How Did China Become America’s Top Rival in 70 Years?

On this National Day, we reflect on how, in just 74 years, China has achieved what took other nations centuries. Its quest for self-reliance through adapted innovation continues. With initiatives like Belt and Road, it aspires to share the fruits of technology widely. As China enters a new era, its scientific development will shape not just the nation, but the world.
October 1, 2023
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Editor’s Note:

“Since the founding of the People’s Republic in 1949, China has overcome daunting challenges to achieve remarkable indigenous innovation and industrialization.
The initial model of development followed the Soviet approach – central planning, emphasis on heavy industry, and vocational education tied to sectoral needs. This yielded successes like nuclear weapons and satellite launches but faltered in raising living standards. With the reform and opening up, China tapped into market mechanisms while retaining a strategic, experimental approach.
Key to progress was enabling private enterprise and venture capital, which facilitated the rise of tech champions like Huawei and DJI. Public investment continued in foundational areas like Beidou. The hybrid model powered exponential growth in high-tech patents and publications.
Yet challenges remain. China has not yet produced transformative scientific breakthroughs on par with Einstein. Its education system struggles to cultivate young talent equipped for the 4th industrial revolution. Still, China forges ahead with characteristic resolve and coordination of state, enterprise, and academia.”

May 22, 2021, was a somber and cloudy day in Changsha when a poignant scene unfolded as thousands of people from all walks of life, with yellow chrysanthemums in hand, gathered to pay their final tribute to Yuan Longping, the crop scientist revered as the “father of hybrid rice” who developed the world’s first high-yield hybrid rice strain and saved millions from hunger.

As the line slowly moved forward, inch by inch, a sense of solemnity permeated the atmosphere. It was a moment of reflection, where the weight of loss mingled with profound gratitude for the scientist’s transformative impact. Millions of Chinese netizens joined these mourners on the internet to bid farewell to this old man, whose legacy serves as a testament to the resilience and defiance of Chinese people against the herculean challenges facing them. Few would remember, once upon a time, the world was wondering how China could ever be able to feed its enormous population, and protect them from hunger and want, with its meager arable lands.

Today, China has a grain-self-sufficient ratio of 100%. Behind the phenomenal success of hybrid rice is the remarkable story of industrialization and modernization propelled by scientific discoveries.

National security trumps all

When Mao proudly declared the founding of this People’s Republic, China was a war-torn nation and an agrarian society with almost non-existent infrastructure for industrialization. To address the daunting challenges in both security and development, China was seeking a quick fix and enlisted the Soviet Union for help. A few decades earlier, the Soviet Union had achieved rapid industrialization in one generation and transformed the country from a predominantly agrarian society into a leading industrial and military power. The Soviet mode of industrialization was featured by central planning, special emphasis (or over-emphasis, as demonstrated later) on heavy industry, and a higher education system to cater to its developmental needs.

Soviet higher education replaced the notion of university education with the concept of vocational–technical training, which focused on the pragmatism of practical skills and knowledge for each field of industry or social services. It’s deeply embedded in the national economy and combines two institutional types: comprehensive universities and specialized institutes/academies, e.g. colleges, especially for engineers, miners, teachers, and doctors. These colleges were subordinated to sectoral ministries and had a top-down administration.

Emulating the system, with aid from the Soviet Union, China quickly saw its fledging industrial capability and burgeoning science community working wonders. The testing of nuclear bombs and the launching of the nation’s first satellite in the 1960s and 70s marked milestones in this period of development and profoundly reshaped the security and geopolitical landscape of East Asia.

On April 24, 1970, China launched her first artificial Earth satellite, Dongfanghong-1;

On October 16, 1964, China’s first atomic bomb was successfully detonated.

