By Doug Kelly, CEO, American Edge Project

An alarming new study finds that China has now surpassed the United States in total innovation output and is rapidly catching America in dozens of other innovation indicators. The majority of China’s gains were made in the past five years, demonstrating an acceleration of its ability to innovate. 

The report by the Information Technology and Innovation Foundation (ITIF) compared 22 indicators of the innovation cycle in the United States and China from 2010 to 2020, including basic innovation inputs and outputs such as venture capital and patents, as well as tangible economic performance. It also measured total innovation and proportional innovation, which adjusts for population size (China has 4.3 times more people than the United States). Key findings include:

  • China made across-the-board gains: In nearly every innovation indicator, the data shows China gaining ground or extending its lead over the United States. 
  • China dominates in total innovation output: China’s gross innovation and advanced-industry output in 2020 was 139 percent of that of the United States, up from 78 percent in 2010. 
  • China projected to surpass the United States by 2035: In proportional innovation (adjusted for population), China is now roughly 75 percent as advanced in innovation and advanced-industry production as the United States. If this growth continues apace, China will surpass the United States by 2035.
  • China leads big in key innovation areas: China is soundly beating the United States in top 500 supercomputers; mobile/broadband subscriptions; published articles on science, engineering, biotech topics; patents; licensing receipts; and several other areas.

The ITIF report notes that China is “evolving from an imitator to an innovator” and has already shown itself capable of leading the world in key strategic technologies, including high-speed rail and supercomputers. The report notes that China’s innovation capabilities will continue to increase, and to regain its leadership, the United States must respond more strategically and forcefully.

China’s innovation growth isn’t accidental. Over the past decade, it has invested trillions in developing its own technology and innovation capabilities including its “Made in China 2025” initiative to boost China’s advanced manufacturing capabilities, an “Internet Plus” plan (2016-2020) to modernize and digitize the country, and a rolling series of initiatives in semiconductors, quantum computing, and most recently, extended reality. As a result of these investments and China’s outright theft of $500 billion annually in intellectual property, China is overtaking the United States in numerous critical technology areas. 

China’s innovation gains present both national security and economic threats to the United States, as technology power increasingly translates into geopolitical power. If China bypasses the United States in the key strategic technologies of the future (A.I., quantum, 5/6G, extended reality, etc.), it can capture the trillions of dollars in economic value from global sales of advanced technologies, make the world increasingly dependent on its technology, and secure a critical military edge that would threaten the national security of the United States and our allies. 

ITIF’s study follows a separate news report earlier this week that claimed China may be on the edge of breaking today’s most complex encryption protocols using a mixture of quantum and traditional technologies. If true, China’s breakthrough would endanger every single country’s military, banking, and text communications. One expert called it “pretty disastrous.”

The ITIF report concludes by asking whether American policymakers will make this innovation challenge “the central organizing principle for U.S. economic and technology policy. Doing so requires the kinds of national organization and commitment America has been able to muster in the past, from Hamilton’s efforts to become technologically independent from England to Roosevelt’s ‘arsenal of democracy’ to the multi-administration effort to defeat the Soviet Union.”

The stakes are high in our competition with China. Congress, the administration, and government agencies should focus on helping accelerate American innovation, rather than passing anti-innovation bills that hand our technology edge to China. Because it matters greatly which country – and which set of values – builds the future.