“WE’RE #1”: CHINA LEADS U.S. IN TECH RESEARCH, DEVELOPMENT, AND PATENTS
China holds a “stunning lead in high-impact research” over the U.S. in 37 of 44 cutting-edge technologies, according to a new report by the Australian Strategic Policy Institute.
The report was commissioned by the U.S. state department.
“Western democracies are losing the global technological competition, including the race for scientific and research breakthroughs,” the institute warned.
“Over the past five years, China generated 48.49 percent of the world’s high-impact research papers in advanced aircraft engines, including hypersonics, and it hosts seven of the world’s top ten research institutions,” the study found.
“In the long term, China’s leading research position means it has set itself up to excel not just in current technological development in almost all sectors, but also in future technologies that don’t yet exist,” the report said.
China is likely to establish monopolies in 10 fields. Among them are electric vehicle batteries, 5G telecommunications, nanomanufacturing, and synthetic biology, in which it produces a third of the world’s research.
The report considered aerospace, artificial intelligence, biotechnology, defense, energy, environment, materials, and quantum technology, among other areas.
It found the U.S. leading in the development of small satellites, high-performance computing, quantum computing, and vaccine research and development.
China is leading especially in military and space technologies, the institute noted.
Last year, China tested a hypersonic missile—one that travels five or as many as 25 times the speed of sound—a development that seemed to surprise U.S. defense officials.
In 2021, Chinese researchers and businesses filed 1.58 million patents, more than twice the number filed from the U.S., according to the U.N.’s World Intellectual Property Organization.
TRENDPOST: Saying the Australian report is a wake-up call to the U.S. would be like saying your alarm clock went off at 10 a.m. when you were due at work by 8.
Instead of a wake-up call, the report is an inventory of opportunities the U.S. has already lost.
Americans like to point their index fingers to the sky and chant “We’re Number One!” While the U.S. still has the world’s largest economy, at least for now, and the world’s largest military, it is sliding toward mediocrity in a range of areas.
The U.S. ranks 18th in health outcomes among countries, although it spends vastly more for it than any other nation, according to the World Population Review. In infant mortality, the review places the U.S. in 33rd place among the 38 member countries of the Organization for Economic Cooperation and Development.
In a 2022 test of students’ accomplishments in reading, math, and science in 85 countries, China ranked first; the U.S. placed 22nd.
While the U.S. rests complacently on memories of its successful past, China is creating a successful future for itself—one that leaves the U.S. in a distant second place, competing with Europe for leftovers.
Gerald Celente often says “The business of China is business; the business of the U.S. is war.” The U.S., with a population of 332 million has a 2023 defense budget of $858 billion compared to China, with a population of 1.4 billion and a $224 billion defense budget.
The Australian report also shows that the business of China is an achievement. The U.S. has less and less to offer in comparison with that.
CHINA’S ECONOMY REMAINS STRONG IN FEBRUARY
In January, China’s economic activity grew at a robust rate, as we reported in “China’s Domestic Economy Rebounds, We’re #1?” (14 Feb 2023).
Skeptics thought the surge might have resulted from a temporary spending spurt during the country’s two-week celebration of the new year.
The verdict is in: it wasn’t.
China’s purchasing managers index (PMI) for manufacturing rose to 52.6 in February, above the level of 50 that separates expansion from contraction and its highest since April 2012, CNBC reported.
The PMI was not only higher than January’s 50.1 but also exceeded analysts’ expectations of 50.5.
The PMI tracking export orders increased to 52.4, reaching its highest rating since March 2011.
The PMI for the non-manufacturing economy, including services and construction, also rose last month, climbing from January’s 54.4 to 56.3 in February.
Separately, construction’s PMI shot up almost 8 percent to 60.2 in February, compared to 56.4 the month before.
In a sign that China’s property development crisis might be easing, home sales among the country’s 100 largest developers jumped 15 percent, year over year, the private China Real Estate Information Corp. reported.
On 1 March, the unofficial Caixin PMI that gauges activity among smaller and private-sector businesses showed upticks in orders, hiring, and the ability to procure supplies.
The survey also showed business owners and executives having a brighter economic outlook than at any time since March 2021.
In January, the International Monetary Fund raised its growth forecast for China this year to 5.3 percent and predicted the country would be responsible for a third of global economic growth in 2023.
