Innovation: The U.S. stands tall but China is catching up

If there is one thing that separates the US from the rest of the world it is our spirit of innovation. Think back as far as you can remember. Who has been the undisputed innovation leader during your lifetime and mine? Think back to Thomas Edison and the light bulb. How did that change history?

Think about the Wright Brothers or Henry Ford. Where are we now because of them? What would the world look like without the US’s big innovations including more modern inventions such as the radio, telephone, television, internet, PCs, and smartphones?

When it comes to innovation, the US stands tall while the rest of the world marvels in amazement. In fact, I would argue that America has always been prosperous thanks to our ability to remain cutting-edge innovators.

This has always been true of America since its founding, but today this is being challenged like never before. China is now a leader in many industries which most notably includes the EV industry where China has found tremendous success while the rest of the world struggles to catch up. Telsa may be great, but I argue they can’t produce $10,000 cars like China can.

This is not just true of EVs, the Chinese are catching up to their US competitors in fields like advanced materials, biotechnology, robotics, and AI. When it comes to the aircraft industry, Boeing is now at particular risk since COMAC, China’s state-subsidized airplane manufacturer, entered the market. Since COMAC delivered its first aircraft in 2022, it has already snatched up over 1000 orders for its C919 aircraft, a direct competitor to Boeing’s 737.

China is good at scaling up. If COMAC can scale up quickly, Boeing is in big trouble not in the distant future but within this decade. By the way, COMAC is currently dependent on the US for critical components. The US could put COMAC out of business tomorrow vis-a-vis export controls, but Washington doesn’t have the stomach for the retribution that would likely ensue since COMAC is a source of national pride for the Chinese.

This is only the tip of the iceberg, China has begun to close the gap in R&D spending which reached $420 billion in 2021 compared to the US $789 billion. The numbers don’t look so lopsided when you consider the fact that research in China is a fraction of what it costs in the US.

China is catching up to the West.