Report: China’s Closing the Innovation Gap

China is progressing more rapidly in innovation and advanced technology industries than the United States, according to a report published by Information Technology and Innovation Foundation today.

“In the span of about a decade, the Chinese economy has made dramatic progress in innovation relative to the United States,” Robert Atkinson, ITIF president and lead author of the report said in a statement. “Backed up by a powerful, unfair arsenal of state policies, China has evolved from an innovation-copier to a reverse innovator and now an innovator in its own right.”

The report concludes that China has done more than any other government in history to promote an innovation-based economy—and the implications could threaten its competitors.

“Given China’s Made in 2025 plan, [a strategic policy to upgrade its manufacturing capabilities and develop high-tech industries] coupled with unfair mercantilist policies, it is no exaggeration to suggest that, without aggressive action, leading economies such as Europe, Japan, Korea, and the United States will, within two decades, likely face a world wherein their advanced industry firms face much stiffer competition and have fewer jobs in industries as diverse as semiconductors, computers, biopharmaceuticals, aerospace, Internet, digital media, and automobiles,” the report said.

ITIF’s research, which looked at 36 different indicators over the last decade, suggests that China has closed the gap with the United States in multiple areas.

For example, in 2008 China produced only 12 of the world’s 500 most powerful supercomputers, compared to the 258 built by the U.S. By 2018, China built 227 of the top supercomputers across the globe, compared to 109 produced by America. Though China has drastically increased this production, the report does note that China’s supercomputers still tend to be less powerful than those built in the United States.

The study also suggests that research universities play a critical role in national innovation systems and the number of university degrees earned annually can be a key measure of future innovation capabilities. In this light, almost 7 million students obtain bachelor’s degrees in China annually—30% of which are in engineering versus 5% of U.S. students. China also increased its number of bachelor’s and master’s graduates from a total of 1.2 million in 2004 to 3.4 million in 2014.

China has also seen notable growth in computer science and engineering education. The country rose from 66% of U.S. levels in 2004 to 146% in 2014.

“In other words, as a share of its population, China produces 46 percent more computer science and engineering degrees than the United States,” the report said. “However, natural sciences and mathematics degrees have seen slower growth, increasing from 29 to 34 percent of U.S. levels over the same period.”

There’s also been an increase in patents granted to China. Between 2006 and 2016 the U.S. Patent and Trademark Office increased patents granted to the country from 1,066 to more than 11,000. The country also surpassed every other foreign nation in this measure except Taiwan, Germany, and Japan. Specifically, China has made significant progress in USPTO-issued patents in chemical and information communication technology fields and beyond.

High-speed rail is another apparent area of China’s rapid innovation. After developing an aggressive railway strategy in 2004, China’s rail output “grew more than six-fold to reach nearly triple that of the U.S. production” between 2006 and 2016.

Other indicators addressed in the report include industrial robot usage, leading innovation-based companies, and research and development investments, among others.

ITIF said America will need a major overhaul of national policies to “retain that mantle of leadership” in the technological space because there is no reason to believe China’s progress will slack over the next decade.

Just as it responded to Sputnik in the early 1960s, “[...] the United States must do more than join with allies to convince China to play by the rules, it must put in place its own robust national innovation and competitiveness strategy,” the report said.