and from government agencies; data of this type are used to estimate monthly IP wherever possible and appropriate. Production indexes for a few industries are derived by dividing estimated nominal output (calculated using unit production or sales and unit values) by a corresponding Fisher price index; the most notable of these fall within the high-technology grouping and include computers, communications equipment, and semiconductors. When suitable data on physical product are not available, estimates of output are based on either production-worker hours or electric power use by industry.