Sustained technology innovation will spur GDP growth

Anti-involution has been a buzzword this year.

Efforts by central regulators to eliminate outdated and excessive capacity in certain industries and to rein in cutthroat competition may be one reason.

But more importantly, as an explanation that went viral on the internet goes: China has been long afflicted with overly intensive competition.

Local governments may be responsible for the unhealthy competition over the past years.

When one emerging industry showed huge growth potential thanks to its advanced technologies and brought in much needed income to the city where it was based, other governments quickly followed suit, dedicated to developing the same industry that had already been a success story elsewhere.

Repetitive construction of similar industrial parks has led to large amounts of production and, eventually, overcapacity.

Of course, the performance appraisal system for local governments should be altered to change the situation. But there is also a simple reason behind such a copy-paste pattern: it is always easier to be a follower.

At a news briefing that I attended the other day, a portfolio manager was outspoken, saying China excels at achieving progress from zero to one, but is no expert in creation from zero to one. Everyone in the room chuckled, signaling consensus.

However, that is not only the case in China.

Although no one remembers the second-largest company in an industry, it should be noted that the second place is somehow safer, as the biggest player, usually the first one to succeed in its area, withstands more risks such as innovation, technology upgrading, change of business models, or simply, public attention.

Legendary Japanese entrepreneur Satoru Anzaki, who served as a top executive for Japanese machinery giant Komatsu for over a decade, once said that the company, which was the world's second largest, would no longer take Caterpillar, the industry's No 1, as its competitor.

His reason was simple.

If Komatsu really rises to the top position, it would lose an example to follow. It would completely depend on itself to fumble on the way ahead. For a company that is not completely well-grounded and prepared, it cannot shoulder such a huge responsibility. The company may even go into the wrong trajectory due to the lack of management experiences and right talent.

Anzaki's words may somehow explain the homogeneous investments made by Chinese companies and governments. On second thought, we can see that the intention behind these investments is nothing but forward-looking: they are searching for continued growth.

A leapfrog in technological innovation will spur GDP growth, which cannot be compared to demographic dividends and capital investment.

We can see that some industries facing the problem of "involution" in China at present are related to emerging technologies.

Photovoltaics is one example. When exports are held up, companies in these industries may need greater competition in the domestic market, thus pointing to the necessity of reducing capacity.

But on the other hand, the importance of original innovation has been pointed out. However, this is an even harder mission.

Originality, as understood by all, cannot be realized overnight. It sits on years of continued efforts, even generations. A country's economic size and competency are the fundamental basis on which companies and individuals can enjoy the liberty of working on something of their own interest.

Meanwhile, a mindset of allowing mistakes, setbacks and complete failures should be nurtured in society.

Fortunately, some attempts are being made in China now. The green light given to unprofitable tech companies to go public on the STAR Market in Shanghai is one such example.