Two weeks ago, SmartPlanet noted that China is moving away from simply being a great copier and manufacturer, as it emerges as a powerhouse of innovation. My colleague Andrew Nusca cited a Harvard Business Review story noting that, "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."
I don't doubt this trend for a second. For just one example, I'll point to something I wrote about last week: The Chinese are plowing resources into developing unconventional nuclear reactors that will eventually power their economic engine. Many other countries are merely equivocating at best in this same innovative area.
But over the last month or so, China's economic performance figures have stumbled. Manufacturing is contracting, according to the recent Purchasing Manager's Index, which fell to 49. The PMI is a key indicator of manufacturing activity, and a number below 50 indicates shrinkage.
Just as worryingly for Beijing, exports are in decline. Of course, that has a lot to do with the stagnant economies of China's major export markets like Europe and the United States.
But still, it's worth wondering whether China might somehow have more ability to keep its factories humming if it wasn't now spending considerable resources on research and development. Without R&D expenditures, it might even have the stomach to contribute to a European bail out - it recently turned down European leaders who came begging for hundreds of billions of euros.
Amid all of this, Chinese wages are rising and the country's emboldened people are increasingly striking and protesting for better pay, improved working conditions, and a cleaner environment. These hints of free speech slow down economic machines in the infamous autocracy, in a manner more familiar to the democracies of the West.
Maybe they are part of an incipient free thinking zeitgiest that also includes the open mindendness to innovate. That is, in the long run, a good thing. But in the near term, strictly speaking, it seems innovation can get in the way.
Stunning graphic: Mark Halper
More economic rumblings from China: