US-China tech race could be decided by population management as superpowers battle for talent

The context behind recent fluctuations and squabbles between the United States and China is quite clear for us all to see – two powers vying for technological domination over the other in the great technology race of the 21st century.

For the moment, it seems evident that China will continue to outpace and surpass the US in the next 10 to 20 years. In the long run, however, the determining factor in the outcome of this struggle, I believe, could be how these two superpowers manage issues of population, in terms of size, demographic make-up, and the policies they implement to govern these issues.

The US and China both have respective competitive advantages and disadvantages in the area of demographic management, and the actions taken, informed by these strengths and weaknesses, could play a decisive role in determining which country reaches technological supremacy over the other.

In the first place, in terms of population size, China undoubtedly comes out on top. The US is indeed a large country, but its paltry population of 327 million pales in comparison to the vast 1.4 billion people who inhabit the most populous nation in the world.

What role does population size play in the technology race? In simple terms, the more people you have, the more research scientists and engineers you have to develop the world-beating artificial intelligence (AI) technologies needed to overtake your competitor.

According to statistics collected by online research platform Web of Science between 1990-2018, research as a percentage of gross domestic product has been growing exponentially in China over the past two decades, and the number of researchers in China has already surpassed that of the US. A glance at China’s recent history testifies to the effectiveness of throwing unimaginable amounts of manpower at resolving countless issues.

The other significant advantage to China’s mass population is the size of its market, which provides Chinese technology giants with domestic innovation opportunities and diverse application scenarios that American firms could only ever dream of. While the retail market in the US is larger than that of China, the Chinese e-commerce market surpassed the US in size as early as 2013, a strong indicator that in this industry, China is leading in the race. This can be mostly attributed to advantages made possible by the country’s larger population – for example, companies have a much larger data set to power their AI.

But while this demographic picture may look rosy for China today, the picture going forward may not look so favourable, unless amendments are made to current policies.

The one-child policy has left a legacy that is likely to seriously impede its ability to compete in the global innovation race – a rapid decline in birth rates. This, combined with life expectancy longer than ever before, has led China to suffer from an ailment that has been shown to be detrimental to innovation – an ageing population.

The group aged 25 to 44 holding college degrees or above are the most potent force for innovation, and although this demographic in China is set to surpass the size of that in the US by 2028 and continue to grow for almost two decades after that, this number will see a sharp decline by around 2045. This, coupled with an exponentially growing population of ages 65 and above, presents the greatest obstacle to China’s sustained innovation and growth, and therefore its place at the forefront of the technology race. To maintain its demographic advantage, China must, in the long run, increase birth rates in the country.

In relative terms, the US suffers less from this problem than China, which could put it at a significant advantage going forward. While its population is not as large as that of China, the US is not faced with the same looming innovation deficit that would result from a rapid decline in birth rates. Although birth rates in the US have declined, they remain above that of most Asian countries apart from India, which puts it at a relative competitive advantage compared to China.

Another key demographic advantage enjoyed by the US over China is derived from how the two countries have historically managed the number of people who live in their country – their demographic make-up. As anyone who walks into an office in Silicon Valley can attest, a world class education system and the promise of superior career opportunities has served to attract talent from across the globe to work at American firms, which is an undeniable advantage that the US holds over China in the race to the top of the technology innovation mountain.

PhD candidate numbers in key fields for innovation like engineering and computer and information sciences reveal that non-US citizens account for over 45 per cent of the total candidature, and 35 per cent in mathematics, showing a strong correlation between migration and innovation.

While also helping to solve the issue of an ageing population, an open door to the brightest minds of the world means that US technology companies can be assured of their ability to remain at the forefront of innovation.

That was, until Donald Trump came along. As we entrepreneurs in Asia look over in confusion, the restrictive immigration policies pursued by the incumbent US president run the very real risk of throwing away the strongest advantage the US holds in the race – an openness to overseas talent. If this protectionism persists, it could have devastating effects on America’s ability to innovate technologically.

This is why I believe it is in this area that the battle for the top will be won or lost – a young, dynamic population with an openness to seeking the best talent from overseas.

For China, this would require significant reform by putting in place policies to encourage childbearing, relaxing immigration and visa laws, and reforming the education system. If Americans wishes to retain their place at the pinnacle, they should avoid the temptations of nativism, and recall their history of diversity, and the benefits to innovation it has brought.

Over the last century, the aspect of human society which has changed the most has been issues of population. For these two superpowers particularly, at this time of intense international competition, to ignore competitive advantage in demographics could be perilous.

China looks poised to outpace the US in the short term, but in the long run, the outcome will come down to foresighted management of population policy.