By Alan Murray and Geoffrey Smith
December 8, 2017

Good morning.

The Fortune Global Forum wrapped up this morning in Guangzhou. You can read full coverage of the last four days here. I leave China with two big takeaways:

First, there is remarkable cutting-edge innovation happening here, and Western businesses ignore it at their peril. Whether it’s Alibaba Chairman Jack Ma’s $15 billion investment in R&D, Tencent CEO Pony Ma’s commitment to developing artificial intelligence, Haier Group CEO Zhang Ruimin’s innovative management methods and investment in the Internet of Things, or the interesting products of the five start-ups that won Fortune’s first China Innovation Awards, there are things happening here that are at the very forefront of business development. China may have built its economy by copying the West, but it is now vying for leadership in a number of key areas.

Second, government is helping drive that innovation. This is the part of the equation that is hardest for Americans to get our heads around. We tend to see government as a drag on business innovation. And even in China, if you look at the state-owned enterprises that still control the majority of economic activity, the government’s heavy hand is clearly retarding change.

But government leaders, like those in Guangzhou, now recognize that the future is being created by innovative startups, not by state-owned enterprises, and they are giving those start-ups money, help and attention. One of the most impressive moments of the conference came Thursday night, when drone company eHang, with the encouragement and support of the Guangzhou government, sent more than 1000 brightly lit drones into the sky over the city for a spectacular, computer coordinated light show, celebrating both Guangzhou and the Fortune Global Forum.

Chinese innovation has two big things going for it, said Zhou Wei, a former Kleiner Perkins partner who now runs his own VC firm in China. “The first is government, which wants to help startups. The second is 1.4 billion consumers, who want to try new things. Together, they create the world’s largest laboratory for learning.”

More news below – and enjoy the weekend.

Alan Murray
@alansmurray
alan.murray@fortune.com

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