A 20-month investigation into Chinese innovation capabilities across 10 advanced-technology industries has found that China is at the forefront of global innovation in two sectors and is closely trailing global leaders in four others. According to a new report by the Information Technology and Innovation Foundation (ITIF), which conducted the investigation, China's firms are making rapid progress and may equal or surpass the U.S. and other Western leaders within a decade.
ITIF's study assessed China's innovative capabilities in robotics, chemicals, nuclear power, semiconductors, display technologies, electric vehicles and batteries, artificial intelligence, quantum computing, biopharmaceuticals, and machine tools. ITIF will present its findings at a Capitol Hill briefing event on September 18.
“The prevailing view of China’s economy has long been that it is a production powerhouse but a mere copier that lacks the scientific and technological ability to develop groundbreaking innovations,” said ITIF President Robert D. Atkinson, who led the research. “But if China can develop new-to-the-world innovations ahead or on par with the United States and its allies in the West, its potential to displace them and gain a decisive global advantage becomes much more likely.”
The report indicates that China leads in nuclear power; is on par in electric vehicles and batteries; is near the lead in robotics, displays, artificial intelligence, and quantum; but lags behind in chemicals, machine tools, semiconductors, and biotechnology. Export controls have somewhat frustrated progress in semiconductors.
The report outlines potential consequences if China becomes the world’s innovation leader: shifting the center of global techno-economic power towards China. This shift could reduce China's vulnerability to Western sanctions while increasing its military capabilities and influence over developing nations. Conversely, this would erode the U.S. technology production base, devalue the dollar significantly or grow the U.S. trade deficit.
“China’s economic, trade, and technology policies are all about winning the war for global techno-economic power,” said Atkinson. “Few acknowledge that the United States is even competing for advanced industry dominance—or if they do, they think a U.S. victory is inevitable.”
ITIF’s analysis describes how China has developed an innovation system that enhances its advantages while degrading competitors'. To respond effectively, ITIF suggests adopting key elements of China's model and embracing "national power capitalism."
ITIF offers five key proposals for U.S. policymakers:
1. Triple the research and experimentation tax credit.
2. Institute a seven-year 25 percent investment tax credit for all new machinery and capital equipment.
3. Establish five national industrial research institutes focused on key industries.
4. Establish a "Competitiveness DARPA" to co-invest with industry on key technologies.
5. Establish a national industrial development bank for domestic manufacturing investment.
“Too many American policymakers simply refuse to believe what is right before their eyes,” said Atkinson. “While evidence suggests it hasn’t taken an overall lead yet, China is much more akin to where the Asian Tigers were 20 years ago.”
Contact: Sydney Mack
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