Robin Li (L), Chairman and CEO of Baidu, chairs a breakfast meeting with the theme of "Dialogue: Technology & Innovation for a Sustainable Future" during the 2015 Boao Forum for Asia (BFA) in Boao, South China's Hainan province, March 29, 2015. Co-chair of the Bill & Melinda Gates Foundation Bill Gates (C) and CEO of Tesla Motors Elon Musk attended the meeting. [Photo/boaoforum.org]

The Central Committee of the Communist Party of China and the State Council, China's cabinet, jointly issued an important document recently encouraging people to overcome all institutional and psychological barriers to accelerate innovation-driven development, coupled with appropriate institutional and legal framework by 2020.

These changes mean free movement of talents, capital, technologies and knowledge, expediting the protection of intellectual property rights, and opening up industries to market competition and enhancing anti-monopoly enforcement to support small and medium-sized enterprises.

Sooner than even informed observers expect, China's will change from being the "world's factory" to the "world's hub of innovation". And the consequences will be global.

In the most recent global innovation index, China has been ranked 35th - even behind Malaysia, Latvia and Portugal. But comparing a country of 1.37 billion people with those of 2-30 million results in flawed interpretations. In China, the level of innovation is different in different regions. First-tier Chinese cities already compete for foreign investments in research and development and business services, whereas manufacturing-led investment is moving to third-and fourth-tier cities.

Indeed, since the early 1990s, Chinese growth has been fueled by increasing R&D investment. This year, China's R&D as percentage of GDP is expected to increase to almost 2.2 percent.

Today, China is eroding even the pre-eminent position of the risk-taking Silicon Valley as the home of the world's largest internet businesses, with two companies (Tencent and Baidu) making the top 10 by digital media revenue and four among the fastest-growing (for example, Qihoo and Sina).

Initial public offerings tell a similar story. In 2012, Facebook raised $16 billion of the total $21.5 billion. That pales in comparison with the historic $25 billion IPO of Alibaba, whose market value was estimated at $231 billion.

On average, China's innovation capabilities are catching up with advanced nations such as the Netherlands and Belgium and, more recently, the core euro economies, including France. Over the past decade, China's share of R&D spending has grown by a factor of 15, while spending has decreased in Europe (-1 percent) and North America (-6 percent).