This article is based on a presentation given to the International Club of Atlanta on December 7, 2021.<\/p>\n
Putting aside the political noise (as much as possible), both China and the U.S. face similar threats and share similar needs for innovation.\u00a0\u00a0 Neither is seriously threatened from outside their borders.\u00a0 The serious threats are found within each country, although aggravated by external forces.\u00a0 In my view, the most serious threat to both is the failure to share equitably \u2014 each country \u2014 the very visible prosperity they now enjoy and their failure to create equitable opportunities for those left behind to improve.<\/p>\n
While I believe the \u201cwar\u201d analogy is not entirely accurate, I will use it to frame my observations on the various \u201cfronts\u201d on which this \u201cwar\u201d is being fought and where battle is currently joined. \u00a0These fronts are talent, capital, government industrial policy, <\/strong>and intellectual property. <\/strong><\/p>\n What started this \u201cwar?\u201d\u00a0 China and the United States got to where they are today largely by energizing their economies and organizing their workforces around manufacturing.\u00a0 America got a head start in the Industrial Revolution when China remained closed.\u00a0 When China opened under Deng Xiaoping, it became the largest market on the planet.\u00a0 It has grown three times the rate of the U.S., doubling every seven years. \u00a0China has become key to the world\u2019s supply chain and the source of most everything, as well as the world\u2019s largest global trader.\u00a0 China is now the largest trading partner for more than twice the number of countries than the United States.<\/p>\n In today\u2019s world, however, neither China nor the U.S. can continue to depend on manufacturing as the engine for economic growth.\u00a0 They must both rely on the growth of innovation-driven economies.\u00a0\u00a0 What is central now to economic growth and quality of life in both places is discovering new ways to create value in what we make, how we make it, what we can do with it, and how we consume or use it.\u00a0 This \u201cCreation of New Value\u201d <\/em>is my working definition of what innovation is.\u00a0 It also is not limited to creating new things.\u00a0 Old things and existing processes used in new ways or to provide new services can also be innovative.<\/p>\n THE CHALLENGE TODAY<\/strong><\/em><\/p>\n Today both China and America are challenged to grow their innovation economies in ways that more broadly share the benefits to assure continued economic advancement, national security, global influence, and domestic political stability.<\/p>\n Both China and America enjoy on average a high quality of life. America still has the larger economy measured by GDP, but in 2014 China surpassed America when measured in Purchasing Power Parity (PPP).\u00a0 This is a rough comparison of the \u201cfelt\u201d prosperity or standard of living.\u00a0 This is hardly surprising because in the past 35 years the Communist Party in China has raised 500 million people out of abject poverty. Today more than 300 million Chinese enjoy a real middle-class life.\u00a0 That, however, leaves an economic gap for 900 million Chinese.<\/p>\n Today, in both America and China, the current divisions between the \u201chaves\u201d and the \u201chave nots,\u201d between the economic elites and the \u201cleft behinds\u201d or \u201cleft outs\u201d or those who \u201cnever had a chance,\u201d threaten more than just national economic growth.\u00a0 These increasing divisions create a loss of confidence in the existing political order and institutions for those who feel ignored.<\/p>\n It is this imperative for continued economic growth sparked by innovation that has led to a global competition for talent, ideas, resources, and rules of the marketplace. This competition has been amplified to \u201cwar status\u201d by rising nationalism fed by both the American and Chinese governments.<\/p>\n TALENT<\/em><\/strong><\/p>\n There is no innovation without innovators.<\/p>\n Measuring human capital just in numbers gives China the edge with a population of 1.4 billion. If you are super talented in China (one in a million) there are 1,400 others just like you.\u00a0 China also has a rigorous, if very regimented, system of education. \u00a0The focus through high school is preparing for the gaokao,<\/em> the national college entrance exam, the lone criterion for admission to Chinese universities.<\/p>\n Education in China is largely based on memorization and hard work with not much critical thinking or problem analysis. The Chinese system, however, produces some people with remarkable talents, commitment to hard work, and self-discipline.\u00a0 Young Chinese with the talent (and middle-class resources) can also study abroad.