China to overtake U.S. as driver of world economy

Jan 25 2008 by Nic Paton Print This Article

For more than a century we've got used to the idea of the U.S. as the leader of the global economy. But China's burgeoning reputation for technological innovation and development means that could all be about to change.

A study of worldwide technological competitiveness by the Georgia Institute of Technology has suggested that China may soon rival the U.S. as the principal driver of the world's economy, knocking America off the perch it had held since the end of World War II.

If that happens, it would mark the first time in nearly a century that the two nations have slugged it out for leadership as equals, the institute has said.

China, the research argued, will soon pass the U.S in the critical ability to develop basic science and technology, turn those developments into products and services and then market them to the world.

Although many in the West still see China as predominantly a low-cost producer of manufactured goods, in fact the institute's study of a number of "high-tech indicators" has shown the country has much bigger aspirations.

"For the first time in nearly a century, we see leadership in basic research and the economic ability to pursue the benefits of that research – to create and market products based on research – in more than one place on the planet," said Nils Newman, co-author of the National Science Foundation-supported study.

"Since World War II, the United States has been the main driver of the global economy. Now we have a situation in which technology products are going to be appearing in the marketplace that were not developed or commercialized here. We won't have had any involvement with them and may not even know they are coming," he added.

The institute has been gathering the high-tech indicators since the mid-1980s, when it started trying to analyse which country would be the "next Japan" as a competitive producer and exporter of technology products.

Its study had ranked 33 nations relative to one another on "technological standing," based on each nation's success in exporting high technology products.

It has also analysed four major factors that help build future technological standing: national orientation toward technological competitiveness, socioeconomic infrastructure, technological infrastructure and productive capacity.

What the analysis has shown is that technological standing is dominated by one feature – a long and continuous upward line that shows China moving from "in the weeds" to world technological leadership over the past 15 years.

The 2007 statistics show China with a technological standing of 82.8, compared to 76.1 for the U.S., 66.8 for Germany and 66.0 for Japan.

By comparison just 11 years ago China's score was just 22.5. The U.S. peaked in 1999 with a score of 95.4.

"China has really changed the world economic landscape in technology," said Alan Porter, study co-author and co-director of the Georgia Tech Technology Policy and Assessment Center, which conducted the research.

"When you take China's low-cost manufacturing and focus on technology, then combine them with the increasing emphasis on research and development, the result ultimately won't leave much room for other countries," he added.

The U.S and Japan had both fallen in relative technological standing – though not absolute measures – because of the dramatic rise of China and other nations such as the "Asian Tigers" of South Korea, Singapore and Taiwan, the research added.

"We are seeing consistent gains for China across all the criteria we measure," Newman said.

"As a percentage mover relative to everyone else, we have not seen a stumble for China. The gains have been dramatic, and there is no real sense that any kind of levelling off is occurring," he added.

Recent statistics for the value of technology products exported – a key component of technological standing – put China behind the U.S. by around $100million, little more than "a rounding error" in the scheme of things, it added.

If that trend continued, Newman noted, China would shortly pass the U.S. in that measure of technological leadership.

China's emphasis on training scientists and engineers – who conduct the research needed to maintain technological competitiveness – has suggested it will continue to grow in its ability to innovate.

By comparison, in the U.S the training of scientists and engineers has lagged and post-9/11 immigration barriers have kept out international scholars who could help fill the gap, the institute warned.

"For scientists and engineers, China now has less than half as many as we do, but they have a lot of growing room," noted Newman.

"It would be difficult for the United States to get much better in this area, and it would be very easy for us to get worse. It would be very easy for the Chinese to get better because they have more room to manoeuvre," he added.

China was also becoming a leader in research and development, Porter argued. For instance, it now leads the world in publications on nanotechnology, even though U.S. papers still received more citations.

"It's like being 40 years old and playing basketball against a competitor who's only 12 years old – but is already at your height," Newman said.

"You are a little better right now and have more experience, but you're not going to squeeze much more performance out. The future clearly doesn't look good for the United States," he added ominously.