The Australian Strategic Policy Institute (ASPI) recently released a report titled “The Global Race for Future Power,” which delivered a striking message: Western countries are losing the global technology race, with China leading in 37 out of the 44 technology areas they are tracking, including Artificial Intelligence, advanced materials, energy, and biotechnology.
While this report has sparked concern among industry players, it’s important to take a closer look at the data to better understand China’s position and what this means for the future of innovation.
Academic research metrics only represent one aspect of innovation:
China is playing an increasingly important role across all technology areas, but it might be premature to say that China is truly ahead or close to a Technology Monopoly as the report states. The report is based solely on academic research metrics and these only represent one of several aspects of innovation. It’s essential to look at other indicators of innovation to see the whole picture.
Still, it is undeniable that China’s technology output has advanced immensely in the last decade and a lot of Western companies recognize that and are keeping close tabs on the country’s position in the global technology race, and what is coming out of some of the main research institutes.
Excerpt of the lead country and technology monopoly risk as per the ASPI report (Source ASPI)
Is China truly ahead in scientific and academic research?
The report primarily focuses on high-impact research, analyzing the top 10% of highly cited papers and utilizing the h-factor to draw conclusions. The use of metrics such as citation count can be useful in measuring the impact of research, but they only represent one aspect of innovation and are not flawless.
Critics have highlighted that in the technology race, countries such as China may have a robust local-language journal ecosystem, which may suffer from citation inflation and not accurately represent truly impactful research.
Nevertheless, more efforts could be made to comprehend where impactful research originates from, by examining metrics such as conferences, keynote speakers, spin-offs created, and grants won. Although it may be challenging to give a definitive answer on who is leading in the technology race, the ASPI report demonstrates that Chinese authors and contributions should not be disregarded.
The global competition for talent:
One interesting analysis the report shared was the global competition for talent across different regions. The US benefits greatly from its institution’s prestige, capturing talent from all across the globe and virtually doubling the home-brewed talent coming from its undergrad pool.
This talent mostly stays in the country and finds employment there, playing a big role in where impactful innovation will come from. China is now recapturing some of the talent that goes abroad to complete post-graduate studies but has yet to fully close the gap on the deficit from the initial undergraduate talent pool.
The Global Competition for Research Talent (adapted from ASPI)
Local ecosystems and Chinese language journals:
At PreScouter, many clients have asked us if they are potentially missing out or could get a competitive advantage by surveying Chinese literature and learning about an innovation earlier. The answer: It depends. International journals are where most of the impactful research is published as they provide the biggest prestige and exposure. However, some authors might publish preliminary or early findings in Chinese journals first.
What I recommend is running a short study in your space to understand the dynamics. One approach is to take a fair sample from some of the most impactful publications from Chinese authors and track back their publication history to see if they were published in Chinese journals or even as a thesis before the international publication. This allows you to understand the true risk of ignoring that literature.
Patents – A leading indicator of impact beyond scientific publications:
If you’re looking for leading indicators of technological impact, look at patents. Patents capture not only the scientific output from academics but from corporations as well, with a much bigger focus on the commercial impact of those breakthroughs.
Patent Applications for the US and China in 2021 and change from 2020 (PreScouter – data source: WIPO)
Is China ahead on patents?
The perspective on China’s dominance in the technology race depends on how one chooses to view it. In terms of output, it is undeniable that China has been leading most key technology areas for a few years now. The Chinese Patent Office received almost half of the world’s patent applications in 2021.
However, measuring impact by quantity alone might not be the best approach. One would expect owners of truly transformative and groundbreaking technologies to protect them across different regions and not just in their home country.
Both China and the US share computer technology as the top field for patents. For example, let’s consider Artificial Intelligence (AI), an area with significant worldwide implications and high competition. Looking at all patents submitted by Chinese applicants, 90% of them are only protected in China. In contrast, around 45% of US patents are protected outside of the US.
Even in absolute numbers, Chinese applicants submitted almost three times the number of patents as US applicants did in 2021. Still, US applicants had almost 40% more international patents than Chinese ones. In my opinion, this indicates that the US is still ahead in this field.
Where each country’s applicants seek protection for their inventions. Data is for patent applications in 2021. (PreScouter – data source: Patsnap)
Another metric to consider is patent valuations. According to estimates, US assignees 2021 patents in the AI space were worth close to $8 billion, while China’s were valued at $3 billion. This once more suggests that the US is still ahead in this field. However, it’s worth noting that just two years before, Chinese patents were valued at only $1 billion, showing the meteoric rise of China in this space.
Embracing China’s innovation ecosystem:
China plays a critical role in the world stage of innovation. The country has become the second-largest spender on research and development, behind the US and ahead of the EU. The country has also seen an exponential increase in the number of innovation-related indicators, including patents, research articles, new companies created, and venture capital.
China boasts a dynamic innovation ecosystem, comprising diverse regional hubs, incubators, and funding entities, which may be challenging for outsiders to navigate. While it’s uncertain if China will surpass the US in the near future, the critical message is that overlooking China could be detrimental for any global enterprise.
