China has been gaining global market share in hi-tech industries at the expense of the United States, according to a new report by the Information Technology & Innovation Foundation (ITIF). Measured across seven key sectors, China’s share of the advanced technology market leapt from less than 4% in 1995 to 21.5% in 2018. The sectors covered in the report include: IT and information services; computer, electronic and optical products; electrical equipment; machinery and equipment; motor vehicle equipment; other transport equipment; and pharmaceutical products. The U.S. saw its market share in the seven sectors decline from 24% in 1995 to 22.5% in 2018, the Washington-based think tank said. Removing IT and other information services, America’s relative share of advanced industry production globally fell by nearly 16 percentage points from 96.2% in 1995 to 80.4% in 2018, according to the ITIF’s Hamilton Index of Advanced-Industry Performance.
Beijing has funneled huge amounts of money into developing its hi-tech industries to meet Western standards and loosen its dependence on imports, an issue that has gained more urgency amid attempts by Washington to contain China’s technological advancement. “We see this tug of war in the fact that there was a strong correlation between the change in the respective shares of global output that China and the United States held in advanced industries from 1995 to 2018,” said the report by ITIF, whose board includes representatives from U.S. tech companies such as Meta, Amazon, Google and Intel. “In other words, the more ground China gained in these industries, the more the United States lost.”
China’s strongest growth was in electrical equipment, where it controls more than a third of the global market. The country also ranked first in car manufacturing in 2018 with 25% of the international market, while the U.S. had the lowest share among the economies profiled in the report. China is also making strides in pharmaceutical production, ranking third behind the U.S. and Germany, the report said. In one of the most competitive categories, China in 2018 surpassed the U.S. to gain the biggest market share in computer, electronic and optical products, which includes semiconductors. It accounted for 25% of the market, while the U.S. at No 2 had about 23% and Korea accounted for 11%. China’s weakest sector was in the production of other transport equipment, but Beijing is seeking to change that by spending billions on the Commercial Aircraft Corporation of China (Comac), the developer of the C919, a narrow body passenger jet to compete with Boeing’s 737 and Airbus’s A320.
China outspends every other country when it comes to supporting industrial policy, according to a separate study by the Center for Strategic and International Studies (CSIS). In 2019, China is estimated to have spent at least 1.73% of GDP to help its industries, more than twice as much as South Korea, the second-largest spender. In dollar terms, China spends more than twice as much as the U.S., the South China Morning Post reports.