Why China Can’t Innovate

China has no lack of entrepreneurs, market demand, or wealth, but can the country succeed in its quest to become the world’s innovation leader? For nearly 40 years, the government has been establishing research programs and high-tech zones, encouraging domestic firms to boost their innovation capacity, and helping colleges and universities flourish. Recently it declared its intention to transform China into “an innovative society” by 2020 and a world leader in science and technology by 2050.|But against the government’s intentions and resources run some powerful currents. Communist Party representatives must be present in companies with more than 50 employees—a requirement that constrains competitive and entrepreneurial behavior. And many Chinese companies have found that the rewards for incremental improvements are so vast that there’s little incentive to pursue breakthroughs.|Certainly, China has shown a potential for innovation and has the capacity to do much more. But will the state have the wisdom to lighten up?