Prediction: China won’t settle for the $100 Sharper Image gift certificate in science
“China will not settle for the $100 Sharper Image gift certificate in science. As the West slashes budgets, China’s spending on R&D has tripled in the last 15 years. By 2020, it will be 2.5 percent of the country’s GDP—about the same as the United States. In 2011, China announced a $23 million plan to lure science superstars (Nobel Prize winners, professors, and the guy who invented Chicken and Waffles) to its shores. The United States did the same with Albert Einstein and others during World War II. It remains to be seen how the lure of cash compares to fear of persecution as motivator. The U.S. still leads the world in scientific publications and citations, but its share has dropped to 21 percent. From 1993 to 2008, China’s share has more than doubled to 10.2 percent”
What does all this mean for the future of U.S. innovation? We still have a great team, but our players are aging and competitors are getting better coaching. The risks of placing all our bets on the “knowledge economy” are starting to show. Others are on the verge of creative parity and have the means to build their creations. Brains and beauty is a deadly combination.
Econovation, 2011, p28
America Is Losing Its Edge for Startups, Oct 2018
The pattern is clear: The rise of the rest is occurring, and it is mainly occurring in cities outside the United States. Across the world, innovators and entrepreneurs are increasingly realizing that they no longer have to come to Silicon Valley or elsewhere in the U.S. to launch their startup, and they are more often starting their new companies at home.
As Hathaway and I outlined in the Wall Street Journal this past weekend, part of the reason is that other nations and global cities have gotten wise to America’s long-term advantage and increased their investments in universities and R&D; made their cities denser and more attractive; and worked hard to retain their talent at home and opened their borders to global talent. The eroding advantage of the U.S. is partly self-inflicted, because it has clamped down on immigration and become far less open to foreign entrepreneurs and innovators.
Thus, China’s response to the trade war is set to be carefully calibrated. Chinese companies are being told by Beijing to cut reliance on US technology and intellectual property in their supply chains, replacing them where possible with alternatives from Europe, Japan, Korea, Taiwan and elsewhere.
Although the United States still spends the most on R&D, China is on pace to overtake the United States soon, perhaps by the end of the year, according to the US National Science Board.
At the present pace China’s tech industry will be at parity with America’s in 10-15 years. This will boost the country’s productivity and create tech jobs.
Using the median of the yardsticks, its tech industry is 42% as powerful as America’s. But it is catching up fast. In 2012 the figure was just 15%.
Chinese firms are collectively 53% as big as America’s, measured by market value. China’s unicorns, a proxy for the next generation of giants, are in total worth 69% of America’s, and its level of VC activity is 85% as big as America’s based on money spent since 2016.
China’s population of AI experts is only 6% of the size of America’s (if you include anyone of Chinese ethnicity this rises to 16%) and the best minds still work in the United States, for example at Alphabet. But now the number of cited AI papers by Chinese scientists is already at 89% of the American level.
In recent years, China’s government has introduced initiatives aimed at increasing both entrepreneurship and innovation. It has shortened dramatically the process for forming a new company. It has built a vast number of schools, where Chinese children learn more about the world they will face. And it recently facilitated the entry of foreign experts to work on new projects in the business sector.
The authorities have also recognized the importance of allowing more competition in the economy.
“In the same time frame, higher education soared sevenfold: 7 million graduated college this year. The result is a generation both creative and comfortable with risk-taking. “We’re seeing people in their early twenties starting companies—people just out of school, and there are even some dropouts,” says Kai-Fu Lee, a Chinese venture capitalist and veteran of Apple, Microsoft, and Google, who has spent the past decade crisscrossing the nation, helping youths start firms. Now major cities are crowded with ambitious inventors and entrepreneurs, flocking into software accelerators and hackerspaces. They no longer want jobs at Google or Apple; like their counterparts in San Francisco, they want to build the next Google or Apple.”
China recently set the new record for filing the most patents in a year, growing its patent filings more rapidly than any other top 10 country.
“Chinese technology companies are now amongst the most valuable — and innovative — in the world. Facebook’s Chinese competitor, Tencent, eclipsed it in market capitalization in November, crossing the $500 billion mark. Tencent’s social-media platform, WeChat, enables bill payment, taxi ordering, and hotel booking while chatting with friends; it is so far ahead in innovation that Facebook may be copying its features. Other Chinese companies, such as Alibaba, Baidu, and DJI, are racing ahead in e-commerce, logistics, artificial intelligence, self-driving cars, and drone technologies. These companies are gearing up to challenge Silicon Valley itself.”
U.S.-trained Chinese-born talent is becoming a key force in driving Chinese companies’ global expansion and the country’s efforts to dominate next-generation technologies like artificial intelligence and machine learning. Where college graduates once coveted a prestigious overseas job and foreign citizenship, many today gravitate toward career opportunities at home, where venture capital is now plentiful and the government dangles financial incentives for cutting-edge research.