\u00a0 More than 700,000 Chinese are studying outside of China. Roughly half are studying in American universities and high schools under various exchange programs.<\/p>\n America\u2019s advantage has been its appeal to moveable talent across the globe.\u00a0 America has made up for its sheer lack of numbers by welcoming those seeking refuge and opportunity.\u00a0 Risk-taking immigrants and those people seeking education in American universities have formed a base of talent and energy that has propelled American innovation for more than a century.\u00a0 Foreign-born talent that came to America \u2014 and their children \u2014 have helped create many innovative products and services, and create and lead many innovation-based companies.<\/p>\n America\u2019s great advantage in innovation is this diversity of talent from across the globe.\u00a0 Where you have different cultures working on the same problem, there is an openness to look for and apply different solutions. This is not easily found in a homogenous population with the same education, perspectives, and culture.\u00a0 This American innovation advantage from diversity requires cultivation and continued support of diversity of both students and faculty in American universities.<\/p>\n About one-third of all current graduate students at Georgia Tech are foreign born.\u00a0 Chinese students represent one-third of that number. They are not displacing American-born students who might otherwise be here.\u00a0 The fact is we don\u2019t have enough American-born students capable of participating in the level of research we conduct at Georgia Tech.\u00a0 Foreign-born faculty are also an important part of the innovation talent pool.\u00a0 Maintaining this global talent pool and the exchange of published research is not only critical for the academic tradition and process, but it also feeds innovation.<\/p>\n There are also important cultural barriers to innovation in both countries.\u00a0 In China, status counts for a lot of behaviors.\u00a0 Obtaining and preserving status is important to the individual and to their family. This tends to make the Chinese culture generationally more risk-averse.\u00a0 Since starting a new enterprise or project carries some risk of failure, there is often a fear that failure of a new project might also stain the person as a failure.\u00a0 In contrast, in Silicon Valley if you haven\u2019t failed a couple of times, you are probably not trying hard enough.\u00a0 Therefore, the entrepreneurial bug is harder to cultivate in China, but they are working on it.<\/p>\n The American cultural barrier to innovation is the increasing populist hostility to immigration that threatens the diverse pool of talent needed for innovation.\u00a0\u00a0 America\u2019s ability to compete successfully for global talent has always depended on America\u2019s promise of both safety and opportunity.\u00a0 The U.S. government\u2019s current paralysis to address immigration reforms and its suspicion of foreign-born talent working in fields of technical innovation threaten the high-level basic research that is essential for American innovation.\u00a0 It is from this high-level basic research that a broad variety of applied innovations in products and services are derived.<\/p>\n America used to have a lock on foreign talent trained here who would wish to stay here.\u00a0 But we are losing some of our best. The U.S. has erred in failing to staple a green card to every Ph.D. we graduate.\u00a0 Those who graduate now can often find opportunities in their home countries with lower costs of living, less hostility to the way they look, and increasing support for their research.<\/p>\n China is funding and creating, with financial and regulatory support, special urban innovation districts that focus on areas for innovation emphasized by the Chinese government.\u00a0 These places look a lot like the American garage culture, staged startup growth spaces and featuring the essential start-up coffee or tea shop.<\/p>\n China is also seeking to repatriate talent it lost to America by offering both financial support and research facilities.\u00a0 This program is neither surprising nor a crime.\u00a0 Faculty, however, failing to be truthful in their disclosures of foreign support or in discussions with the FBI can be criminal. \u00a0There have been several highly publicized arrests of distinguished Chinese academic scholars.\u00a0 Most have failed to result in convictions or even prosecution.\u00a0 But the overall anti-Chinese publicity is having a chilling effect in important areas of innovation and impacts the needed pool of talent.<\/p>\n This is particularly a problem for public universities that are more susceptible to the political winds.\u00a0 American research universities have for many years provided the required export controls and protections for restricted or classified research.