Moreover, will China start making transition from cheap labour, efficiency based economy to innovation based one. Does government is aware of that challenge or they try to execute strategy for old model, that used to work, but may not help to make that transition?
This is my biggest skepticism towards China. They are simply not an aspirational brand. Who says "I buy Vietnamese so someday I can buy Chinese"? No, they say "I buy Chinese so someday I can buy European."
It doesn't matter how much of my dad's semiconductor research they steal (>10,000 hacking attempts from China EVERY DAY at an IVY LEAGUE INSTITUTION), China will never be sexy. That's why Titans like Renren and Weibo are huge in China while almost nobody outside the Middle Kingdom could give a damn. Name one luxury product that says "Made in China" without being accompanied by "Designed in California."
If the Chinese government let go of their iron grip of culture, maybe something remotely approaching cool will come out of China, but that's a can of worms they would rather keep shut.
It should be no surprise that even Hong Kongers are openly racist towards mainlanders: China has no brand.
It seems entirely plausible to me that China is working through the same historical process. Consider the possibilities of Foxcon- they already manufacture the most desirable consumer devices in the world.
Foxconn does indeed produce excellent electronics, but they're largely designed elsewhere. Most Chinese-designed consumer products lack appeal outside of China.
The reason I harp on about culture is because it drives fashion. The Chinese government is so adamant about dictating culture that it stamps out the possibility for subcultures to grow and, most crucially, become popular outside the country. Just look at China's film industry. Actually, don't. I've seen what passes for Chinese film media and it could have been written by a machine, or one of those folks from 1984 who release the same book every few years with different character names.
Dissent gives rise to new culture: American blacks playing blues becomes classic rock, which becomes punk rock, and so on. A government focused on dictating culture in an age of information is like going to high school and still being dressed by your mom.
Meanwhile, peripheral - and far poorer - countries are having cultural booms as their popularity spreads around the globe. Singapore, Vietnam, Thailand, heck, not to mention India, all have widely appealing cultural products. If China can't become cool, then they'll remain a factory, subject to the whims of global finance and technology.
Much of Japan's industrial transformation came after massive US post WWII investment.
(Note: same happened in Germany as well).
(Don't get me wrong: The Great Firewall is not a good thing, but I don't see it being wholly relevant here.)
Typo? If China's devaluing yen, could you link me to a source?