Stimulating Chinese Innovation

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n late 2007, China surpassed the United States as the single largest contributor of greenhouse gases to the atmosphere.1 If this trend continues, China will increase its production of CO2 emissions at a rate faster than that of all the affluent countries of the world put together.2 Transportation and coal sources are responsible for a significant portion of these emissions, and their share will grow as China's citizens are increasingly able to afford their own cars and coal is converted to liquid transportation fuels (and used for other energy purposes).3

The automobile is at the heart of China's economic growth and modernization. The Chinese government designated cars a pillar industry in 1994, with remarkable results. Since the start of the new millennium, growing wealth has led to soaring car use that's remaking cities and lifestyles. If China follows America's car-centric model, it could by itself add another billion cars in the twenty-first century. These conventional cars would consume vast amounts of energy, dump billions of tons of carbon dioxide into the atmosphere, exacerbate social tensions, and demand massive new investments in roads. The result could be catastrophic for China and the world.

China, along with other emerging economies, is struggling with the downsides of rapidly increasing motorization. China's leaders are just beginning to realize that mindlessly embracing America's inefficient, oil-dependent transportation monoculture would be a huge mistake. Slowly they're recognizing that there are better ways of serving the demands of more than a billion travelers while at the same time enhancing citizens' quality of life. With very different economic, environmental, political, and demographic circumstances from the United States and other rich countries, China is positioned to take a different path, given the right stimulation.

There is much to despair of in China: pervasive pollution, soaring oil use and greenhouse gas emissions, huge pockets of poverty, escalating unemployment and crime, ongoing human rights violations, and much more.4 Sustainable development is hampered by resource, energy, and environmental constraints. Some 40 million farmers have lost their land to urban and industrial development. Income gaps between people, trades, regions, and industries are on the rise. There are far fewer jobs than workers, poverty levels are still unacceptably high, and low-income individuals have trouble putting food on their tables. Political corruption remains pervasive.

While any number of problems could derail China as it barrels forward, we focus on what good might come out of stimulating innovation in China. Through sheer desperation, but also out of its entrepreneurial spirit, China is indeed developing innovative products and services. As the world becomes more globalized, these innovations should spread internationally. The challenge is to merge China's innovativeness with government leadership to create something different and better. The question is how to guide the storm of innovation and entrepreneurialism in a way that supports the public interest of the Chinese people and—as China becomes more integrated into the larger world order—the interests of the entire globe.

China is certainly contributing to pollution and energy pressures, but it also could (and must) emerge as a world leader in easing those pressures. The immense, awakening Chinese market could single-handedly change the face of transportation forever. To promote progress, it's in the interest of the rest of the world to enthusiastically back China in its pursuit of a more benign transport-energy path. This is the most hopeful scenario for China's policy development. The chances of realizing this goal have much to do with financial incentives, technical assistance, and political pressure from the United States and other nations in the years to come. It will take creativity and resources, but the timing is right.

China's Extreme Makeover

China is in the midst of an unprecedented economic makeover. In recent years, the country's economy has catapulted to third largest in the world. From the ashes of a disastrous state-controlled society is emerging one of the world's most highly entrepreneurial economies. Rising affluence is leading to soaring motorization in a country that as recently as the mid-1990s relied almost exclusively on walking, biking, and bus for urban transport. China's auto industry and its cities are changing at lightning speed.

These rapid shifts are bringing enormous problems and challenges. Much is going wrong in China's booming economy. Environmental disasters are seemingly everywhere.5 The downside of motorization and a burgeoning auto industry is becoming painfully apparent. Still, China's economic dynamism and the sheer scale of growth provides fertile ground for new ideas and new initiatives—many of them squarely in the public interest and many of them transferable to other places. We'll explore a number of these innovations later, after surveying some of the vast and swift changes overtaking China.

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