Innovation is an institutional design

The efficiency innovation comes from the improvement of institutions and models. The past 30 years' fast economic growth in China is a result of its reform featuring in continuous institutional innovation.

The economic rise of Japan, South Korea and Singapore after World War II originated from their successes in continuous and efficient innovation. And if they want to go further, they have to compete with the US in market innovation, which is most costly.

The innovation initiatives of China, if well implemented, will see China enter into a new development phase. The "Internet+" provides China with such a chance to reshuffle and integrate its backbone industries.

The establishment of an apprentice system in workshops in 1880 ushered Germany onto the road of becoming the world's best manufacturer.

About seven million students graduate from technical schools in China each year. But most of them work on the assembly lines. They should play bigger roles in upgrading the industries.

China has world-class Internet and manufacturing enterprises. To realize the seamless converging between them, China also needs to improve the quality of its vocational education system, encourage independent and critical thinking, and cultivate an inclusive attitude to failures in innovation.

Second, the government should continue to play an active role in promoting innovations in the some areas that enterprises will not easily do, but benefit the people, such as the exploration of space.

Third, the government must watch carefully over funds earmarked for R&D, because corruption and bureaucratism, if unchecked, can erode not only the funds, but also people's belief in intellectual endeavors.

Last but not least, China must strengthen the protection of intellectual property rights through the rule of law, rather than only government action, and raise the public awareness that IPR protection benefits China in the long run.