China is making rapid advances in technology, but without reform in the education system and a culture tolerant of failure, it won't produce the next Steve Jobs, says technology entrepreneur Kai-Fu Lee in an interview with the BBC, as part of a series of features on challenges for China's new leaders.

What was the technology scene like in China when you went there in the late 1990s?

In 1998 I returned to China to work for Microsoft and start up technology research labs. Young Chinese people I met while in the US showed a lot of potential and were very hungry for success, very hard-working. I felt with my experience that I could help them realise their potential as well as to do great things for my employer.

How much has it changed since then?

In the late 1990s business leadership was lacking. Companies were being built, but leaders did not have enough experience to run them. Industries were much smaller and it felt like a backward country.

Fourteen years on, we see a very vibrant economy with powerful and successful companies led by leaders with experience. At that time, many companies were about pure manufacturing and now there are quite a few in the hi-tech sector. They are not in the forefront of the world, but they are capable companies with decent technology portfolios.

What capacity does China have to develop a truly creative technology industry?

Find out more Kai-Fu Lee is a Chinese-American technology entrepreneur

He is currently the CEO of China-based Innovation Works, a venture capital firm for Chinese technology start-ups

In 1998 he went to China to set up Microsoft Research Labs.

In 2005 he became founding president of Google China and stayed as its chief there until 2009

I think China is well on the path to becoming competitive with South Korea. Companies are able to come up with product concepts and understand user needs. But it will be much more difficult to catch up with the US - Silicon Valley.

Companies like Apple and Google are innovative from their very roots, built to change the world and with people willing to take big risks. The US has a culture tolerant of failure, driven by individual passion. Companies are not started to make money or make the founders a billionaire, but to build great technology.

China is in a state where entrepreneurs' major desire is to gain influence and wealth. It is still in a place where Chinese companies are understanding user needs and filling them rather than understanding user needs that users can't even articulate.

Before China gets to that level of innovation, it has to overcome a lot of issues that are cultural and about education, where there is emphasis on discipline and obedience. Silicon Valley, on the other hand is innovative, passionate, rebellious and fearless. Because of such differences, it will be difficult to produce a Steve Jobs or Mark Zuckerburg in China.

Can there be true innovation when society and politics is so top-down? What about censorship?

Innovation is a key part of the current as well as the next five-year plan so the government will have the opportunity to put resources into venture capital incubation, universities and research.

But there are some questions: you cannot force or decree innovation out of funding or planning. I think the current five-year plans will drive China to South Korea's level but it will probably fall short of reaching the true innovation that people like Jobs and Zuckerburg pioneered.

Censorship is a double-edged sword. On the one hand it limits what people can do but it also creates an environment where many American companies cannot or choose not to enter, thus reducing competition - so the market is open to local players.

What would you like China's new leaders do to encourage innovation?

I would like to see education reform, but done in an appropriate, gradual way so that the Chinese education system can retain all that is good about it, such as developing basic skills.

But it would be important to let in some Western influences so students are not just sitting in a room and following orders but learning to ask the key questions. The injection of critical thinking and curiosity is probably the most important thing I would hope to see.

I think the government should also put resources into letting experts make key decisions, because government bureaucrats can't possibly be experts on what companies to fund, what technologies to reward or even what kind of talent to educate or bring to China.

What is the power of microblogs in China?

China: internet and innovation China has 538 million internet users as of June 2012, according to a report by the China Internet Network Information Centre (CNNIC)

Among them, 388 million use the internet through smartphones

The Twitter-like weibo platforms had 170 million users as of June 2012, 24.2% up from the end of 2011.

Online banking users by June were up 14.8% from the end of 2011, totalling 191 million

Examples of Chinese technological innovations include: Beidou navigation system (China's rival to the the US GPS system), Digital Terrestrial Multimedia Broadcast - a digital TV standard

I wrote a book on microblogs changing China. It is something I thought would happen and it did. It created a platform for people to contribute their expressions, ideas, observations and share it all in real time.

Microblogs reflect current news events, social problems, unfairness in courts, local government corruption and information about events in the US, such as the presidential elections - all difficult to access before.

The state-owned press has one view, not multiple views, and microblogs opened people eyes and created a degree of relative freedom of speech and transparency. They even act as a kind of media check on government, because when media is state-owned it is difficult for them to perform that purpose.

Although microblogs have generated more criticism of the government, the authorities have also tended to respond in a constructive manner. And when government officials start their own microblogs, it brings them closer to the people.

What innovations might we see coming from China?

China is not likely to come up with next world-changing product. Innovation is likely to come from taking products that are already known and applying them in another context. I can see this working in areas where there is government support, in areas that do not require out-of-the box thinking but innovative trial and error, such as pharmaceuticals and alternative energy.

Software innovation is certainly possible. A company called Tencent has a very innovative product called "wechat" - an online communication system. It has reached 200m people in China already and is available in English.

Venture capital investment is also important - it has a very clever multi-phase approach so when funding runs out for a project, you make fresh decisions about its direction.

What do you think China might look like in 10 years?

That is a very difficult one to speculate about. There is a lot of pressure and desire for improvements in rule of law, greater representation and greater transparency. I would take an optimistic view - I think we will see progress.

There can always be unfortunate incidents and I can't assess the degrees to which these changes might take place. If you adopt a view that spans three or four years, progress might not appear significant, but if you adopt the longer view looking across eight to 10 years, there is likely to be progress on openness.