The Economic Model and Innovation System of Chinese State Sector

In this chapter, economic model and innovation system in the Chinese state sector are detailed. They operate in the similar way to the Germany leading coordinated market economies (the advanced European countries and Japan). The firms in both business systems have coordinated governance structure and both have coordination-based innovation system. Why do evidences show that the innovation system in the Chinese state sector is superior to the European model? Even though they both are coordination-based models, the coordination types are different from each other: In the Chinese state sector it is state coordination based on its controlling shareholding, while in European model it is institutional coordination. State coordination-based Chinese state strategic innovation appears to be more powerful than institutional coordination-based European Innovation. The success is manifest from the Chinese-made spacecraft and satellites, high speed trains, highly innovated infrastructure networks, and building up of the advanced 5G stations. The chapter focuses on how the economic model and innovation system were built up during the period from the mid-1990s to the middle of the first decade of 21st century.