China, a nation that has dominated the world multiple times over the past thousand years, is on its way to repeating history once again. Economic reforms introduced by communist leader Deng Xiaoping in the late 1970s have propelled China to become a nation now deemed worthy of challenging the United States for the number one title. In 2017, PricewaterhouseCoopers (PwC) reports that the Chinese economy will overtake the US as the largest economy by 2030. China had averaged 10% annual growth between 1999 and 2008 and in recent years remained in the range of 6 to 8%. With the recent push for technological innovations, we may see a growth in the numbers and eventually a leap forward to become the world’s largest economy.
“China has long been one of the richest countries, that is, one of the most fertile, best cultivated, most industrious and most populated countries in the world.” Quote from Adam Smith’s masterpiece “The Wealth of the Nation”. In fact, in recent years, China has taken concrete steps to make it happen. In 2015, China announced “Made In China 2025,” a strategic plan detailing the steps required to equip and transform the nation with local technological innovations and enact the Chinese equivalent of the Fourth Industrial Revolution. In 2017, China’s spending on research and development amounted to 1.76 trillion yuan ($ 279 billion), an increase of 14% year-on-year. In fact, a term was invented to describe China’s unique innovation policy and its ability to drive innovation and technological advancement within its own geographical limits. Dubbed “Indigenous Innovation”, China has poised to be the next innovation and technology capital of the world. Below are some of the reasons that China may, or rather, dethrone the US in the next decade or so.
1. Size matters. China is a huge nation, be it because of its geographic size or its population. While China and the US are equally large at 9.3 million square kilometers and 9.1 million square kilometers respectively, China surpasses (no pun intended) the US with more than 1.4 billion citizens, more than 4 times that of the US population China’s high rate of technology adoption as well as its closed ecosystem has created a perfect environment for Chinese companies to grow and prosper. With more than 772 million Internet users, China is a data paradise. Furthermore, it has long been known that citizens of China are more permissive in sharing their personal data, a stark contrast to Western nations where personal data policies and regulations are strictly enforced. The recent Cambridge Analytica saga on Facebook user data highlighted the importance of keeping personal data private, but we may never see it in China. However, reports of the use of “emotional surveillance” monitoring the brain waves of employees at military sites and state-owned companies appear to have crossed the line in their latest efforts to control their people.
2. Support from the Chinese government. Policies like China’s 13th Five-Year Plan (2016-2020) and Made In China 2025 are strong evidence of China’s ambitious plans to establish itself as a world leader in leading technology. Subsidies, low-interest loans and tax breaks are some of the supports that tech companies are expected to receive as part of China’s plan to boost research and innovation in the nation. What’s more,
Instead of making Western companies like Google, Facebook and Twitter prosper, the Chinese government fed domestic companies through protectionism and huge subsidies. Local tech giants like Baidu, Alibaba, and Tencent, commonly known as BAT, were able to grow up in a sheltered environment and have the entire Chinese pie to themselves. Since then, these companies have expanded abroad through acquisitions and the establishment of research and innovation centers, a move that many nations have seen as a blatant act of “technology importation,” also known as technology transfer.
3. Finally, it is pure ignorance about China. In fact, many with little awareness of today’s China would still perceive it as a “copycat” country that thrives on manufacturing counterfeit and “Made-In-China” products for the outside world. The fact is, they are now producing leaders in innovation and they are the ones to win. A good example is Shenzhen, which has evolved along the way to become its own innovation hub. Known as China’s Silicon Valley for hardware, Shenzhen is home to many of the companies that produce the tech product we see today, from drone producer DJI to iPhone maker Foxconn. It has positioned itself as a hardware and IoT hub for many electronics manufacturers and an access point for Chinese tech startups. Ignorance used to be a blessing when one can freely enjoy the low cost of manufacturing in China; ignorance is now an imminent acquisition threat.
“China has a fairly deep awareness of what is happening in the English-speaking world, but the reverse is not true.” Quote from Andrew Ng, Co-founder of Coursera and one of the pioneers in Artificial Intelligence.
The future will be dominated by technology and China has prepared to be part of the future. President Xi Jinping knew the difficulties of sustaining China’s economic growth and understood the potential of technology to scale millions of companies and eliminate inefficiencies while benefiting end consumers.
However, it would be naive to conclude that China will overtake the United States simply on the basis of superior technology. The possibility of a trade war between the United States and China only benefits China, as it has the advantages of economies of scale and a single, independent market. The current trade surplus with the US is evident from the US’s dependence on goods from China, and a trade war will only hurt the country with price increases in consumer goods. The trade surplus for the first quarter of 2018 soared almost 20% to reach $ 58.25 billion, citing the possibility of a trade war. In addition, China has been expanding its economic and political influence with the Belt and Road Initiative (BRI). Expected to cost more than a trillion dollars and affect 60% of the world’s population, the BRI is the largest Chinese company since the Great Wall of China. All signs point to the fact that China has the money, the technology, and the clout to take over the world.
In general, China has evolved from a nation of imitation to one of innovation, from one of producing products to one of inventing products. China is the elephant in the room that Western counterparts have chosen to take for granted for decades and ignore their uprising. Perhaps it is time for the world to take a good look at China and, ironically, repeat what it is doing now. For the US, cooperation could be the best and only way forward.