There are few American heroes in Asia these days. Steve Jobs was the great exception, widely admired precisely because he is seen as a quintessentially American self-made man. To many fans, especially in China, the late Apple chief executive is an uncomfortable reminder that their country still has a long way to go before it can produce a figure with similar accomplishments and stature.
It is not clear what exactly it takes to produce a Steve Jobs, of course. But to those Chinese who wish to see their country develop the same entrepreneurial culture there are several ingredients missing, which mostly have to do with two areas: education and finance (notwithstanding the fact that Jobs was, famously, a college drop out).
The Chinese system still suffers from an emphasis on rote learning. That stifles creativity. Answers are to be learnt, not discovered. Today’s educational system implicitly encourages widespread copying, not just in exams but in everything from mobile phones to cancer research.
In north Asia, generally, hierarchy is still strong. Juniors rarely question their seniors, lest they appear to be insubordinate. At some symposia, questions are asked in order of seniority. Time usually runs out before junior participants have a chance to speak.
Moreover, Chinese universities, especially the first-tier ones, are part of the political system. University presidents are party members. Professors from China now teaching at institutions including Stanford and Yale say politics and party loyalty are as much a prerequisite for promotion as merit.
As a result, these professors say it will take as long as 50 years before institutions such as Tsinghua can compete with their American peers in their ability to foster real innovation.
The other big challenge is to ensure that good ideas get funding. Samsung, considered at the leading edge of Asian tech companies, started a venture capital arm as the Asian financial crisis was coming to an end. At the time, the company was fighting to survive and was forced to lay off engineers as it slashed costs. It discovered that many of those laid-off Samsung engineers were far more productive outside the embrace of the big company than they ever were in it and formed its venture fund to invest in the start-ups of its former staff.
China is also struggling with the challenge of making sure its entrepreneurs and smaller companies can get the funding they need. Today, China’s financial system is still structured around the needs and demands of the state-owned enterprises. These behemoths continue to get the bulk of bank loans, paying artificially low rates, even though they account for an ever-shrinking portion of economic output.
In a world where interest rates are tightly controlled, banks are reluctant to lend to small and medium enterprises let alone start-ups because they can’t charge enough to compensate for the risk and these companies lack adequate collateral.
The capital markets are still underdeveloped. The shadow banks are more akin to pawn shops or loan sharks for small companies and start-ups. While China has formed hundreds of private equity and venture funds – the most appropriate sources of funding for entrepreneurial start-ups – many of these seem at the moment to be more focused on raising funds than on finding the next Steve Jobs.
The difficulty for smaller companies and start-ups of obtaining money outside the shadow banking system where rates are artificially high has now become a matter of official concern. Last week, China’s State Council announced measures calling on banks to provide more credit to smaller enterprises, promised relaxed standards for lending and voiced support for alternative financing channels including venture capital.
Some of China’s most impressive financial minds, such as Gao Jian, a senior official at China Development Bank (and widely considered the father of the Chinese bond markets), have been working for a while now on innovative measures such as raising money in the capital markets through collective bonds in the name of China Development Bank itself and then distributing the proceeds to dozens of smaller, cash-starved companies.
If banks respond to the latest official measures, credit should ease marginally for smaller companies in coming months.
More and more Chinese themselves realise that it is time to change the template and that the old ‘c-c’ (copy in China) business model needs to change.
The admiration for Jobs is an indirect admission of that. It is vastly better than jaded Hong Kong, where a recent survey showed that the most admired person among young people in the territory was a truck driver who won the lottery.
Henny Sender is the Financial Times’ Chief Correspondent, International Finance
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