In the same period, China has been making significant efforts to catch up with the rest of the world in technology. Alongside the high-yield hybrid rice developed by Yuan Longping, this period has witnessed several notable achievements: the launch of the first domestically-produced nuclear-powered submarine, the development of the first computer capable of storing several gigabytes of Chinese characters, and the introduction of the first quartz optical fiber, ushering in a new era in digital communication. Despite these remarkable advancements, China’s progress in science and industrialization encountered similar conundrums faced by the Soviet Union.

As a market economy didn’t exist, most of the discoveries were made in public institutions, directed and monitored by government agencies. And like the Soviets, the R&D of military technologies took priority over civilian applications. This strategy improved the national security condition but failed to raise the living standard of the average Chinese. When China finally emerged from decades of political turmoil at the end of the 1970s, it was astonished by the fact that the technology gap between itself and the leading economies in the world had widened to a shocking extent.

At this point, it has become clear that to unleash the full potential of 1 billion Chinese people at that time, China needs to rejoin the world and build a market economy.

The roaring 2000s

The value of private firms and venture capitalists in promoting technology innovation was widely appreciated by the authorities and society alike.

China’s venture capital industry has experienced remarkable development since its inception in 1985 when the government established the first venture capital corporation to support the emerging high-tech sector. The industry boomed in the 2000s, especially after the 2008 financial crisis when the government implemented favorable policies and injected a large amount of capital into the market.

By 2018, China became the second largest venture capital market in the world, with a high number of unicorns and a huge deal value, only behind the United States. Some analysts estimated that China will have overtaken the US as the world’s number one by 2020. The main drivers of China’s venture capital industry were the strong government support, the flourishing private sector, and the immense market demand.

The coming of age of homegrown venture capitals is not the sole legacy of the roaring 2000s. This decade has also witnessed the ascent of Chinese internet giants that rival their American counterparts in both market value and innovative prowess. Presently, apps such as TikTok, CapCut, and Temu, all crafted by Chinese firms, rank among the most popular globally.

If Chinese players are merely on par with their American counterparts in the internet industry, their real strength lies in combining technology innovations with their manufacturing prowess. They have significantly outperformed any competitors in the telecommunications and drone sectors. The dominance of HUAWEI in 5G technology is widely recognized, as evidenced by the all-out efforts of the US government to impede its further development. In the drone industry, DJI commands a staggering 70% of the global market share, solidifying its position as the largest drone manufacturer. In a distant second place, Intel captures a mere 4.1% share, closely followed by another Chinese firm, Yuneec, in third place with 3.6%.

At the same time, the academic output in STEM subjects measured by publications in the top journals by authors from Chinese institutions more than tripled in this decade. This trend continues and even accelerates in the second decade of the 21st century. In 2022, Chinese researchers published three times as many papers on artificial intelligence as the United States.

The quality of these scientific outputs also improves dramatically. China accounted for 27.2% of the most cited papers published in 2018, 2019, and 2020, and the United States for 24.9%.

Best of two worlds

In the popular narrative surrounding the Chinese economy, this was the watershed moment when China was reborn as a business-friendly market economy. However, reality is more nuanced. Especially in the realm of science and industrialization, China never places blind faith in the so-called invisible hand of the free market. The government instead adopts a rather hands-on approach when navigating the breathtaking developments of the technology revolution, driven by the mindset of an experimental scientist to find the right mix of solutions.

(121114) — ZHUHAI, Nov. 14, 2012 (Xinhua) — A model of the Beidou Satellite Navigation System is displayed during the 9th China International Aviation and Aerospace Exhibition in Zhuhai, south China’s Guangdong Province, Nov. 14, 2012. China began to construct the Beidou system in 2000 with a goal of breaking its dependence on the U.S. Global Positioning System by 2020. Authorities plan to launch a total of 30 satellites to complete the system, with the 16th satellite being launched last month.<br />
(Xinhua/Liang Xu)(wjq)

On one hand, public universities and institutions, as well as state-run enterprises, continue to play a central role in scientific research, particularly in major scientific projects with wide-ranging impacts, such as the Beidou system.

