Is China Winning the Innovation Race?
Flags of America and China illuminated by light bulbs with a question mark between them.
Over the past two millennia, Chinese ingenuity has spawned some of humanity's most consequential inventions. Without gunpowder, guns, bombs, and rockets; without paper, printing, and money printed on paper; and without the compass, which enabled ships to navigate the open ocean, modern civilization might never have been born.
Today, a specter is haunting the developed world: Chinese innovation dominance. And the results have been so spectacular that the United States feels its preeminence threatened.
Yet China lapsed into cultural and technological stagnation during the Qing dynasty, just as the Scientific Revolution was transforming Europe. Western colonial incursions and a series of failed rebellions further sapped the Celestial Empire's capacity for innovation. By the mid-20th century, when the Communist triumph led to a devastating famine and years of bloody political turmoil, practically the only intellectual property China could offer for export was Mao's Little Red Book.
After Deng Xiaoping took power in 1978, launching a transition from a rigidly planned economy to a semi-capitalist one, China's factories began pumping out goods for foreign consumption. Still, originality remained a low priority. The phrase "Made in China" came to be synonymous with "cheap knockoff."
Today, however, a specter is haunting the developed world: Chinese innovation dominance. It first wafted into view in 2006, when the government announced an "indigenous innovation" campaign, dedicated to establishing China as a technology powerhouse by 2020—and a global leader by 2050—as part of its Medium- and Long-Term National Plan for Science and Technology Development. Since then, an array of initiatives have sought to unleash what pundits often call the Chinese "tech dragon," whether in individual industries, such as semiconductors or artificial intelligence, or across the board (as with the Made in China 2025 project, inaugurated in 2015). These efforts draw on a well-stocked bureaucratic arsenal: state-directed financing; strategic mergers and acquisitions; competition policies designed to boost domestic companies and hobble foreign rivals; buy-Chinese procurement policies; cash incentives for companies to file patents; subsidies for academic researchers in favored fields.
The results have been spectacular—so much so that the United States feels its preeminence threatened. Voices across the political spectrum are calling for emergency measures, including a clampdown on technology transfers, capital investment, and Chinese students' ability to study abroad. But are the fears driving such proposals justified?
"We've flipped from thinking China is incapable of anything but imitation to thinking China is about to eat our lunch," says Kaiser Kuo, host of the Sinica podcast at supchina.com, who recently returned to the U.S after 20 years in Beijing—the last six as director of international communications for the tech giant Baidu. Like some other veteran China-watchers, Kuo believes neither extreme reflects reality. "We're in as much danger now of overestimating China's innovative capacity," he warns, "as we were a few years ago of underestimating it."
A Lab and Tech-Business Bonanza
By many measures, China's innovation renaissance is mind-boggling. Spending on research and development as a percentage of gross domestic product nearly quadrupled between 1996 and 2016, from .56 percent to 2.1 percent; during the same period, spending in the United States rose by just .3 percentage points, from 2.44 to 2.79 percent of GDP. China is now second only to the U.S. in total R&D spending, accounting for 21 percent of the global total of $2 trillion, according to a report released in January by the National Science Foundation. In 2016, the number of scientific publications from China exceeded those from the U.S. for the first time, by 426,000 to 409,000. Chinese researchers are blazing new trails on the frontiers of cloning, stem cell medicine, gene editing, and quantum computing. Chinese patent applications have soared from 170,000 to nearly 3 million since 2000; the country now files almost as many international patents as the U.S. and Japan, and more than Germany and South Korea. Between 2008 and 2017, two Chinese tech firms—Huawei and ZTE—traded places as the world's top patent filer in six out of nine years.
"China is still in its Star Trek phase, while we're in our Black Mirror phase." Yet there are formidable barriers to China beating America in the innovation race—or even catching up anytime soon.
Accompanying this lab-based ferment is a tech-business bonanza. China's three biggest internet companies, Baidu, Alibaba Group and Tencent Holdings (known collectively as BAT), have become global titans of search, e-commerce, mobile payments, gaming, and social media. Da-Jiang Innovations in Science and Technology (DJI) controls more than 70 percent of the world's commercial drone market. Of the planet's 262 "unicorns" (startups worth more than a billion dollars), about one-third are Chinese. The country attracted $77 billion in venture capital investment between 2014 and 2016, according to Fortune, and is now among the top three markets for VC in emerging technologies including AI, virtual reality, autonomous vehicles, and 3D printing.
