China already vies with the USA for Olympic gold. Will it similarly catch up in the innovation race? Chinese firms have come to dominate many manufacturing industries in the global marketplace. The Chinese leadership and some executives, however, have recognized the critical need for Chinese firms to be more innovative in order to break out of the low value-added segments that they occupy in most of these industries. The recent emphasis on “innovation” and “creative industries” is actually part of a long-term, continued effort to catch-up with leading nations. This presentation traces this effort and accomplishments, and then reviews the significant challenges for Chinese firms to move beyond their current fundamental strategy combining imitation and cost-innovation.