China is leveraging these advantages and striving to become a global technological leader using state-led policies such as Made in China 2025 or the New Generation of Artificial Intelligence Development Plan. One of Beijing’s objectives is to raise the domestic content of core components and materials in high-tech manufacturing to 70 percent by 2025. To help achieve this, China is eclipsing the United States as the world’s largest overall (public and private) R&D investor. The Chinese government already outspent the U.S. government on intramural funding in 2017 ($67.4 billion to $47.1 billion), and Beijing likely exceeded U.S. gross domestic spending on R&D in 2018 (after sitting at roughly one-third below U.S. spending levels a decade ago). By comparison, Japan’s total R&D investment is about where China’s spending was in 2008 (roughly $150 billion), and its intramural government spending only amounts to $12.1 billion.
In addition, China is the world leader in patent applications with 40 percent of the global total, a share more than two times larger than that of the United States and four times larger than that of Japan. China is also poised to overtake the United States in the most-cited 1 percent of published AI papers by 2025, if current trends continue. Though there are some questions about the efficiency and effectiveness of Beijing’s push to become a leader in tech, it is undeniable that Washington and Tokyo face mounting competition in innovation.