These developments have fueled a buoyant techno-optimism in China that contrasts sharply with the darker view increasingly prevalent in the West—in part, perhaps, because China's historic limits on civil liberties have inured the populace to the intrusive implications of, say, facial recognition technology or social-credit software, which are already being used to tighten government control. "China is still in its Star Trek phase, while we're in our Black Mirror phase," Kuo observes. By contrast with Americans' ambivalent attitudes toward Facebook founder Mark Zuckerberg or Amazon's Jeff Bezos, he adds, most Chinese regard tech entrepreneurs like Baidu's Robin Li and Alibaba's Jack Ma as "flat-out heroes."
Yet there are formidable barriers to China beating America in the innovation race—or even catching up anytime soon. Many are catalogued in The Fat Tech Dragon, a 2017 monograph by Scott Kennedy, deputy director of the Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies. Among the obstacles, Kennedy writes, are "an education system that encourages deference to authority and does not prepare students to be creative and take risks, a financial system that disproportionately funnels funds to undeserving state-owned enterprises… and a market structure where profits can be made through a low-margin, high-volume strategy or through political connections."
China's R&D money, Kennedy points out, is mostly showered on the "D": of the $209 billion spent in 2015, only 5 percent went toward basic research, 10.8 percent toward applied research, and a massive 84.2 percent toward development. While fully half of venture capital in the States goes to early-stage startups, the figure for China is under 20 percent; true "angel" investors are scarce. Likewise, only 21 percent of Chinese patents are for original inventions, as opposed to tweaks of existing technologies. Most problematic, the domestic value of patents in China is strikingly low. In 2015, the country's patent licensing generated revenues of just $1.75 billion, compared to $115 billion for IP licensing in the U.S. in 2012 (the most recent year for which data is available). In short, Kennedy concludes, "China may now be a 'large' IP country, but it is still a 'weak' one."
"[The Chinese] are trying very hard to keep the economy from crashing, but it'll happen eventually. Then there will be a major, major contraction."
Anne Stevenson-Yang, co-founder and research director of J Capital Research, and a leading China analyst, sees another potential stumbling block: the government's obsession with neck-snapping GDP growth. "What China does is to determine, 'Our GDP growth will be X,' and then it generates enough investment to create X," Stevenson-Yang explains. To meet those quotas, officials pour money into gigantic construction projects, creating the empty "ghost cities" that litter the countryside, or subsidize industrial production far beyond realistic demand. "It's the ultimate Ponzi-scheme economy," she says, citing as examples the Chinese cellphone and solar industries, which ballooned on state funding, flooded global markets with dirt-cheap products, thrived just long enough to kill off most of their overseas competitors, and then largely collapsed. Such ventures, Stevenson-Yang notes, have driven China's debt load perilously high. "They're trying very hard to keep the economy from crashing, but it'll happen eventually," she predicts. "Then there will be a major, major contraction."
"An Intensifying Race Toward Techno-Nationalism"
The greatest vulnerability of the Chinese innovation boom may be that it still depends heavily on imported IP. "Over the last few years, China has placed its bets on a combination of global knowledge sourcing and indigenous technology development," says Dieter Ernst, a senior fellow at the Centre for International Governance Innovation in Waterloo, Canada, and the East-West Center in Honolulu, who has served as an Asia advisor for the U.N. and the World Bank. Aside from international journals (and, occasionally, industrial espionage), Chinese labs and corporations obtain non-indigenous knowledge in a number of ways: by paying licensing fees; recruiting Chinese scientists and engineers who've studied or worked abroad; hiring professionals from other countries; or acquiring foreign companies. And though enforcement of IP laws has improved markedly in recent years, foreign businesses are often pressured to provide technology transfers in exchange for access to markets.
Many of China's top tech entrepreneurs—including Ma, Li, and Alibaba's Joseph Tsai—are alumni of U.S. universities, and, as Kuo puts it, "big fans of all things American." Unfortunately, however, Americans are ever less likely to be fans of China, thanks largely to that country's sometimes predatory trade practices—and also to what Ernst calls "an intensifying race toward techno-nationalism." With varying degrees of bellicosity and consistency, leaders of both U.S. parties embrace elements of the trend, as do politicians (and voters) across much of Europe. "There's a growing consensus that China is poised to overtake us," says Ernst, "and that we need to design policies to obstruct its rise."
