The CEO of Coca-Cola recently stated that China is a better place to do business than the United States. Muhtar Kent's remarks were prompted by the complexities of America's tax code, its bureaucratic red tape, and its polarized political process. Coca-Cola still invests in the United States but, like most U.S. multinationals, it now invests far more heavily in the growth markets of the BRICS.
The Chinese admire America, especially its entrepreneurial spirit and track record in commercializing innovation. But they are making huge strides of their own. There are more than 100 million registered private enterprises in China; the Chinese firm Huawei was third among all companies in number of patents filed last year; and media conversation these days centers on when, not whether, China will produce a success story like Steve Jobs'.
America should not underestimate China's capacity to innovate. From gunpowder on, the history of Chinese innovation is strong. Chinese society is highly competitive. When the Chinese can no longer make easy money imitating, they will start innovating. Home-grown innovations will motivate tougher enforcement of intellectual property regulations.
There is too much wishful thinking in America that China will stumble, politically if not economically. The Chinese government has delivered 10-plus years of stellar economic growth; citizens' trust in the government is high. And when Shanghai places No. 1 in the world in high school math scores, it's not because of rote-like learning processes that kill imagination and out-of-the-box thinking. It's because Chinese parents invest heavily in their children's education, generally for an only child whose earning power will determine the parents' and grandparents' comfort in old age.
The Chinese government's latest five-year plan emphasizes the need for long-term investment in research and development, to shift China from being "factory to the world" to being an innovation-driven, knowledge and service economy. The Chinese understand that being an innovative brand-owner like Apple or Nike is much more profitable than being an original equipment manufacturer. They have Japanese and South Korean examples such as Sony and Samsung to follow. The five-year plan also calls for doubling the percentage of gross domestic product from creative industries. Young people born after the "opening" in 1989 are leading vibrant arts and fashion scenes in the major cities.
Chinese policymakers know that for 50 years the United States has invested around 3% of GDP in R&D. It will take decades before China is on a par with America in innovation. But the Chinese have a clear long-term plan, a highly competitive domestic market that demands innovation, an increasingly high-quality higher-education system, an army of well-trained scientists in the overseas diaspora, and many overseas multinationals pouring money into R&D centers in China as the price of admission for market access.
Chinese know much more about America than vice versa. As Chinese state-owned enterprises upgrade their talent management and expand internationally, that is itself a competitive advantage. The Chinese understand what makes America competitive. They want the entrepreneurship, the innovativeness, and the wealth creation — without the political gridlock, underemployment, and demoralization. They can develop their large domestic market, to some extent independent of the travails of the global economy. And the Chinese understand that idle political scapegoating of China in a U.S. election year is the price of (and testimony to) their progress and potential.
The Chinese are patiently preparing for what many see as their manifest destiny to lead the world. After all, China is the world's most populous country. But you will hear few hubristic statements from Beijing. China knows it has a long road ahead. Holding all those U.S. Treasury bonds, it doesn't expect or want America to stumble any time soon. Whatever the CEO of Coca-Cola may say, the U.S. still places No. 5 on the World Economic Forum's national competiveness rankings; China ranks 26th. And among the world's most valuable brands, the U.S. accounts for 60, China for none. However, the Asian Century may just turn out to be all in and all done by 2050, not 2100, unless the U.S. can get its mojo back soon.