Here's a news story you probably didn't see: "Creative enterprises hub to be established in Qianhai." You didn't see it because it ran in the Shenzhen Standard, an English-language newspaper in China's Guangdong province, slightly north of Hong Kong. The local government is investing $750 million to build a giant hub for design and other creative enterprises.

Americans assume that China will be hard-pressed to move up the food chain from commodity manufacturing into the high-tech creative domains of Silicon Valley. Arnold Wasserman, the design guru who co-founded The Idea Factory, disagrees: "They will eat our lunch."

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Design schools are popping up all over China. In fact, nearly a thousand programs were launched in the last decade, says Jeffrey Kapec, who teaches design at the Pratt Institute in New York. Every top design school in the United States has hosted a steady stream of students from China, most of them returning home. Experts like Wasserman are recruited to start design firms and run projects in China, Singapore, and other Asian nations.

Asians are a major presence in prestigious design competitions like the Spark Design and Architecture Award. Koreans, for example, took eight out of the top 10 places in the concept and student category this year. (Wasserman was a judge.)

China isn't there yet, and the world's most populous country must overcome political and perhaps cultural barriers before it will outdesign Silicon Valley. But "China has a huge advantage because government policy, from the central government and Communist Party right down to the cities, supports design and innovations in manufacturing. The U.S. is still stuck in the game of being afraid to pick winners and isn't likely to change," says Wasserman in a lengthy conversation with InfoWorld.

China knows design is more than inspiration

China has long excelled at quality control and just-in-time manufacturing. But the line between those engineering-oriented areas of expertise and what we normally call "design" is blurring.

Consider the iPhone. Although the inspiration was Apple's, much of the design that made it fit together so well came from designers at Apple's contract manufacturers. Recall the story recounted in the New York Times series on Apple: At the last minute, Apple CEO Steve Jobs decided the screen of the first iPhone should be made of glass, not plastic. The Chinese turned around the change in days.

It's easy to dismiss the feat as mere manufacturing expertise, but it's only true if you think design starts and stops at the front end of product development.

"What we call design is not a momentary flash of brilliance," argues Wasserman, whose design credentials include stints at Xerox (where he was vice president of corporate industrial design), Ideo, and the Pratt Institute. "It extends through the value chain from marketing insights, ethnographic studies, and actual design of the [product]. It is a looping, iterative process."

That's why the iPhone example is so instructive. Design happened at every step of the process, from Cupertino to China (an insight that takes nothing away from Apple design chief Jony Ive and his team).

While we all love the image of someone's eureka moment, great inventions are often the product of many brains and hands over a long period of time. In an essay he wrote in 2010, Wasserman argued that in a sense the iPad was already a 40-year-old-product at its release:

To understand how innovation actually happens, you have to know that the iPad is over 40 years old, not just in basic concept, but in almost every detail of functionality and user experience. You have to understand the position of the iPad in the context of the history of human-computer interaction and the graphical user interface.

To be clear, Wasserman is not minimizing Apple's genius; he is placing it in context.

China's weakness: Software and mobile apps

The Chinese government's stranglehold on its citizens' access to the Internet is not only a violation of their right to know, it is a significant roadblock to development of software, mobile apps, and Internet technologies, says Wasserman. "You can't work in isolation," he says.

For example, a Chinese engineer researching a product can be stymied by entering a keyword the Internet censors have chosen to block. At some point, you have to assume the government will catch on and loosen its restrictions, but until it does, Chinese developers are at a significant disadvantage.

There may be another, far subtler issue: culture. In an essay published in Fast Company, Jeffrey Kapec argued that industrial design thinking is still a new concept to contemporary Chinese. "At its most fundamental level, industrial design thinking is a challenge to the status quo. It's not a process to incrementally improve a product for the next generation," he wrote.

Kapec says Chinese companies think of design as a process in which they "take the positive attributes of two products and mash them together into a new product." I'm not at all sure that Kapec isn't indulging in a cultural stereotype, but it is fair to say the Chinese tech industry has yet to design a breakthrough product like the iPhone from start to finish.

This is not another Asian "threat" that will sputter

What's more, Asian countries have a history of challenging the United States in manufacturing and product design, then ultimately falling short. There was a period in the 1980s when Japan Inc., as people called it, seemed poised to gut the American economy. Japanese auto manufacturers and makers of consumer products outthought, outproduced, and outdesigned their American counterparts. "Sony was the Apple of the 1980s," says Wasserman.

When U.S. companies woke up, Wasserman and others went to Japan, clipboards and cameras in hand, itching to copy Japan's manufacturing techniques, particularly quality control. "We went to school on Japan," he says. Eventually the United States caught up, and Japan began a long economic slide that has yet to end.

That could happen again if the United States is willing to do the same in China. Design innovation is a critical part of the economy, so we'd better go back to school, in China this time. As Wasserman put it at the end of our conversation: "Design is the front end to innovation, which is the door to entrepreneurship, which is the engine to grow the economic sector with the highest value-add."