One of the foremost liberal analysts supporting this view is Lee Branstetter, a professor of economics and public policy at Carnegie Mellon University and former senior economist on President Barack Obama's Council of Economic Advisors. "Over the decades, in a systematic and premeditated fashion, the Chinese government and its state-owned enterprises have worked to extract valuable technology from foreign multinationals, with an explicit goal of eventually displacing those leading multinationals with successful Chinese firms in global markets," Branstetter wrote in a 2017 report to the United States Trade Representative. To combat such "forced transfers," he suggested, laws could be passed empowering foreign governments to investigate coercive requests and block any deemed inappropriate—not just those involving military-related or crucial infrastructure technology, which current statutes cover. Branstetter also called for "sharply" curtailing Chinese students' access to Western graduate programs, as a way to "get policymakers' attention in Beijing" and induce them to play fair.
Similar sentiments are taking hold in Congress, where the Foreign Investment Risk Review Modernization Act—aimed at strengthening the process by which the Committee on Foreign Investment in the United States reviews Chinese acquisition of American technologies—is expected to pass with bipartisan support, though its harsher provisions were softened due to objections from Silicon Valley. The Trump Administration announced in May that it would soon take executive action to curb Chinese investments in U.S. tech firms and otherwise limit access to intellectual property. The State Department, meanwhile, imposed a one-year limit on visas for Chinese grad students in high-tech fields.
Ernst argues that such measures are motivated largely by exaggerated notions of China's ability to reach its ambitious goals, and by the political advantages that fearmongering confers. "If you look at AI, chip design and fabrication, robotics, pharmaceuticals, the gap with the U.S. is huge," he says. "Reducing it will take at least 10 or 15 years."
Cracking down on U.S. tech transfers to Chinese companies, Ernst cautions, will deprive U.S. firms of vital investment capital and spur China to retaliate, cutting off access to the nation's gargantuan markets; it will also push China to forge IP deals with more compliant nations, or revert to outright piracy. And restricting student visas, besides harming U.S. universities that depend on Chinese scholars' billions in tuition, will have a "chilling effect on America's ability to attract to researchers and engineers from all countries."
"It's not a zero-sum game. I don't think China is going to eat our lunch. We can sit down and enjoy lunch together."
America's own science and technology community, Ernst adds, considers it crucial to swap ideas with China's fast-growing pool of talent. The 2017 annual meeting of the Palo Alto-based Association for Advancement of Artificial Intelligence, he notes, featured a nearly equal number of papers by researchers in China and the U.S. Organizers postponed the meeting after discovering that the original date coincided with the Chinese New Year.
China's rising influence on the tech world carries upsides as well as downsides, Scott Kennedy observes. The country's successes in e-commerce, he says, "haven't damaged the global internet sector, but have actually been a spur to additional innovation and progress. By contrast, China's success in solar and wind has decimated the global sectors," due to state-mandated overcapacity. "When Chinese firms win through open competition, the outcome is constructive; when they win through industrial policy and protectionism, the outcome is destructive."
The solution, Kennedy and like-minded experts argue, is to discourage protectionism rather than engage in it, adjusting tech-transfer policy just enough to cope with evolving national-security concerns. Instead of trying to squelch China's innovation explosion, they say, the U.S. should seek ways to spread its potential benefits (as happened in previous eras with Japan and South Korea), and increase America's indigenous investments in tech-related research, education, and job training.
"It's not a zero-sum game," says Kaiser Kuo. "I don't think China is going to eat our lunch. We can sit down and enjoy lunch together."
Chicken that is grown entirely in a laboratory, without harming a single bird, could be sold in supermarkets in the coming months. But critics say the doubts about lab-grown meat have not been appropriately explored.
Last November, when the U.S. Food and Drug Administration disclosed that chicken from a California firm called UPSIDE Foods did not raise safety concerns, it drily upended how humans have obtained animal protein for thousands of generations.
“The FDA is ready to work with additional firms developing cultured animal cell food and production processes to ensure their food is safe and lawful,” the agency said in a statement at the time.
Assuming UPSIDE obtains clearances from the U.S. Department of Agriculture, its chicken – grown entirely in a laboratory without harming a single bird – could be sold in supermarkets in the coming months.
“Ultimately, we want our products to be available everywhere meat is sold, including retail and food service channels,” a company spokesperson said. The upscale French restaurant Atelier Crenn in San Francisco will have UPSIDE chicken on its menu once it is approved, she added.
Known as lab-grown or cultured meat, a product such as UPSIDE’s is created using stem cells and other tissue obtained from a chicken, cow or other livestock. Those cells are then multiplied in a nutrient-dense environment, usually in conjunction with a “scaffold” of plant-based materials or gelatin to give them a familiar form, such as a chicken breast or a ribeye steak. A Dutch company called Mosa Meat claims it can produce 80,000 hamburgers derived from a cluster of tissue the size of a sesame seed.
