Is Nanotechnology helping China climb the Manufacturing Ladder?

China is not typically known for its highly advanced technology manufacturing. “A lot of the entrepreneurial activities around the Asia-Pacific have been great market-needs kinds of things, where people haven’t had to develop a lot of advanced technologies to be successful,” says Dr. Richard Dasher of the US-Asia Technology Management Center at Stanford University.

Traditionally, China’s reputation has been more closely linked to low cost manufacturing for multinational corporations.

But according to Dr. Lerwen Liu, an Asia-based nanotechnology expert, this model is slowly shifting. Thanks to public-private partnerships and developments in nanotechnology, Liu projects that within five to ten years, “China will compete in every part of the industry value chain, especially advanced manufacturing.”

Nanotechnology, put simply, “lets you manipulate atoms and molecules to make things you desire,” Liu explains. In the nanotechnology arena, China will increasingly develop higher performance, lighter weight products and devices from cellphone touchscreens to memory chips and batteries. Nanotechnology can be used in a number of fields to improve product efficiency, reduce costs and even promote sustainability efforts.

Part of this shift in manufacturing comes from the Beijing-based Chinese Academy of Sciences, which has helped incubate a number of new companies working in the field. An overall lack of research and development in Chinese companies, Liu says, has left a huge void for them to fill.  “A lot of Chinese universities have state-of the art equipment,” she explains. “But there’s a big gap between academic publications and industry adoption.” To this end, the Academy has played a key role in incubation.

Another integral part of this shift is a group of proactive “technopreneurs” who are helping China move up the manufacturing chain. “The key to success is the engineers, scientists and entrepreneurs on the ground,” she says. Many are Chinese “returnees” who were educated across the world and returned to China to take advantage of government incentives for businesses. “We see that more and more now, especially with decreasing funding in the US and Europe.”

The Chinese government is working hard to recruit top technical experts with business and venture experience. To make entrepreneurship easier, the government has invested in public-private partnerships and research parks to build up support ecosystems and infrastructure for start-ups. For new companies, the government absorbs a large share of their costs, including rent, research and development funds, and half their salaries.

The burn rate in China is also significantly lower than what is typical in Silicon Valley. Here, “the burn rate is roughly half a million monthly– in China it’s about 10 percent of that,” Liu says. “So it’s very easy to be profitable.”

Aside from government grants, Liu says venture capital is also relatively assessable in China today for high-tech entrepreneurs. “Financing is not a problem,” she says.  “If you have a good idea, it’s not an issue.”

Unfortunately, if that idea is very good, it can often be hard to protect it given the lack of intellectual property safeguards in China. To protect IP, Liu says the key is to “hire people you trust. Be very selective. Treat them well and retain them.”

And unlike the Japanese market, Liu sees Chinese entrepreneurs trying to go global from the very outset. “Chinese [companies] have a billion people market, and want to go global from day one,” she explains. “It’s a different mindset.”

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