The government has set a growth target of “about 5 percent” this year, surprising analysts who had expected something more ambitious.
However, by setting a modest expectation that officials believe the economy will exceed with relative ease, Beijing will be able to declare success without having to offer tax breaks, subsidies, and other incentives to jump-start spending and investment.
The 5-percent goal “should be taken as a floor of growth the government is willing to tolerate,” Zhang Zhiwei, chief economist at Pinpoint Asset Management, said to Bloomberg.
“Because the COVID policy has been adjusted, there’s no urgency for them to run another round of big economic stimulus,” he added.
In 2022, the country’s economy grew 3 percent, far below the target of 5.5 percent, which itself was the most modest in more than a decade.
The domestic consumption index is likely to improve during the last half of this year, Derek Scissors, chief economist for the China Beige Book, told CNBC.
“In April, we should see where the course of Chinese consumption is going,” he added. “It will be better than last year, but it won’t be much better.”
That note of caution is shared by some economists who see the past two months of economic enthusiasm as the waning post-COVID demand after the country’s almost three years of virus-related restrictions in shopping, work, and social contact.
Signs of weakness remain: in 2022, the number of jobs in China’s cities shrank for the first time since the 1960s, according to the National Bureau of Statistics. Disposable income per person grew by 2.9 percent last year, the second-least since 1989.
TREND FORECAST: Beijing set a growth goal that will not require it to offer more subsidies or stimulus programs. To do so could revive the “irrational exuberance” that jacked up property prices and led to extravagant stock-market speculation in the recent past.
Instead, the government will relax its hand on the economy and allow it to grow at a measured pace.
However, Beijing was wise to set a goal that disappointed some analysts and dropped the share price of some Chinese companies.
South Korea’s exports in January and February declined 12 percent from a year earlier, indicating lingering weakness in export-oriented Asian economies as global demand sags under continued inflation and higher interest rates.
These signs of a slowing world economy mean that no country, including Beijing, can take growth for granted this year.
IN CHINA, THE WORLD’S BIGGEST EV MARKET, HYBRID SALES STAY STRONG
Tesla may be the electric vehicle (EV) company with the largest U.S. stock-market value—above $619 billion last week—but in second place is another few people have heard of: Li Auto, with a $20-billion market capitalization.
Perhaps even more surprising: this Chinese automaker has not gone all in on EVs.
Instead, its focus is plug-in hybrids (PHEVs), cars that carry a gasoline engine to run a generator to charge the car’s battery pack when it runs low on electrons.
Together, the two power sources can run Li’s smallest EV for 700 miles without refueling, the company says.
The fact that Li has a larger U.S. market cap than better-known EV makers including Lucid, NIO and Rivian speaks to the steady demand for PHEVs in China.
Although China leads the world in EV sales and production, it still has a patchy network of public charging stations and “range anxiety”—the fear that your EV will run out of juice mid-trip—persists.
That creates a steady market of buyers who want the assurance that the on-board gasoline engine provides.
As a result, PHEV sales in China will shoot up 65 percent this year, compared to 25 percent for regular EVs, according to an analysis by Bernstein Asset Management.
In contrast, PHEV sales in Europe slipped by 3 percent in 2022, largely because major Western automakers have skipped making PHEV models and gone straight to all-electric cars.
“Li’s success in China underlines the risk that this all-or-nothing approach turns out to be short-sighted,” The Wall Street Journal noted.
“The first rush of EV sales could lead to a second wave for hybrid adoption as areas less well-served by charging infrastructure join the transition [to electric mobility] on terms that work for them,” it added.
“Car makers with a more nuanced approach to the transition, such as Toyota, could end up looking smarter than they do now,” the WSJ said.
TREND FORECAST: China leads the world in EVs’ market penetration; Europe leads the U.S. One reason: range anxiety, according to surveys, even though most EV owners plug in their cars at night and have a full charge by the next morning.
That might explain why U.S. hybrid sales jumped 76 percent in 2021, while sales of fully electric cars gained 51.8 percent, according to Statista.
Because of high sticker prices and a growing shortage of lithium, cobalt, and other necessary EV ingredients outside of China, hybrid sales in the West will continue to outpace EVs for the next several years.
Meanwhile, automakers and the U.S. government are funding a growing network of charging stations. That network will grow roughly in tandem with EV sales, gradually relieving the fear of sitting at the roadside in a dead EV.