Critics say the doubts about lab-grown meat and the possibility it could merge “Brave New World” with “The Jungle” and “Soylent Green” have not been appropriately explored.
That’s a far cry from when it took months of work to create the first lab-grown hamburger a decade ago. That minuscule patty – which did not contain any fat and was literally plucked from a Petri dish to go into a frying pan – cost about $325,000 to produce.
Just a decade later, an Israeli company called Future Meat said it can produce lab-grown meat for about $1.70 per pound. It plans to open a production facility in the U.S. sometime in 2023 and distribute its products under the brand name “Believer.”
Costs for production have sunk so low that researchers at Carnegie Mellon University in Pittsburgh expect sometime in early 2024 to produce lab-grown Wagyu steak to showcase the viability of growing high-end cuts of beef cheaply. The Carnegie Mellon team is producing its Wagyu using a consumer 3-D printer bought secondhand on eBay and modified to print the highly marbled flesh using a method developed by the university. The device costs $200 – about the same as a pound of Wagyu in the U.S. The initiative’s modest five-figure budget was successfully crowdfunded last year.
“The big cost is going to be the cells (which are being extracted by a cow somewhere in Pennsylvania), but otherwise printing doesn’t add much to the process,” said Rosalyn Abbott, a Carnegie Mellon assistant professor of bioengineering who is co-leader on the project. “But it adds value, unlike doing this with ground meat.”
Lab-Grown Meat’s Promise
Proponents of lab-grown meat say it will cut down on traditional agriculture, which has been a leading contributor to deforestation, water shortages and contaminated waterways from animal waste, as well as climate change.
An Oxford University study from 2011 concludes lab-grown meat could have greenhouse emissions 96 percent lower compared to traditionally raised livestock. Moreover, proponents of lab-grown meat claim that the suffering of animals would decline dramatically, as they would no longer need to be warehoused and slaughtered. A recently opened 26-story high-rise in China dedicated to the raising and slaughtering of pigs illustrates the current plight of livestock in stark terms.
Scientists may even learn how to tweak lab-grown meat to make it more nutritious. Natural red meat is high in saturated fat and, if it’s eaten too often, can lead to chronic diseases. In lab versions, the saturated fat could be swapped for healthier, omega-3 fatty acids.
But critics say the doubts about lab-grown meat and the possibility it could merge “Brave New World” with “The Jungle” and “Soylent Green” have not been appropriately explored.
A Slippery Slope?
Some academics who have studied the moral and ethical issues surrounding lab-grown meat believe it will have a tough path ahead gaining acceptance by consumers. Should it actually succeed in gaining acceptance, many ethical questions must be answered.
“People might be interested” in lab-grown meat, perhaps as a curiosity, said Carlos Alvaro, an associate professor of philosophy at the New York City College of Technology, part of the City University of New York. But the allure of traditionally sourced meat has been baked – or perhaps grilled – into people’s minds for so long that they may not want to make the switch. Plant-based meat provides a recent example of the uphill battle involved in changing old food habits, with Beyond Meat’s stock prices dipping nearly 80 percent in 2022.
"There are many studies showing that people don’t really care about the environment (to that extent)," Alvaro said. "So I don’t know how you would convince people to do this because of the environment.”
“From my research, I understand that the taste (of lab-grown meat) is not quite there,” Alvaro said, noting that the amino acids, sugars and other nutrients required to grow cultivated meat do not mimic what livestock are fed. He also observed that the multiplication of cells as part of the process “really mimic cancer cells” in the way they grow, another off-putting thought for would-be consumers of the product.
Alvaro is also convinced the public will not buy into any argument that lab-grown meat is more environmentally friendly.
“If people care about the environment, they either try and consume considerably less meat and other animal products, or they go vegan or vegetarian,” he said. “But there are many studies showing that people don’t really care about the environment (to that extent). So I don’t know how you would convince people to do this because of the environment.”
Ben Bramble, a professor at Australian National University who previously held posts at Princeton and Trinity College in Ireland, takes a slightly different tack. He noted that “if lab-grown meat becomes cheaper, healthier, or tastier than regular meat, there will be a large market for it. If it becomes all of these things, it will dominate the market.”
However, Bramble has misgivings about that occurring. He believes a smooth transition from traditionally sourced meat to a lab-grown version would allow humans to elide over the decades of animal cruelty perpetrated by large-scale agriculture, without fully reckoning with and learning from this injustice.
