The Great Tech Rivalry: China vs the U.S.

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Executive Summary

To mark the arrival of the 21st century, in 1999 the National Academies of Science, Engineering, and Medicine offered an Olympian preview of the decades ahead. The Academy foresaw a world in which “yesterday’s science fiction [would] enter the marketplace: animal cloning, talking electronic road maps installed in automobiles, powerful computers as small as a pack of cigarettes.” Its Report declared that America’s “uniquely powerful system for creating new knowledge and putting it to work for everyone’s benefit” had been the primary engine of productivity growth in the 20th century and would likewise be the single largest determinant for the 21st century.

Rereading that report today, the elephant in the room it missed was China. In the future the Academy’s National Research Council envisioned, China hardly mattered. Reflecting the conventional wisdom of the era, Time Magazine’s special issue Beyond 2000 asserted confidently: “China cannot grow into an industrial giant in the 21st century. Its population is too large and its gross domestic product too small.” With a per capita income at roughly the same level as Guyana and the Philippines, most Chinese did not have enough money to buy advanced technology products—let alone the resources to invent them.

By 2010, this picture was beginning to change. China had grown into a low-cost manufacturing site for multinational companies and was on its way to becoming the manufacturing workshop of the world for mass market goods. But according to the dominant school of thought at the time, as noted by China scholar William Kirby in the Harvard Business Review, many believed “China [was] largely a land of rule-bound rote learners” that could only imitate, not innovate. Advances in information technology could only be made in free societies by free thinkers, not under an authoritarian regime behind a firewall, the logic went. So rampant were the issues of copycat software and shanzhai electronics in China that Microsoft famously abandoned its efforts to stem pirated copies of Windows.

Today, China’s rapid rise to challenge U.S. dominance of technology’s commanding heights has captured America’s attention. The rivalry in technology is what the Director of the Central Intelligence Agency, Bill Burns, spotlights as the “main arena for competition and rivalry with China.” It has displaced the U.S. as the world’s top high-tech manufacturer, producing 250 million computers, 25 million automobiles, and 1.5 billion smartphones in 2020. Beyond becoming a manufacturing powerhouse, China has become a serious competitor in the foundational technologies of the 21st century: artificial intelligence (AI), 5G, quantum information science (QIS), semiconductors, biotechnology, and green energy. In some races, it has already become No. 1. In others, on current trajectories, it will overtake the U.S. within the next decade.

President Xi Jinping has declared, “Technological innovation has become the main battleground of the global playing field, and competition for tech dominance will grow unprecedentedly fierce.” Emphasizing the need to “develop indigenous capabilities, decrease dependence on foreign technology, and advance emerging technologies,” the Chinese government’s most recent Five-Year Plan identifies key performance indicators, sets deadlines for outcomes, and holds provincial and local governments accountable for delivering results.

One of America’s most respected leaders in advancing and applying technology, Eric Schmidt, who led Google to become one of the world’s leading technology companies, has been candid about his views. Noting that “many Americans still have an outdated vision of China,” he believes “the United States now faces an economic and military competitor in China that is aggressively trying to close our lead in emerging technologies.” In his assessment: “Unless these trends change, in the 2030s we will be competing with a country that has a bigger economy, more research and development investments, better research, wider deployment of new technologies, and stronger computing infrastructure.”

To take stock of the state of the technology race, this report examines the progress made by the U.S. and China in each key technology over the past 20 years.

To begin with our bottom lines up front:

• In the advanced technology likely to have the greatest impact on economics and security in the decade ahead—AI—China is now a “full-spectrum peer competitor” in the words of Eric Schmidt.
• In 5G, according to the Pentagon’s Defense Innovation Board, “China is on a track to repeat in 5G what happened with the United States in 4G.” Despite advantages in 5G standards and chip design, America’s 5G infrastructure rollout is years behind China’s, giving China a first-mover advantage in developing the 5G era’s platforms.
• In quantum information science, America has long been viewed as the leader, but China’s national push presents a clear challenge. China has already surpassed the U.S. in quantum communication and has rapidly narrowed America’s lead in quantum computing.
• America retains its position of dominance in the semiconductor industry, which it has held for almost half a century. But China’s decades-long campaign to become a semiconductor powerhouse has made it a serious competitor that may soon catch up in two key arenas: semiconductor fabrication and chip design.
• The U.S. has seven of the ten most-valuable life sciences companies, but China is competing fiercely across the full biotech R&D spectrum. Chinese researchers have narrowed America’s lead in the CRISPR gene editing technique and surpassed it in CAR T-cell therapy.
• Though America has been the primary inventor of new green energy technologies over the past two decades, today China is the world’s leading manufacturer, user, and exporter of those technologies, cementing a monopoly over the green energy supply chain of the future. Consequently, America’s green push relies on deepening its dependence on China.
• China’s whole-of-society approach is challenging America’s traditional advantages in the macro-drivers of the technological competition, including its technology talent pipeline, R&D ecosystem, and national policies. As the National Security Council’s Senior Director for Technology and National Security Tarun Chhabra and the Center for Security and Emerging Technologies have recognized, “The United States is no longer the global science and technology (S&T) hegemon.”