Jan. 23, 2023

ITIF: Wake Up, America: China Is Overtaking the United States in Innovation Capacity by Ian Clay and Robert D. Atkinson

The last decade was marked by dramatic evolution in China’s innovation capabilities and strategies, much of which was driven by the transition of Chinese Communist Party (CCP) and state leadership from Hu Jintao and Xi Jinping and the introduction of China’s latest major innovation policy framework: Made in China 2025 (MIC). This report updates an earlier ITIF report, applying more recent data to assess the progress China made during the previous decade with respect to the United States across a series of innovation indicators.1

Innovation means different things to different people, in part because there are so many different kinds of innovation. One kind is catch-up or copying innovation, wherein China has performed superbly. Another is new-to-the-world or frontier innovation. China’s capacity for the latter is one of the most important unknowns in the global economy. Many countries have tried and failed to make the transition from “imitator” to “innovator,” and China’s ability or inability to fully make that transition will largely define global geopolitical development in the decades to come. If China can surpass the United States in innovation—both catch-up and frontier—the global value chain (GVC) for the highest-value-added products stands to undergo a tremendous change. This would represent a serious economic and geopolitical challenge to the United States and its allies, particularly because of China’s predatory trade and innovation policy practices.

Read More