On the other hand, the government takes a step back when necessary, such as in the case of the internet & digital economy, leaving ample room for Chinese entrepreneurs to pursue their ventures and innovations through cycles of trial and error. The aim is to have the best of two worlds, as both industrial policy and market mechanisms are regarded as tools to attain strategic goals.

The results have exceeded the original expectations. In 2009, when the Ministry of Science & Technology announced its ambitious plan to nurture a car industry that could one day rival and surpass the West by focusing on electric vehicles (EVs), it was widely ridiculed and dismissed as impractical, bordering on daydreaming. Fourteen years later, China has emerged as the world’s largest exporter of cars and dominates the EV and lithium battery market. It is a prime example of a meticulous industrial plan with strategic foresight, combined with the vibrancy and entrepreneurial spirit of private enterprises.

The space industry is another well-known example of the concerted effort between government agencies, SOEs, and the private sector, forming a highly intricate ecosystem. The Beidou Navigation Satellite System alone claims an overall output value of 500.7 billion yuan in 2022, marking a significant 6.76% year-on-year growth. Core sectors directly involving satellite navigation technology and applications, such as chips, devices, algorithms, software, navigation data, terminal equipment, and infrastructure, saw an increased output of 5.05% totaling 152.7 billion yuan. This segment represented 30.50% of the total value.

The road ahead less traveled

Despite all these dazzling developments, according to many members of the Chinese science community, the country still falls short in one major arena. Despite making significant progress in science research, Chinese scholars have so far failed to produce any new knowledge that would fundamentally revolutionize the way we see our world. In other words, China has failed to produce its own Einstein.

Conversely, the Chinese education system has also struggled to produce enough young talents with practical skills and knowledge that would help them survive and thrive against the backdrop of the 4th Industrial Revolution. With all the talks of youth unemployment and labor shortage for emerging high-tech industries, the evident mismatch between education and the demands of the industry becomes strikingly apparent.

To expand the frontiers of human knowledge driven by the curiosity of scientists on the one hand, and to fuel economic growth by supplying young blood equipped with more down-to-earth, highly practical skills on the other hand, may initially seem contradictory pursuits. The question then arises: How can an education system reconcile these two objectives and deliver successful outcomes?

To address these challenges, the trio of governments, SOEs, and the private sector are on the move again. Depending on the scenarios, each of the 3 could take the lead.

To keep up with competition and the pace of innovation in today’s technology world, companies have rediscovered the merits of fundamental research, the research that asks and tries to answer the big questions, to unveil the ultimate secrets of the universe. Ren Zhengfei of HUAWEI has more than once stressed the significance of this type of scientific pursuit, as he supports and finances those studies seemingly without the potential of any practical application in the near future. He regards the discoveries made in labs as precursors of disruptive innovation in business and thus invests heavily in university labs around the world. As a result, his company pioneers a plethora of cutting-edge technologies. Without a doubt, the government also throws its full weight behind this conglomerate in these efforts.

In other areas, government agencies take on a leading role. High-level application-oriented universities, established across the country, collaborate closely with industries. China also undertakes major international scientific projects such as the Five-hundred-meter Aperture Spherical Radio Telescope (FAST) and the Tiangong space station, making them open to researchers worldwide.

It is easy to observe the similarities between this new generation of application-oriented universities and Germany’s Hochschule. China aspires to develop an advanced manufacturing industry that bears some resemblance to Germany’s but with the added advantage of its own strengths in IoT, 5G/6G, AI, and other areas, as well as the enormous scale of production and the vast domestic market.

What truly distinguishes China is its ability to mobilize vast resources and coordinate efforts toward long-term strategic goals. Additionally, it aims for the benefits of technological development to be shared more equitably among countries through various global initiatives encompassing trade, finance, infrastructure, and technology transfer.

If China were to succeed in these endeavors, a new world would emerge.

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