Monthly Archives: July 2011

1 weibi = 1 yuan

With all the talk of the dollar being replaced by the euro or the yuan, one may have easily missed Weibo - among China’s largest micro-blogging sites – annoucing the launch of a virtual currency aptly named weibi.

Through this move the Chinese ‘Twitter’ is trying to generate some revenue from its impressive user base (estimated at 200 million). The curreny is equivalent to one yuan for each unit and users can use their bank accounts or online payment tool Alipay to top up their weibi account.

The introduction of fees Weibo runs the risk of antagonising the micro-blogging community and killing the golden goose. If that happens, it will always have the possibility to devaluate the weibi.

#29 in the Global Innovation Index

According to the annual report released by INSEAD, China now ranks #29 (up from #43) in the global innovation index – and #1 among developing countries.
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Source: INSEAD (2011) Global Innovation Index
As with many synthetic indexes, it is always worthwhile to dig further into the data. It turns out that China has a number of strengths and weaknesses. Among the former, the report lists patent applications, gross capital formation, high-tech imports and exports (a large majority are MNC-driven). Among the latter, one can find regulatory quality, press freedom and time to start a business. True enough, both business and market sophistication have notably increased over the years and so has scientific output.If China aims to reach the top 20 or higher it will have to wiork hard (and fast) on its institutions.

A new wind is blowing

Chinese wind turbines may not be as advanced in terms of technology as their overseas competitors’ but they are up to 30% cheaper. This explains partly how Chinese wind manufacturers emerged from nowhere – before 2006 there was no Chinese firm in the top 10 global manufacturers - and managed to capture a significant share in the world markets. Help from the government to develop “indigenous technology” and traditional market-for-technology probably explain the rest of the success.

In addition to selling turbines, a number of Chinese companies are taking further step by establishing themselves directly abroad. The Longyuan Power Group acquired rights to develop a 100 megawatt project in Canada. Sinowell just agreed on a EUR 1.5 billion investment to build a 1500 megawatt windfarm in Ireland and is exploring offshore farms in Greece. It is no surprise either that a couple of month ago, Sinovel released a 6 megawatt turbine prototype (with 128 meter blades in diameter) and announced it is working on a 10 megawatt turbine, the world’s largest.

The question now is how Western governments and companies can counter China’s succesful industrial policies.

Of cyberthreats and supply chains

Until recently the high level discussions between the United States and China focused on traditional issues of defense and economy. This year one of the topics addressed was cybersecurity.

While the concern on the Chinese side seems to be the policing of the network, the Americans worry increasingly about the protection of the network. In a nutshell, there is a concern that, as pointed out by a recent report of the conservative Heritage Foundation, “China could exploit its position as one of the world’s largest producers of computer chips, motherboards, and other physical parts of the Internet to affect infrastructure”. For James Mulvenon, the real problem is not about testing hardware at the point of entry (including third party certification) but rather controlling everything that takes place afterwards (e.g., remote maintenance and upgrades).

While some of the Washington hawks fret about network maintenance conducted from Shenzhen, I wonder what the Chinese do with the upgrades and patches from San Jose and Redmond.

Looking East, looking South

For sure it is hard to miss the growing relationship between China and Africa. Be it for natural resources (oil, copper or agricultural land) and infrastructure (construction of highways or railways), Chinese firms are now a common sight across the continent – part of the success of these partnerships is attributed to the fact that, unlike aid from the West, no particular conditionalities are attached to the deals.

According to Nature, China is now adding scientific collaboration to its vibrant trade relationship with Africa. An ambitious scheme launched in 2009 set the ground for scientific exchange, including funding for scientific projects (e.g., solar lighting in Tunisia, biogas in Ethiopia or hydropower in the Central African Republic) and scholarships for African students.

So far not all the objectives have been met but that shouldn’t be a real problem given China’s track record to plan and deliver. Like with any technology transfer (soft or hard) the real success will lie with the beneficiary’s capacity to appropriate the knowledge and make it work in a domestic context over the long run.