Taking innovation to the next level

Although China has shown remarkable determination and skill in organizing and deploying resources to meet key objectives, there are still significant barriers that continue to limit its people's creative capacity. Critics of China's patent process point out that below-par standards, poorly designed incentives and a focus on quantity over quality have created a system in which "patents are easy to file, but gems are hard to find". Some of China's brightest minds, such as ex-Google China chief Lee Kai-Fu, note that China's educational system trains its students to be very good at rote learning but "doesn't make them creative, original thinkers". Others point out that Internet censorship and a lack of cultural diversity creates an overwhelmingly homogeneous environment that isn't conducive to creative thinking.

To fuel the next wave of innovation, China needs to combine these impressive investments with behavior and a cultural mind-set that foster truly disruptive innovation. No doubt this is easier said than done, but several bright spots of innovation direct us to deep wells of creative potential that can be tapped within Chinese people and companies.

For example, five Chinese companies landed spots on our "World's Most Innovative Companies List", a joint collaboration with Forbes Magazine and HOLT (a division of Credit Suisse Group AG) that we have run for the past three years. Companies on our list are ranked by their innovation premium: the difference between their market capitalization and a net present value of cash flows from existing businesses.