JUST IN: U.S. Better Positioned for Tech Competition than China, Report Finds

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The United States’ defense innovation sector maintains a distinct advantage over China’s, but change is needed to ensure China does not take the lead in the long term, according to a recent Center for Strategic and Budgetary Assessments report.

The 2022 National Defense Strategy identified China as the Defense Department’s pacing challenge, and the long-term strategic competition between the United States and China “will be increasingly defined by both countries’ ability to mobilize and direct their respective techno-security systems over the next decade,” said the CSBA report, entitled “The Decisive Decade: United States–China Competition in Defense Innovation and Defense Industrial Policy in and Beyond the 2020s.”

The report defined the techno-security system as the organizations that comprise “a nation’s industrial economy and innovation base that produce key technologies for strategic, dual-use, and defense applications.” The U.S. and Chinese systems differ significantly, the report said: the United States is “anti-statist,” with private industry primarily directing and guiding innovation, while China is “largely state-driven and highly centralized, with the Chinese Communist Party directing innovation and production through its control of state-owned enterprises.”

When assessing each country’s techno-security systems, CSBA evaluated five factors: external threat perceptions and threat environment; leadership and management coordination; governance regime; public-private partnerships and civil-military integration; and techno-national versus global engagement approaches.

The one area in which China has a pronounced advantage is threat perception, said Tai Ming Cheung, a professor in the School of Global Policy and Strategy at the University of California, San Diego, and a co-author of the report.

“China has identified the United States as their main techno-security threat ever since the late 1990s,” Cheung said during a webinar hosted by CSBA June 22. “The United States, though, took a very long time,” not sounding out China as its main strategic competitor until the early 2010s — “and even now, I would say, the United States is still trying to debate how significant the Chinese threat is.”

China’s early mobilization allowed it to narrow the technological gap with the United States, the report said.

Where there is little distance between the United States and China at this time is leadership and management coordination, the report said. China has a centralized, top-down coordination model that is “effective for rapid catch-up and for engaging in high-risk, early-stage disruptive technological development,” whereas the United States employs a decentralized, bottom-up approach in which responsibility is divided between multiple government agencies, which lends itself to “routinized technological development.”

Ultimately, which model proves more effective will largely “depend upon the nature of technological change in the techno-security domain going [forward]” and whether that change occurs incrementally or rapidly, Cheung said.

Thomas Mahnken, CSBA’s president and CEO and a co-author of the report, said the United States should put a greater emphasis on speed of delivery when it comes to defense innovation.

“If we go back and look at some of the key successes that the United States had — particularly in the early Cold War — it was where we emphasized speed,” Mahnken said during the webinar.

“These days, we tend to think much more about reliable delivery, delivery on schedule, under cost,” which are important, but the United States must also have a sense of urgency to field key technologies, he said. Additionally, the government must give industry a consistent demand signal for the technologies that are needed, he added.

Where the United States is much stronger than China is governance, Cheung said. Through profits and market access, the United States incentivizes commercial companies to participate in defense innovation, while the Chinese government has historically taken “much more of a coercive approach,” threatening punishment if companies don’t work with it.

The United States’ market-driven, positive approach “has been a critical factor in enabling a lot of the innovation and industrial development,” he said. China is trying to develop a more “friendly state-to-market relationship,” the results of which are yet to be determined, he added.

And while there have been worries about China’s fusion of commercial industry and its military, the United States is “much, much stronger and has a much more extensive track record on civil-military integration” and public-private partnerships, he said. The report said that “China’s approach is still in its infancy and will suffer from a structural statist bias in its development.”

However, Mahnken noted that in the United States “recently the government-industry relationship has been marked more by suspicion than collaboration.”

One way the government can foster a better relationship with industry is to tweak incentives, he said. The report said the current “defense acquisition system has become increasingly rigid and risk-averse,” giving companies “few incentives to take the sort of risks that are central to the process of innovation.”

Mahnken said: “I think you get a lot of mileage from tweaking incentives … whether that's like creating some systemic incentives to give greater impetus to bring in new entrants into the market, whether it's using tax incentives for the types of things that are desired, I think that's a good way to go.”

International partnerships will also be key in this innovation race, and those are a “core strength” of the United States, Cheung said. “The United States has a much more robust and expansionist relationship with friends and allies” than China, “and the United States is very much a net exporter of defense and technology goods,” whereas China is a net importer.

Overall, the United States’ techno-security system “remains in the lead … but the Chinese are catching up,” and issues must be addressed to mitigate stagnation so the United States’ strengths do not become weaknesses, he said.

Mahnken said: “The U.S. system overall is superior to the Chinese system overall, so we're not going to enjoy success by trying to out-authoritarian the authoritarians. We're going to enjoy success by bolstering our system — and I actually say in a number of cases — becoming more true to the nature of our system.”

Topics: International