China Is Overtaking the United States in Innovation Capacity, New ITIF Report Finds

WASHINGTON—China has surpassed the United States in total innovation output and is getting close on a proportional basis, according to a new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy.

ITIF’s study concludes that China’s innovation and advanced-industry output in 2020 was 139 percent of the equivalent output in the United States, up from 78 percent in 2010. On a proportional basis (accounting for the size of its economy, population, and other factors), China’s innovation output in 2020 was 75 percent of the U.S. equivalent, up from 58 percent in 2010.

“China is evolving from an imitator to an innovator, following a path blazed by its Asian Tiger neighbors—but at a much larger scale, with far greater geopolitical consequences,” said ITIF President Robert D. Atkinson, who co-authored the report. “China has already shown itself capable of leading the world in several advanced technologies, such as supercomputers and high-speed rail. Its innovation capabilities now threaten the global market share of firms from the United States and allied nations in most high-value-added, advanced industries that are important to U.S. prosperity and security.”

ITIF performed a comparative analysis of 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, and tangible economic performance outcomes such as value added in advanced industries. In nearly every indicator, the data shows China gaining ground or extending its lead over the United States.

ITIF’s analysis found that China has been making the strongest and most widespread progress relative to the United States in its tangible innovation outputs, which include indicators such as science and engineering articles, international patent families (IPFs), and international intellectual property receipts. By the decade’s end, China published more scientific articles in all fields except geological, atmospheric, and oceanic sciences. However, data on the number of citations shows that its research is still less influential than the United States in all fields except mathematics and statistics. China also surpassed the United States in IPFs granted in every field.

China’s progress was mixed in economic indicators of innovation outcomes, which include production in high R&D industries, exports in advanced industries, supercomputers, and cybersecurity. However, China’s production and exports in high-R&D industries as a whole were increasing relative to the United States, as was its degree of specialization.

While ITIF’s analysis shows China is making steady progress as an innovator relative to the United States, it also faces several challenges that it must overcome to continue growing. Despite its enormous population, China is a middle-income country with imbalanced demographics. Only 44 percent of the mainland’s population is under 40, compared to 52 percent in the United States. China also became a less efficient economy over the last decade, with its total factor productivity declining 0.6 percent annually from 2010 through 2019, while the Chinese government’s increasing involvement in markets and resource allocation will likely deter future efficiency gains. Nonetheless, China may be well-positioned to overcome its productivity issues and eventually surpass the United States in efficiency.

“Many U.S. elites comfort themselves with the narrative that China cannot truly innovate, at least under Xi Jinping, so America has little to worry about. But their view of innovation is too narrow,” said ITIF policy analyst Ian Clay. “Simply assessing advanced-industry strength by counting the number of science-based, new-to-the-world products a country has developed is too narrow. There should be no call for complacency, given China’s recent gains in areas such as space exploration, genomics, artificial intelligence, and quantum computing.”

Atkinson added: “No matter how you measure it, China was successful in the previous decade in catching up with the United States. The key question for U.S. policymakers is not whether China will continue to make progress in innovation and advanced production. It clearly will. But how China performs relative to the United States will largely depend on U.S. actions—so the question is whether America will make this a central organizing principle for its economic and technology policy.”

Read the report.