The New China Playbook by Keyu Jin

Author:Keyu Jin [Jin, Keyu]
Language: eng
Format: epub
Publisher: Penguin Publishing Group
Published: 2023-05-16T00:00:00+00:00

Technological Leapfrogging

As we saw with industrialization, it turns out that starting out from behind conveys some surprising benefits. For one thing, a backward economy can adopt the latest technologies directly from advanced economies, thereby skipping all those long, slow, costly intermediary steps. Some developing countries have elected not to build broadband infrastructure, for example, putting their focus on mobile networks instead. Others are circumventing traditional consumer banks by going straight to mobile banking. And developing countries can also make the shift toward the technologies of renewable energy without having to build—and later discard—power plants based on fossil fuel. It is almost always easier to start from a clean slate than it is to demolish an existing structure in order to make way for the new.

When New York International Airport, today known as John F. Kennedy International Airport, was built in 1948, it was the most advanced airport of its time. Today it still functions, so it’s still in use, but its infrastructure is far from state-of-the-art. By contrast, in 1948, when JFK was under construction, Beijing was still relying on a converted military airport for domestic air travel, but today its Daxing airport has facial recognition security access, heating and cooling systems based on geothermal heat pumps, and radio frequency identification for baggage tracking. Tearing down JFK to build a smart airport like Daxing makes less sense given the heavy investment already made in the past. The obstacle of legacy is less about the ability to create new technologies than it is about escaping from old ones.

Because mature economies have extensive experience with old technologies, this often makes new ones seem less worthwhile—especially those that appear to offer only incremental benefits in the beginning. There is an argument to be made that sometimes the biggest barrier to creating something truly great is having something already good enough. Several decades ago, the US doubled down on its credit card payment network and became the most advanced player in the payment space. Being so invested in that system led the US to spend the last decade upgrading its bank-based magnetic strip cards into chips.[10] American consumers kept getting new credit cards in the mail from banks and credit card companies as the chips improved, and retailers kept upgrading their chip readers at the point of purchase, all at great expense. China, on the other hand, was free to ride the wave of a revolution in financial technology and create a totally new ecosystem of digital payments. As a result, Chinese consumers scan a QR code with their phones to pay instantly for purchases. And with a few clicks, Chinese consumers can pay, borrow, invest, or even purchase insurance products tailored to their specific needs. Having once been the front-runner, the US now lags far behind in digital payment technologies.

A further burden of legacy is that it creates powerful incumbents with deep-seated interests in maintaining the status quo. Kodak was the first company to develop the digital camera, but it intentionally held back for fear of losing its lucrative business selling rolls of film.

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