Who Is Winning the AI Race: China, the EU, or the United States? — 2021 Update

The nations that lead in the development and use of artificial intelligence (AI) will shape the future of the technology and significantly improve their economic competitiveness, while those that fall behind risk losing competitiveness in key industries. As a result, more than 30 nations have created national AI strategies to improve their prospects. To date, the United States has emerged as the early frontrunner in AI, but China is challenging its lead.

This report examines the progress China, the European Union, and the United States have made in AI relative to each other in recent years and provides an update on a report released on their comparative rankings from 2019. It finds that the United States still holds a substantial overall lead, but that China has continued to reduce the gap in some important areas. In addition, the EU continues to fall behind. Absent significant policy changes in both the EU and United States—particularly the EU changing its regulatory system to be more innovation-friendly, and the United States developing and funding a more proactive national AI strategy—it is likely that the EU will remain behind both the United States and China, and that China will eventually close the gap with the United States.

In 2019, the Center for Data Innovation analyzed the AI capabilities of China, the European Union, and the United States using 30 metrics across 6 categories: talent, research, development, hardware, adoption, and data. We found that the United States led in four categories (talent, research, development, and hardware), and China led in two (adoption and data). Out of 100 total available points, the United States led with 44.2 points, followed by China with 32.3 and the European Union with 23.5.

This report measures the progress each region has since made in AI by using new data to update 15 of the metrics and add 1 new metric. It finds that the United States still leads, with 44.6 points, followed by China with 32.0 and the European Union with 23.3.
To get a sense of each region’s AI strengths in relation to their size, we also calculated scores for each metric by adjusting for the size of their labor forces. Controlling for size, the United States (58.0 points) leads the European Union (24.2) and China (17.8)—although China has narrowed the distance between itself and the United States since our last report.

Crucially, China has made incremental progress—reducing the gap or extending its lead over the United States in more than half of the updated metrics. In contrast, the EU has made progress relative to the United States in only slightly more than a quarter of the updated metrics. As such, the United States has maintained or expanded its lead over the European Union in nearly 75 percent of the updated metrics.

Despite China’s incremental improvement in many indicators, the United States has slightly increased its overall lead in our scoring system because it has performed extremely well on heavily weighted indicators, such as venture capital and private equity funding. For example, it has an unmatched number of AI start-ups, which received $8 billion more in venture capital and private equity funding than did China in 2019. The United States also performs well on several indicators in which China has narrowed the gap somewhat. One example is the research and development (R&D) spending of software and computer services firms. Chinese firms have clearly surpassed EU firms in R&D spending, but U.S. software and computer services firms still spent three times more on R&D than did China and the European Union combined in 2019. Furthermore, average U.S. research quality is still higher than that of China and the European Union. Lastly, despite China’s growing attempts to reduce its reliance on U.S. semiconductors, the United States is still the world leader in designing chips for AI systems.

China’s AI capabilities relative to the European Union and the United States have improved in several ways. First, China has surpassed the EU as the world leader in AI publications. Second, the quality of its AI research has generally trended upward year to year. Third, its software and computer services firms have increased their R&D spending. Fourth, China now has nearly twice as many supercomputers ranked in the top 500 for performance as the United States—the United States led in this indicator as recently as 2017. Finally, China likely continues to lead in the amount of data generated. Overall, however, China has not significantly reduced the gap in AI between itself and the United States, but its trend of consistent progress could eventually evaporate the U.S. lead.

The European Union’s progress vis-à-vis the United States is mixed. For example, U.S. AI firms continue to receive substantially more investment than do European ones. Yet EU venture capital and private equity funding as a percentage of U.S. funding grew from 13 percent to 22 percent between 2016 and 2019. In addition, the EU’s field-weighted citation impact (FWCI) for AI papers, a relative measure of paper quality, increased in 2018 while the United States’ FWCI decreased. But the European Union has fallen further behind the United States in terms of the number of funding deals, acquisitions of AI firms, and AI firms that have raised at least $1 million in funding since our last report. In addition, EU software and computer services firms have failed to close the gap between themselves and U.S. firms in R&D spending. The United Kingdom’s departure from the bloc will also diminish EU AI capabilities, both in absolute terms and on a per-capita basis.