Race for the Future: The Emerging Technological Showdown Between the United States and China
Edited by Emilia Grabowski, Jordan Collinson, Owen Andrews, and Sarah Ahmad
For decades, the United States’ position as the world’s undisputed leader in technological innovation was a given, as its advances in science and technology consistently outpaced all rivals. This dominant position, however, is now under serious threat. Strategic initiatives like “Made in China 2025” and “China Standards 2035” are enabling China to rapidly close the technological gap, positioning it as a direct competitor in developing the next generation of technology.
By contrast, the United States has done comparatively little to reinforce its technological edge and, in some cases, has even undermined its own long-term competitiveness. The Trump administration's policies, from funding cuts for key scientific institutions to a recent deal permitting the sale of specialized H20 AI chips to China, exemplify a trend of recklessness that risks undermining America's long-term competitiveness. This haphazard approach represents an abandonment of the principles, like robust research funding or attracting global talent, that the United States used to build its technological lead. At the same time, China is aggressively implementing its own state-driven plan to supplant the United States as the global leader in technological innovation.
Through a concerted strategy of public investment in higher education and private sector research, the United States has firmly established itself as a global leader in innovation and cutting-edge technology over the past several decades. With the invention of the integrated circuit in 1958, the American technology sector experienced rapid growth, positioning the United States at the forefront of technical advancement. This growth accelerated through the rest of the twentieth century as the United States spearheaded the personal computer revolution, with Silicon Valley emerging as a vibrant hub of innovation and groundbreaking technologies. In the years that followed, American firms translated this scientific leadership into a new generation of hardware, pioneering the powerful graphics processing units (GPUs) and specialized chips that laid the groundwork for the modern artificial intelligence revolution. Today, this historical advantage can be seen in the United States’ effective control over the world’s most advanced semiconductors — the foundational components of most modern technology. Ultimately, control over this critical technology is the key to both wielding geopolitical influence now and to driving innovative scientific progress in the future.
Recognizing the strategic importance of scientific advancement, China began a concerted push over the past decade to challenge American leadership. Beijing has poured hundreds of billions of dollars into its domestic technology sector to close the spending gap with the United States. For example, in 2023, China’s government research expenditures were more than one and a half times that of the United States. This massive investment is the cornerstone of China’s national strategy of not merely joining the ranks of major technological powers, but supplanting the United States as the world’s preeminent one. Spearheading this effort is Beijing’s “Made in China 2025” plan, launched in 2015 to upgrade and eventually control next-generation industries like advanced manufacturing and green technology. This initiative builds on earlier “indigenous innovation” policies aiming to transition China’s economy from one of low-margin mass manufacturing to one driven by proprietary technological innovation.
Alongside these industrial policies, Beijing has established dominance over the global supply of rare earth elements, which are essential for manufacturing everything from semiconductors to lithium-ion batteries. This dominance was the result of a long-term strategy. Beijing declared rare earths a strategic resource as early as the 1990s, and by the mid-2000s, it had secured an effective global monopoly. Just this past month, China expanded its rare earth export restrictions with a new global licensing requirement. The rule requires companies anywhere in the world to gain Beijing’s approval in order to export rare-earth magnets or semiconductor materials that contain even a fraction of controlled metals originating from China. This move coincides with China’s shift from focusing on physical technologies to controlling the technical standards that dictate their use. The new “China Standards 2035” initiative continues this push for technological supremacy by focusing on increasing the country’s ownership of standard-essential patents (SEPs). These are patents that any company must license to comply with a global technical standard — a deliberate strategy designed to make the world’s next generation of technology dependent on Chinese intellectual property. While China is currently the second-largest payer of these licensing fees, by subsidizing and encouraging Chinese companies to develop intellectual properties that can be identified as SEPs, it hopes to shape the emerging technologies market.
