0For long, China has been, as the clich?d term states, ?the factory of the world??churning cheap products allayed by a magic combination of state-control, cheap labour force, smooth and integrated production chains and an envious, never-failing infrastructure. It is precisely the scale and combination of factors that has inhibited global companies in China to scout elsewhere in Asia?so, Vietnam?s cheap labour force, Philippines? strong English skills or even India?s range of diverse strengths have appeared less attractive. No doubt, despite economic hiccups, China is in its golden years. China is further seeking to redefine itself?attempting to move away from its image of a cheap ?me too imitator??think HiPhone and A phone A6?to position itself as a knowledge and ideas economy, and one powered by innovation. Innovation has become a ?catch-all? phrase, and one that the Communist Party is willing to wager on.

Innovation is not new. Paper, printing, gunpowder and the compass are China?s contribution to the world. But, today, China?s open embrace of innovation is part of a global trend where innovation has been identified as the roadmap to the future, a panacea of sorts. It has been commonly argued that the US has a cutting edge because of innovation. There, prodigies and geniuses have pioneered game-changing ?process? and ?product? innovations that bounce off a strong industry-academia linkages (missing so far in China and India). Not surprisingly, 40% of the world?s top innovative companies are American.

The Communist Party is behind a focus on ?indigenous innovation? and has formulated the ?National Patent Development Strategy?(2011-2020) that aims to make China the most prolific patent-filer in the world. According to NYT, the Chinese plan is for corporations and individual investors to file two million patents by 2015, way more than the US. Budding innovators are being enticed to be more productive with cash incentives and better housing, and companies enticed with tax breaks.

R&D investment in China is on the rise?from 1.34% of GDP in 2005 to 1.76% of GDP in 2010, estimated to touch 2.5% by 2020. China Daily pegs R&D personnel as reaching 2.29 million person years and claims that China produces the largest number of undergraduate and post-graduate students, as well as doctorates in science and engineering. In a recent university standards survey by the Institute of Applied Economic and Social Research at the University of Melbourne, Chinese universities ranked higher (39) than Indian universities (48)?taking connectivity, resources, environment and output into consideration). According to the McKinsey Quarterly (2012), China has created the seeds of 22 Silicon Valley-like innovation hubs within life sciences and biotech industries.

Pioneers of open innovation, such as Nabil Sakkab, who widely championed a ?connect & develop? approach to innovation, have helped flatten the world. In a widely cited Harvard Business Review article (2006), Sakkab identified a need for global companies to network, integrate, understand and harness promising ideas from anywhere and creatively apply R&D finesse to create better and cheaper products for the consumer. It is less about where the idea originated, and more about integrating external ideas and capabilities with internal needs, and getting better products into the marketplace. As Sakkab says, ?Some products will come from our labs, others will come through them?. With global companies flocking to China, a new axis is certainly in the making.

With Europe downbeat and Asia still optimistic, global companies are now investing in Asia, to tap into the skills of an educated younger generation and the prospects of a large market. China boasts an estimated 980 MNCs (2010) with R&D centres?such as Henkel, Novartis, GE and Unilever, P&G and L?Oreal.

While China has been lagging in ?product innovation?, it has been adept at ?process innovation??incrementally improving or adapting technologies made elsewhere. Recently, The Economist lauded the likes of China?s largest medical equipment manufacturer and telecom giant Huawei for devising technologies that are cheaper and better than those made by their western counterparts.

China?s homegrown successes include Focus Media and Alibaba. Take, for example, Focus Media, a Shanghai-based company, which based its model on one that originated in the US. Focus Media chose to reach office-going consumers in China by running continuous TV ads on digital displays on buses, subways, taxis, train and even outside elevators?using the understanding that the average urban Chinese spent a lot of time commuting, away from the couch.

While eBay hovers in the background, Jack Ma, a schoolteacher-turned-entrepreneur, proved his claim that Alibaba will be the ?crocodile of Yangtze?. Alibaba serves corporations, mainly small- and medium-sized enterprises. Alibaba?s Taobao (Taobao means searching for treasure) was built using an understanding of the Chinese mind. Unlike eBay, which was formal, Taobao integrated a chat service which helped the buyer and seller work the price. Today, Taobao Marketplace and Taobao Mall have captured the lion?s share of the market. Chinese social networking sites have reworked Google and Facebook to Chinese idiosyncrasies. Tencent?s QQ instant messaging services, Sina Corporation?s microblog Weibo, Facebook equivalent Kaixin (kaixin means ?open the heart?) and Renren (renren means ?people-people?) are going strong.

However, the difference between China and India is that, while India gains from an entrepreneurial drive for innovation, China?s strength seems to be emanating in part from the efforts of the Party?s paternal persona. According to Yasheng Huang of the MIT Sloan School of Management, while Indians start with a market orientation and figure out a technological solution to their commercial challenges, Chinese companies start with a technological problem, and the market is their secondary concern. Thus, it is quite clear that while China?s innovation has a patron (the Party), Indians have their own patron?themselves. Whosoever the patron, it?s about time to discard China as only a suave imitator.

While one could downgrade the Chinese approach, which is counter to most successful innovation models in the past, it would be folly to dismiss this outright. China has shown, at a time when private capitalism was the buzzword and was in full flourish in the last two decades (before the 2007 economic downturn), that state-sponsored models can also deliver the goods, just as well or better.

The author is a Singapore-based sinologist, currently a visiting fellow at the Institute of Chinese Studies, Delhi. Views are personal