“My fear is that if we all switch over to lab-grown meat because it has become cheaper, healthier, or tastier than regular meat, we might never come to realize what we have done, and the terrible things we are capable of,” he said. “This would be a catastrophe.”
Bramble’s writings about cultured meat also raise some serious moral conundrums. If, for example, animal meat may be cultivated without killing animals, why not create products from human protein?
Actually, that’s already happened.
It occurred in 2019, when Orkan Telhan, a professor of fine arts at the University of Pennsylvania, collaborated with two scientists to create an art exhibit at the Philadelphia Museum of Art on the future of foodstuffs.
Although the exhibit included bioengineered bread and genetically modified salmon, it was an installation called “Ouroboros Steak” that drew the most attention. That was comprised of pieces of human flesh grown in a lab from cultivated cells and expired blood products obtained from online sources.
The exhibit was presented as four tiny morsels of red meat – shaped in patterns suggesting an ouroboros, a dragon eating its own tail. They were placed in tiny individual saucers atop a larger plate and placemat with a calico pattern, suggesting an item to order in a diner. The artwork drew international headlines – as well as condemnation for Telhan’s vision.
Telhan’s artwork is intended to critique the overarching assumption that lab-grown meat will eventually replace more traditional production methods, as well as the lack of transparency surrounding many processed foodstuffs. “They think that this problem (from industrial-scale agriculture) is going be solved by this new technology,” Telhan said. “I am critical (of) that perspective.”
Unlike Bramble, Telhan is not against lab-grown meat, so long as its producers are transparent about the sourcing of materials and its cultivation. But he believes that large-scale agricultural meat production – which dates back centuries – is not going to be replaced so quickly.
“We see this again and again with different industries, like algae-based fuels. A lot of companies were excited about this, and promoted it,” Telhan said. “And years later, we know these fuels work. But to be able to displace the oil industry means building the infrastructure to scale takes billions of dollars, and nobody has the patience or money to do it.”
Alvaro concurred on this point, which he believes is already weakened because a large swath of consumers aren’t concerned about environmental degradation.
“They’re going to have to sell this big, but in order to convince people to do so, they have to convince them to eat this product instead of regular meat,” Alvaro said.
Hidden Tweaks?
Moreover, if lab-based meat does obtain a significant market share, Telhan suggested companies may do things to the product – such as to genetically modify it to become more profitable – and never notify consumers. That is a particular concern in the U.S., where regulations regarding such modifications are vastly more relaxed than in the European Union.
“I think that they have really good objectives, and they aspire to good objectives,” Telhan said. “But the system itself doesn't really allow for that much transparency.”
No matter what the future holds, sometime next year Carnegie Mellon is expected to hold a press conference announcing it has produced a cut of the world’s most expensive beef with the help of a modified piece of consumer electronics. It will likely take place at around the same time UPSIDE chicken will be available for purchase in supermarkets and restaurants, pending the USDA’s approvals.
Abbott, the Carnegie Mellon professor, suggested the future event will be both informative and celebratory.
“I think Carnegie Mellon would have someone potentially cook it for us,” she said. “Like have a really good chef in New York City do it.”
In this week's Friday Five, breathing this way may cut down on anxiety, a fasting regimen that could make you sick, this type of job makes men more virile, 3D printed hearts could save your life, and the role of metformin in preventing dementia.
The Friday Five covers five stories in research that you may have missed this week. There are plenty of controversies and troubling ethical issues in science – and we get into many of them in our online magazine – but this news roundup focuses on scientific creativity and progress to give you a therapeutic dose of inspiration headed into the weekend.
Here are the promising studies covered in this week's Friday Five, featuring interviews with Dr. David Spiegel, associate chair of psychiatry and behavioral sciences at Stanford, and Dr. Filip Swirski, professor of medicine and cardiology at the Icahn School of Medicine at Mount Sinai.
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Here are the promising studies covered in this week's Friday Five, featuring interviews with Dr. David Spiegel, associate chair of psychiatry and behavioral sciences at Stanford, and Dr. Filip Swirski, professor of medicine and cardiology at the Icahn School of Medicine at Mount Sinai.
- Breathing this way cuts down on anxiety*
- Could your fasting regimen make you sick?
- This type of job makes men more virile
- 3D printed hearts could save your life
- Yet another potential benefit of metformin
* This video with Dr. Andrew Huberman of Stanford shows exactly how to do the breathing practice.