Being referred to as a “strategic competitor” by the US government, China has been increasingly seen as a threat to the US and subjected to a comparison between its economic ascendancy with America’s hegemony. The prediction that China’s GDP, namely the value of everything produced in a country in a given period, would outstrip that of the US someday is well established, if not hackneyed.
Yet this fact alone does not explain why China’s rise constitutes a genuine threat to the US. After all, it’s natural for a country whose population is more than three times higher to have a higher GDP, even if that country relies on churning out second-rate toys and clothes. What really rattles the US and renders President Donald Trump determined to combat the alleged intellectual property theft of China is, in fact, the latter’s potential to become a true competitor of the US; not only in terms of GDP figures, but also in terms of the industries in which it specialises:
The graph above shows the total amount of money spent on research and development of a few selected countries between 1997 and 2014. Current PPP is used instead of nominal terms in order to adjust the usual undervaluation of currencies of developing countries, especially China which is often accused of committing competitive devaluation. Countries like Japan and Germany are selected to represent developed countries other than the US, and the other four members of BRICS are selected to represent developing countries excluding China.
Two phenomena are patent. First, since 2008, the growth of China’s total R&D spending has been faster, not only faster than its own past record but also faster than that of the US, as shown by the steeper slope. Second, while the gap between the US and China has been closing up, the gaps between them and every other country in the graph have, in fact, become wider: the curves of the remaining countries are all flatter than those of China and the US, showing a slower annual growth. These can be more obviously observed when data are converted to natural logs, a usual method used by economists to show changes in growth rates:
In this graph, a steeper line means a faster growth of the growth rate, and China’s line is strikingly steeper than that of the US. Although Russia and India do have a steeper line than the US, they are not as threatening as China since their growth rates are low anyway, which can be inferred from the flatness of their total R&D spending curves in our first graph. The similar gradients of the US and other developed countries mean that the US is able to increase its R&D at a faster rate than other developed countries constantly.
If we look at countries’ R&D spending per capita, China is way lower than developed countries, let alone the US:
But this is not a relief for the US; on the contrary, it only fuels Uncle Sam’s fear, because a low per capita figure with an impressive growth rate implicates China’s potential to have even more researchers in future. This is corroborated by the trend observed from the number of researchers per million people:
Similar to what we observed in total spendings, the gap between the US’s and China’s ratio of researchers to laypeople is also diminishing. Given the particularly large population of China, should the trend continue, it’s not impossible to see China’s researchers outnumber their American counterparts in our lifetime.
The US procured its global hegemony after the Second World War since it outdid western Europe in R&D, so it’s not hard to see why China’s increasing R&D is a threat to the US. If one day China succeeds in challenging the US’s monopoly in hi-tech industries, American people’s income will surely be adversely affected. But protectionism doesn’t seem to be a good solution to prevent the advent of that day: it only makes the competition between countries more intense and hostile. Perhaps a better solution is to further liberalize the movement of labour, to allow both countries’ investors to invest in each other’s firms and to give each other access to domestic market. In this way, America can also benefit from China’s booming R&D.