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Holding the banner high: Innovation, value chains, and competitiveness in a new era of global growth

By Gary Coleman - September 19, 2013

Gary with Mayor of TianjinThe World Economic Forum’s (WEF) Annual Meeting of the New Champions (AMNC, or Summer Davos) in Dalian, China, last week centered on the theme of innovation. With China’s growth no longer in the double digits, innovation and the energy it can bring to the world economy is looming large. Indeed, Chinese Premier Li Keqiang was emphatic in his remarks at the event’s opening plenary: “Innovation is the running theme and spirit of the policies adopted by the Chinese government, and it is the banner that we will always hold high.”

But innovation in a vacuum is meaningless, and Premier Li recognizes this. “We live in a global village” said Li. “No country can live in isolation of others like Robinson Crusoe.” Nowhere is this more true than when it comes to global value chains (GVC). Value chains are now the ties that bind countries together and bring public and private innovation to the world.

Consider this: the developing country share in global value-added trade increased from 20 percent in 1990 to over 40 percent today.  Economies with the fastest-growing GVC participation have GDP per capita growth rates 200 basis points above the average.  

The panel I moderated at Summer Davos, “Surviving Value Chain Shocks,” focused on the critical nature of value chains. Comprising experts in GVCs from both the business and public policy spheres, the panel discussed how to improve competitiveness by moving up the value chain. It also addressed the inherent risks of today’s far-reaching GVCs. 

It’s no coincidence that the very same factors that contribute to competitiveness also support access to GVCs as well as mitigate their risk. Infrastructure is one of WEF’s pillars in its evaluation of competitiveness and is critical to building and sustaining access to value chains. The pillar of higher education and training allows countries to move up the value chain by participating in high-end services such as research, new product development, and brand management. It also contributes to the quality control that can prevent reputation-threatening incidents along the value chain. 

The pillar of technological readiness is perhaps the most important. Enabling digital technologies allow players from anywhere in the world to participate in GVCs. And technology supports the data transparency that is now crucial to sustaining complex GVCs.

China right now is seeking to move up the value chain. Innovation—another competitiveness pillar—will be essential to achieving this. So it’s no wonder that from start to finish, the AMNC featured government officials and business executives from China touting reforms that promote innovation. At the closing ceremony, Vice Mayor Ren Xuefeng of Tianjin, where Summer Davos will take place next year, cited his own city’s focus on innovation. I had met earlier that day with the Vice Mayor (see photo above) to discuss plans for a joint Deloitte-Tianjin event at the 2014 AMNC—and I look forward to seeing how China’s reforms have unfolded this time next year. If implemented as talked about, a new era of global growth should certainly be under way.

Dttl_garycoleman_56x56 Gary Coleman is Managing Director, Global Industries, of Deloitte Touche Tohmatsu Limited. He will be heading the Deloitte delegation to the upcoming Annual Meeting of the New Champions 2013 (Summer Davos) , where he will be moderating the panel “Surviving Value Chain Shocks,” on 12 September. Follow him on Twitter @gcoleman_gary.


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