Executive summary

With its rapid advancements in critical technologies, today, China is a formidable competitor to the developed West for global technology leadership. Innovation can take many forms, including process innovation – in which China excels – leveraging its large and dynamic manufacturing base. However, this is not enough. Technological progress also hinges on a nation’s ability to develop and spread innovation, to boost aggregate productivity and potential growth. On this, China’s innovation strategy has become increasingly centralised, with the government favouring specific sectors and systematically cracking down on others. A dynamic private sector and decentralised approach are essential for new technologies to spread and become accessible, fostering progress. In this respect, the environment for Chinese companies and institutions to innovate has deteriorated recently. 

Today, the United States and its allies still hold significant advantages in capital markets and innovation ecosystems, while Chinese regulators crack down on the financial sector. For China to sustain its technological rise, it must prioritise final-demand innovation. While top-down, state-driven approaches have been effective in certain areas, they may not be sufficient to boost long-term growth. If China’s policies continue to stifle these market forces, its technological rise may plateau. China’s future success will depend on whether it can balance its top-down, state-driven approach with the bottom-up forces of consumer demand and commercialisation.

You can now read the full whitepaper at the link below