“China is no Asian Tiger but a fire-breathing dragon on steroids”

China’s ability to innovate is much stronger than previously understood in the West, according to a report by the Information Technology & Innovation Foundation (ITIF). At roughly equal R&D expenditure, Chinese researchers manage to generate more high-profile publications. In terms of applications, several of China’s industries – such as nuclear power, batteries and electric cars – are on par with, if not superior to, Western countries. Others are catching up fast. “The reality is that China is much more akin to where the Asian Tigers (Hong Kong, South Korea, Singapore and Taiwan) were 20 years ago, only in this case, China isn’t a tiger but rather a fire-breathing dragon on government-provided steroids,” the think tank writes.

The combination of low costs and growing innovation capability makes an increasing number of Chinese companies formidable global competitors. Chinese firms also benefit from protectionism and state support, though domestic competition is often fierce, promoting fast innovation. “China isn’t the Soviet Union, and its firms have considerable degrees of freedom to act, as long as they’re working to achieve the goal of making China the world innovation leader.”

The ITIF recommends that the US embraces “national power capitalism,” which features several elements of China’s innovation policy. These include upping tax credits for R&D labor costs, instituting a multi-year 25 percent investment tax credit for all new machinery and capital equipment, and establishing national industrial research institutes that focus on the middle Technology Readiness Levels.