\u00a0 But the rise of American hostility to immigration is eroding America\u2019s innovation advantage by ignoring that our diversity is our strength \u2014 not a weakness or a threat.<\/p>\n America\u2019s other cultural barrier to innovation is the historical discrimination that wastes half our domestic potential by underfunding education, employment training, access to technology, and opportunities in general for children of color and children of all colors in distressed communities.\u00a0 Both countries also suffer from gender discrimination that fails to provide women the full range of opportunities and support needed for success in technology.\u00a0 With a population that is less than 25 percent of China\u2019s, America should avoid wasting any potential pool of talent.<\/p>\n Another key issue in both countries is developing an innovation workforce. Both countries confront new generations of young talent that favor a better \u201cwork-life balance.\u201d\u00a0 There is dissatisfaction in China with the current \u201c996\u201d work philosophy (9 a.m. to 9 p.m. six days a week).\u00a0 China social media has seen a new \u201clying flat\u201d (tang ping<\/em>) movement (that advocates lying down instead of working hard). This was quickly taken down by the Chinese government, but not before being joined by millions of young Chinese who share that view.<\/p>\n In both countries, those born since 1980 do not believe that hard work is its own reward.\u00a0 While they are capable, motivated to succeed, and are fine with less space, money, and status, they do seek more \u201cself-time,\u201d \u201dlife balance,\u201d and mobility.\u00a0 <\/strong>They can get good jobs, but most do not expect to live better than their parents.\u00a0 In both countries, many of these talented and educated young people cannot afford to buy a condo\/home and thus will become a generation of \u201crenters without roots,\u201d free to pursue their next opportunity, wherever it may be.<\/p>\n Mobility is a big deal.\u00a0 Those with the skills needed for innovation will be able to move freely and globally from job to job and place to place.\u00a0 The pandemic has accelerated fundamental changes in how (and where) business operates.\u00a0 An MBA or a graduate degree in computer science or any advanced technology has become a \u201cglobal passport.\u201d\u00a0 Those with these skills can move to work anywhere, for anyone, and from anywhere.\u00a0 They can and will move from job to job \u2014 or the jobs may come to them wherever they are.\u00a0 Their longer productive years will also involve several different and changing jobs as technologies evolve.\u00a0 Thus, the young in both countries need to develop the skills to be adaptive, lifelong learners in a changing global society or risk becoming obsolete.<\/p>\n CAPITAL<\/strong><\/em><\/p>\n For 20 years China has invested heavily in both the hard and soft infrastructure needed for innovation education and research.\u00a0 During this same time, the United States has been losing ground in global Gross Domestic Expenditure on Research & Development (GERD) for Innovation.\u00a0 In the 20 years from 1999 to 2019, the U.S. share of the global R&D investments dropped from 40 percent to 30 percent.\u00a0 In contrast, China\u2019s global share has grown from 15 percent to over 24 percent in just the last 10 years.<\/p>\n In 2014, I was invited to speak on the future of Innovation at the Chinese Economic Conference in Shenzhen, China. \u00a0This was the part of China first to \u201copen up\u201d under Deng Xiaoping\u2019s initiative.\u00a0 In 2000 Shenzhen was a fishing village across from Hong Kong.\u00a0 By 2014, Shenzhen had grown to become a thriving metropolis of 15 million people and the biggest hub of innovation in China.<\/p>\n Shenzhen lacked a major Level 1 research university to spawn ideas, talent, and companies.\u00a0 To meet this need they began to build campus \u201coutposts\u201d for other major research universities in China and globally.\u00a0 Some American universities had operated a campus in China for years, mostly in Shanghai or Beijing.\u00a0 NYU, Duke, Michigan, Berkeley, and Georgia Tech were among them.<\/p>\n Georgia Tech was the first American university to create a joint venture in China (China Tech) after Deng Xiaoping\u2019s Atlanta visit in 1979.\u00a0 Georgia Tech began in Shanghai and decided to move to Shenzhen in 2010 after the provincial government agreed to build Georgia Tech a new campus in Shenzhen in a joint venture with Tianjin University.1<\/a><\/sup><\/p>\n While China\u2019s R&D is supported by large state investments, most R&D in the United States comes through private investment seeking a profit. According to the National Center for Science and Engineering Statistics:2<\/a><\/sup><\/p>\n