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Can China Innovate? — CEO Daily, Friday 22nd September

Good morning.

Can China innovate?

That was the question we addressed last night at a Fortune dinner in San Francisco. The three guests interviewed by my colleague Adam Lashinsky—Ying Wang of Fosun KZ Capital, Hans Tung of GGV Capital, and Jonathan Woetzel of McKinsey—all answered with an unqualified “yes.” China is no longer just a fast follower, they said. It is now at the cutting edge of innovation in many areas. Tung noted that one out of three “unicorns”—startups valued at more than $1 billion—is in China, not too far behind the 42% that are based in the U.S..

The panelists credited the world’s largest and most demanding consumer market, as well as a permissive regulatory environment, for driving innovation. Asked what new technologies developed in China would first make their way to Western markets, Tung cited dockless bike sharing and “biowearables”; Wang talked about an on-demand technology for doctors and hospital services; and Woetzel pointed to drone makers DJI and eHang.

Wang did note one downside to the innovation ecosystem in China—an education system that doesn’t encourage independent thinking and creativity. I’d add another: state owned enterprises whose government funding discourages risk-taking.

Burgeoning innovation in China is the reason Fortune is holding its first ever Brainstorm Tech International conference in Guangzhou in December, prior to the Fortune Global Forum. We’ll highlight innovative startups from across China who have developed businesses that have applications in the rest of the world.

Among the attendees confirmed for the Forum are the big five Chinese tech CEOs—Alibaba’s Jack Ma, Baidu’s Robin Li, and Tencent’s Pony Ma, Terry Gou of Foxconn, and Huawei’s Ken Hu. Others confirmed to attend include Stuart Gulliver of HSBC, Alex Gorsky of J&J, Carlos Brito of AB InBev, Denise Morrison of Campbell Soup, and Chuck Robbins of Cisco.

You can find more information about Brainstorm Tech International here, and the Fortune Global Forum here.

More news below, and enjoy the weekend.


Top News

North Korea Threatens Again

Kim Jong-un, after careful consideration, responded to Donald Trump’s UN speech by threatening to detonate a hydrogen bomb. There have been no above-ground nuclear detonations in the world since 1980. Such an exercise would be the ultimate proof of North Korea’s ability to deliver a nuclear payload via long-range missiles, a question which, for now at least, remains in some doubt. Kim also responded to Trump’s personal insults with some choice words of his own, continuing a richly entertaining game of nuclear-tipped “Yo’ Mama” jokes that the rest of the world somehow forgot to laugh at.  Time

Facebook Election Ads 

Facebook said it would turn over to special counsel Robert Mueller the details of 3,000 ads connected to last year’s elections that it thinks were paid for by Russian agents. Elliot Schrage, Facebook’s vice president of policy and communications, said it wouldn’t disclose details about the ads to the public, out of respect for advertisers’ privacy. It goes without saying that the $100,000 that Facebook reportedly received for the ads pales in comparison to overall spending on ads during the election. Fortune

Who Will Keep Angela Company After Sunday?

Germany goes to the polls this weekend, with Angela Merkel as good as assured a fourth term as chancellor. After Sunday, she’ll have more leeway to seek a rapprochement with President Trump without the fear of losing votes. Tax cuts are a near-certainty, which will help the Eurozone economy offset any slowdown in the U.S., but her chief efforts in a final term will be directed at making her migrant policy work, helping the car industry through the electric transition, and—if Emmanuel Macron can persuade her—making the Eurozone proof against future crises. Fortune

London Bans Uber

London’s transport regulator said it won’t renew Uber’s license at the end of the month, saying it wasn’t a “fit and proper” operator of a taxi service. Transport for London took issue with its sloppy background checks, the use of its Greyball software to deceive regulators, and with its selective reporting of crimes to the police. Uber, displaying its usual degree of self-awareness, responded that the move proved London “isn’t open to innovative companies.”  Fortune




Around the Water Cooler

L’Oréal in Play After Bettencourt’s Death

Lilian Bettencourt, who inherited control of cosmetics group L’Oreal and whose family foundation still controls one-third of its shares, died aged 94. Looking beyond the personal issues, her death will invite speculation over the future of the French company: Nestlé holds a 23% stake and has the rights of first refusal on the foundation’s shares if they are offered. According to Reuters, it can’t raise its stake in the company for six months. Fortune

HPE Plans 5,000 Job Cuts

Hewlett Packard Enterprise is planning to cut over 5,000 jobs, or some 10% of its staff, Bloomberg reported. It would be part of Meg Whitman’s drive to cut “layers” in the group as it seeks $1.5 billion in annual cost cuts. Fortune

Mercedes to Build EVs in Alabama

Mercedes-Benz said it will invest $1 billion in its plant in Tuscaloosa, Alabama, to make electric vehicles, creating some 600 jobs in the process. The company is playing catch-up with Tesla and will only start production of its new EQ series in two years’ time in Germany. Mercedes aims to offer an electric or hybrid version of all of its models by 2022. FT, metered access

Consolidation Coming Down the Track

Consolidation among the world’s train makers is taking a new twist. Siemens is reportedly close to choosing between Bombardier and Alstom as its preferred partner for its business, which makes Germany’s ICE expresses. A Franco-German tie-up would leave little room for competition among European rail operators, but none of the three is big enough on its own to compete in global markets with China’s CRRC. A spin-off would be another step in the gradual dismantling of Siemens’ long-cherished conglomerate model. Reuters

Summaries by Geoffrey Smith;