Entrepreneurial China

China Eye's contrarian view is that China is one of the most innovative and entrepreneurial countries in the world.

There were two Swedish MBA students visiting to understand more about China's economy, particularly from the perspective of intellectual property rights, or IPR.

"Why," asked the young lady, "Is China so backward on IPR issues?"

I looked at her in amazement. "Backward?" I exclaimed. "What do you mean? China is at the forefront of trends on intellectual property, it is forging a path to the future; it is pioneering new IPR business models for the new century."

Here is the pitch: Globally, retail sales of CDs have been slowly losing ground to online downloads of MP3 files. But in China, the listening public just circumvented the whole issue and went straight for MP3. The MP3 format for listening to music on Winamp through PC speakers was the standard in offices and homes across China in the late 1990s, years before that was the case in Des Moines or even Los Angeles, ages before the iPod was even a twinkle in Steve Jobs' eye.

Surely that is the sign of a pioneering and efficient system – it spots the technology and solution that will win out and concentrates on them, letting all other approaches drop away.

This is not a frivolous comment. The global music industry is struggling with how to deal with the technological shift that has taken place in the past decade, with the Internet and MP3 and downloads, and it is finding it hard to shed its old business models and preconceptions. There will always be a music business and consumers will always pay somehow for something, even if it is just convenience. But the revenue model of the future will not be a simple deal of shipping product to HMV stores and consumers are never going to assign the same value to a minute of music ever again.

China viscerally understands that in a way that the US as a whole does not yet. The result is that a lot of pioneering work is being done by people in the China music industry to seek out business models that work in the context of the new technology and consumer mindset. The US and the West in general will follow as the old world is allowed to die, in order to allow the new world to grow.

Many, maybe most, songs that are recorded in China these days are done so on the assumption that there will be no direct profit made on the retail sale of those tunes through CDs. But composers still compose songs, companies still sign artists and recording studios still churn out product.

The revenue event, the "point of sale,? has shifted along the line. It is no longer necessarily the consumer buying a physical item in a store. Who is the most popular pop star in China as I write? Zhou Jielun, a Taiwan hip-hop sort of Chinese Eminem-influenced brooding angular anti-pretty boy. I ask the first Chinese person sitting next me if she has ever heard his songs.

"Yes."

"Did you buy the CD? "

"No."

"Where did you hear them?"

"I downloaded the MP3s."

"So how does Zhou Jielun and his company make money?"

"Of course, concerts."

That's it. The new model is that recorded music is a promo for other activities. And China is leading the way.

From a national perspective, too, China exhibits a level of raw entrepreneurial talent that totally offsets the cliched image of stultifying state control. The stultification exists, of course, in terms of individual companies and individuals.

But as a holistic system, China is frighteningly entrepreneurial. Look at the way it grabs manufacturing contracts off other producers around the world, and how it reacts more swiftly than any other economic entity to changes in market conditions.

Take textiles. When the global quota system ended, China producers piled on the production, the West screamed, the producers started shipping product to Hong Kong and other places to shift the apparent place of origin.

It's just brilliant business strategy. Entrepreneurial and innovative, China is ahead of the curve.