In stark contrast to China's concerted drive to become a global leader in advanced technology, the United States has actually eroded its own competitive advantage. In August of this year, the Trump administration signed a deal with chip giants Nvidia and AMD, granting the companies export licenses for H20 chips to China in exchange for a 15% share of the resulting revenue. The H20 chip had previously been developed specifically for the Chinese market after the Biden administration implemented export restrictions in 2023 designed to curb the sale of the most advanced American chips, like Nvidia’s H100 chip. President Trump himself, however, banned the sale of these chips in April, alleging that H20 chips were still too advanced to be sold. The deal, marking a significant policy reversal, immediately raised national security concerns: several prominent security experts wrote a letter to the administration expressing “deep concern” that this deal would significantly advance China’s AI capabilities. Moreover, the Trump administration has further undermined the very institutions responsible for this critical technological innovation. Trump’s proposed 2026 budget includes a 57% budget cut to the National Science Foundation (NSF), a 40% cut to the National Institute of Health (NIH), and a 47% budget cut to the National Aeronautics and Space Administration (NASA).
These funding cuts are particularly alarming because China has largely closed the gap with the United States in key research metrics. For instance, in the private sector, spending on research and development by Chinese businesses now stands at 95% of their American counterparts. Additionally, even though the United States still spends significantly more on higher education research and development, China has surpassed the United States in the number of top scientists. China now employs more researchers than the United States and the EU combined. Additionally, the Trump administration has introduced sweeping immigration restrictions that directly threaten to weaken a critical source of American talent. As political analyst Fareed Zakaria argues, “America’s edge in innovation is overwhelmingly a product of immigration.” In 2021, more than 46% of STEM PhDs graduating from American institutions were foreign-born — a figure that starkly illustrates the United States’ dependence on global talent for its technological edge. Taken together, these trends are undercutting the United States’ key advantages in research and talent precisely when the competitive challenge from China has never been greater.
While the United States’ technological advantage is slipping, China’s rise to preeminence is not necessarily inevitable. The United States requires clear and deliberate policies to reverse this alarming trend. These strategies can generally be grouped into two categories: defensive measures designed to slow China’s progress, and offensive measures aimed at accelerating American innovation.
Defensively, the United States must first immediately stop the sale of H20 chips to China and tighten controls on other advanced technologies that its scientists can reverse-engineer. Second, the United States must tighten export controls on Electronic Design Automation (EDA) — foundational software used to design all advanced semiconductors. Although the United States has banned its most advanced EDA software, Chinese firms still illegally acquire this critical design technology by using shell companies and third-party intermediaries. Third, the United States must limit the monopoly China has on both the mining and refining of rare earths. China’s share of global rare earth metal processing stood at approximately 60% in 2021, while until 2023, it accounted for nearly all global heavy rare earth processing. The United States must address this critical strategic vulnerability by diversifying its supply chains and proactively developing its own nascent rare earths industry backed by the federal government.
Offensively, the United States should also reinforce a vital source of its innovative strength by reversing policies that discourage international students from studying and working in the country. Indeed, nearly half of all Silicon Valley start-ups have a founder who is an immigrant or first-generation American. Additionally, the government must restore and increase funding for the key scientific institutions, like the NSF and NIH, that commonly produce America's technological breakthroughs. With these defensive measures against China as well as increased investment and attention in domestic innovation, the United States can arrest this decline in influence and restore its position as the clear global leader in advanced technology.
The struggle to lead the next generation of technology will only intensify in the years ahead, particularly as artificial intelligence capabilities continue to accelerate. At stake is not just leadership in a single sector, but the ability to wield unprecedented geoeconomic and geopolitical power. The United States, therefore, cannot afford to relinquish its long-standing role as the global leader of technological innovation. While recent policies have pushed the nation in a dangerous direction, it is not too late to reverse course and recommit to the strategies that have driven its technological leadership. By defending its current advantages while investing in domestic innovation and talent, the United States can ensure that the future of technology is built on American ingenuity and leadership.