China Overtakes the US as the New Technology Powerhouse

20 May 08

China will soon pass the US in the critical ability to turn technology innovations into products and services an international survey has shown.

The Georgia Institute of Technology's bi-annual 'High Tech Indicators' study into the worldwide technological competitiveness of 33 nations finds that China may soon rival the United States as the principal driver of the world's economy. This is a position the US has held since the end of World War II but is now under threat.

The study shows that China has zoomed up the leader board in terms of global position in developing new technology. But the scary part is that China has become better at converting technology research into new products and services. As such, the study predicts China will soon overtake the United States as the principal driver of the world's economy. If this happens it will mark the first time on nearly a century that 2 nations have competed for global leadership as equals.

The study also shows that other developing nations including South Korea, Singapore, Taiwan, Brazil, India and Chile are also moving up the leaderboard and getting better at developing innovative technologies.

"For the first time in nearly a century, we see leadership in basic research and the economic ability to persue the benefits of that research - to create and market products based on that research - in more than one place on the planet," said Nils Newman, co-author of the US Georgia Tech report. "Since World War II, the United States has been the main driver of the global economy. Now we have a situation in which technology products are going to be appearing in the marketplace that were not developed or commercialized here. We won't have had any involvement with them and may not even know they are coming."

China has achieved its high global ranking in short time. "It's like being 40 years old and playing basketball against a competitor who's only 12 years old - but is already at your height. You are better right now and have more experience, but you're not going to squeeze much more performance out. The future clearly doesn't look good for the United States," Newman said.

Geogia Tech's 'High tech Indicators' study ranks 33 nations relative to one another on 'technological standing,' an output factor that indicated each nation's recent success in exporting high technology products. Four major input factors help build future technological standing: national orientation toward technological competitiveness, socioeconomic infrastructure, technological infrastructure and productive capacity. Each of the factors is based on a combination of statistical data and exprt opinions. Georgie Tech has been producing the study since 1980.

What are the factors that have been steadily pushing China up the ladder for the past 15 years? China has planned to put itself in the top position and has been working toward achieving this goal for many years. China has been training more scientists and engineers than other countries and generously funding their research endeavours. China is also getting better and better at marrying that research to their low-cost productive processes. If you put those factors together you get a powerhouse of innovation with real productive outcomes.

In terms of Australia matching it with China and other emerging nations, it does seem as though the Government is heeding the message. In the recently released budget, the Australian Government has increased its spending on research programs and the introduction of the new Enterprise Connect Centres is aimed at developing commercial applications for this research. Australia already has a high global standing in resources allocated to research and development, so the Government would seem to be on the right path in trying to make it easier to integrate new technology innovations into industry. It is critical to the competitiveness of the Australian nation that the spending on research is converted to productive outcomes to boost our national output and provide opportunities for our local manufacturing sector.

So how is Australia doing in the Georgie Tech Indicator study? Not so good it would seem. Here are the highlights of the study concerning Australia's position.

Input Indicators

Australia dropped 10.1 points for its 'National Orientation' ranking to sit 17th. National Orientation indicates evidence that a nation is undertaking directed action to achieve technological competitiveness.

The Socioeconomic Infrastructure indicator measures the social and economic institutions that support and maintain the physical, human, organizational and economic resources essential to the functioning of a modern, technology based industrial nation. Again Australia has dropped down losing 7.0 points to lie in 12th place.

The technological Infrastructure indicator measures the capacity of a nation's Institutions and resources which contribute directly to a nation's capacity to develop, produce, and market new technology. Central to the concept are the ideas of economic investment and social support for technology absorption and utilization which can take the form of monetary payments, laws, regulations and social institutions. Also included is the physical and human capital in place to develop, produce, and market new technology. Australia again lost ground here and sits in 11th place.

Productive capacity is the physical and human resources devoted to manufacturing products, and the efficiency with which those resources are used. For this indicator, Australia has been making steady gains since 1993, but has slipped back in the latest study to sit in 21st place.

But, despite the recent drops, the 15 year averages show that both Australia and New Zealand have made notable increases. On the 15 year averages, Australia ranks 17th overall for input indicators.

Technology Standing Indicator

The Technology Standing Indicator is the main, overall indicator used by the Georgia tech study to rank each of the 33 nations and takes output factors into consideration. The currently released survey is the first time China has taken the number 1 ranking in the survey's history.

Australia's score has been steadily rising since 1993, but not fast enough to make any significant gain in ranking. Australia currently sits in a fairly lack-lustre 20th position.

The survey forecasts a further decline for Australia's ranking in the future studies due to slow growth. So overall Australia quite obviously needs to do much better. Our smaller competitors such as New Zealand, Ireland and Canada are doing much better than Australia.

The lessons to be learned are in the results. Nations that put resources into research and development infrastructure and activities and endeavour to commercialise the outputs are the star performers.

The full survey can be viewed by clicking here.