Nobel laureate warns of declining innovative spirit

The latest piece of advice from Nobel Prize-winning economist Edmund Phelps for China to promote innovation had to do with a group rarely mentioned in government documents or official languages: Chinese mothers.

Speaking at a forum in south China's Hainan Province, the Columbia University professor warned that lack of entrepreneurial spirit is impairing China's innovation drive and also overshadowing the economic recovery in the United States.

Citing a recent Wall Street Journal report, Phelps described many students in prestigious Chinese universities being encouraged by their mothers to find secure government jobs instead of venturing into businesses.

"That's bad, you don't want to go down that road. You want Chinese mothers to encourage an entrepreneurial, innovative life," Phelps said in a discussion session on Friday ahead of the Boao Forum for Asia, which will be held on the island of Hainan from April 6 to 8.

The economist saw huge room for innovative progress in China and suggested that the cultivation of an innovative spirit is key to unleashing that potential.

An important role is played by mothers, who should encourage their children to take some chances in a life of exploration and self development, he urged.

"A lot of startups are not doing well in China because the most educated people coming out of the universities are not becoming entrepreneurs. They are going to the government," said Phelps, who won the Nobel Prize in 2006 for research into the relationship between inflation and unemployment.

Chinese can demonstrate innovation only with encouragement from the whole society and if the government is willing to create necessary institutions, according to Phelps.

Chinese companies are operating at a sophisticated level all around the world and have the potential for innovation, he said, citing his experience of visiting a zipper factory in China in 2011, when he was surprised by the factory's international network and "incredibly innovative and beautiful" products.

He advised the government to help create more small, local banks and venture capital institutions catering to the needs of individual entrepreneurs so as to direct more Chinese savings to sectors with innovation.

He compared the current fallow situation for innovation in China to present conditions in the United States. Innovation has "slowed to a trickle" in the United States, which was the root cause of the economic slowdown in the country and was difficult to change, Phelps observed.

While some technical innovations in high-tech industries in the Silicon Valley are a bright spot, there is not as much of a spirit of adventure and discovery in the U.S. business world as there once was across the economy, he said.

The decline of desire to explore is central to lack of innovation in the United States, which led to weak business investment and productivity growth there, said the economist.

He predicted U.S. growth was unlikely to rebound to 4 percent or even 3 percent per annum and that a 2-percent or 2.2-percent growth will be a pleasing figure.

"Something is going wrong with the character of the population. The hope is that that can be changed," said Phelps.