According to the ITIF, evidence suggests that Beijing has not yet taken the lead, but has gained the upper hand in some industrial areas, with Western companies likely to be overtaken by Chinese ones within a decade
China has reached a new stage in its economic development, with much greater innovation capabilities in its universities and domestic companies, and, for many innovation indicators, China now ranks ahead of the United States, says the Information Technology & Innovation Foundation (ITIF) in its latest report titled "China Is Rapidly Becoming a Leading Innovator in Advanced Industries."
China leads or is on par with global leaders in commercial nuclear power and electric vehicles and batteries. It lags behind for now in other key sectors, including robotics, biopharmaceuticals, chemicals, and AI. But it is making rapid progress.
GettyImages
According to the ITIF, the combination of low costs with a growing capacity for innovation is making a growing number of Chinese companies formidable global competitors. And this rapid progress in innovation is the result of the Chinese Communist Party's determined efforts to dominate global markets in a number of advanced sectors.
Although China's innovation system is not perfect, it is much more robust than previously thought and there are many aspects that the United States and its Allies should emulate.
What path for the West?
To enable these policies, America should embrace a “national power capitalism” suited to the current existential competition, the U.S. think tank prods.
There are four main challenges to making this intellectual transition. First, the world has never been confronted with a model such as China’s: a massive country dead set on practicing power trade to win in advanced industries. Too many American policymakers, experts, and pundits simply refuse to believe what is right before their eyes.
Second, the lion’s share of policy experts focused on China come from a national security or foreign policy background, not a techno-economic one. As such, the narrative and agenda are colored by these concerns. Case in point, the dominant argument for limiting Chinese imports is almost always about security, not preserving U.S. techno-economic capabilities.
Third, the strong commitment still by many to free-market capitalism, coupled with the emerging commitment to worker and climate capitalism, is likely to drown out voices and forces advocating for national power capitalism. Vastly more pundits, experts, and policymakers see climate change and reducing inequality—not China—as the existential challenges of the day. Moreover, even those who recognize a China threat, default to “doubling down” on support capitalism and the American system. We need to understand that this system has failed to address the China challenge. It is time to accept the reality that we need to construct a new national innovation system.
Finally, America has never been able to be on a “war” footing unless war came to America first (e.g., the American Revolutionary War, the War of 1812, the Civil War, WWI and WWII, and the Cold War with the Soviet Union fought in a series of proxy hot wars [e.g., South Korea, and Vietnam]). But each time war came, America responded with overwhelming productive force. But this time is different. At least in the last century, America never faced an adversary that could outproduce it. Now it does. Unfortunately, the odds are that America will not be able to get on techno-economic war footing absent a Chinese invasion of Taiwan.
This is problematic because the results of this study suggest that China has for the most part not caught up to the world’s innovation leaders, but that it is making extremely rapid strides and, absent some kind of external or internal shocks, is likely to be at or very close to the global innovation frontier in most advanced industries in the next 10 to 20 years. There are several implications for this, and the outcome depends in large part on Western nations’ responses.
“The government must identify key sectors that are critical to national power and invest appropriately to win the techno-economic war.”
To do this, America should establish five industrial research institutes, a “DARPA for Competitiveness” and an industrial development bank; triple the tax credit for research and experimentation; and establish a seven-year 25 percent credit for capital goods.
Comments