Editor’s note: This was contributed by Paddy Cosgrave, CEO of Web Summit and RISE. RISE is a technology conference taking place in Hong Kong between July 11-13 and brings together 15,000 tech leaders and attendees from Asia and the rest of the world. Connect with Paddy on LinkedIn.

A number of months ago, ahead of our US-based event Collision, I wrote about the direction of American innovation and I found something incredible. China has eclipsed the US in terms of the creation of intellectual property.

This revelation alone may not sound earth-shattering, but when you consider what is happening in more detail you begin to discover some truly significant trends.

In recent years, a tilt in China’s favor has become a landslide when it comes to innovation. In 2010, for example, Chinese companies had registered in the region of 380,000 patents compared to 470,000 in the US. Five years later, China has completely overtaken the US, registering in excess of 1,000,000 patents compared to 600,000 in the US. The gap between both is now accelerating at a historically unprecedented pace. In fact, last year alone China increased their number of registered patents by 45% while the number of registered patents in the US actually declined.

It doesn’t look like the US will be catching up soon either.

The top 1,000 US companies are investing less in research and development (R&D) than at any point over the last 50 years. US federal spending on R&D, as a percentage of GDP, is at its lowest level in 40 years. Add to that a persistent decline in the number of startups being created in the US economy and it is unsurprising that some are saying America is facing a burgeoning innovation problem.

AI: Frontline of innovation

This trend hasn’t gone unnoticed in the US. In the final months of the Obama administration, the U.S. government published two separate reports which noted that the US is no longer the undisputed world leader in AI research and innovation, and expressed concern about China’s emergence as a major player in the field. The reports recommended increased expenditure on machine learning research, and enhanced collaboration between the US government and tech industry leaders to unlock the potentials of AI. But despite these efforts, 91% of the 1,268 top US and international tech founders, CEOs, investors and developers surveyed at Collision in May 2017 believed that the US government is “fatally underprepared” for the impact of AI on the US ecosystem.

AI appears to be the frontline of this battle of innovation between East and West at the moment and China’s influence is growing.

China has shown increasing interest in the American start-up world, notably in the field of AI. Research firm CB Insights found that Chinese participation in funding rounds for American startups came close to US$10 billion in value by 2016 while recent figures indicate that Chinese companies have invested in 51 US artificial intelligence companies to the tune of US$700 million.

China Dominance and US attitudes

China’s newfound dominance in AI isn’t a huge surprise. They have invested massively in AI research output since 2013, and so far these efforts are yielding incredible results.

Here are just a few examples: The three Chinese tech giants – Baidu, Didi, and Tencent – have all set up their own AI research labs, with Baidu, in particular, taking several steps to cement itself among world’s leading lights in deep learning. At its AI lab in Silicon Valley, 200 Baidu developers are pioneering driverless car technology, visual dictionaries, facial- and speech-recognition software to rival the offerings of American competitors. Similarly, Tencent is sponsoring scholarships in some of China’s leading science and technology universities, giving students access to WeChat’s enormous databases, while at the same time allowing Tencent to tap the best research and talent coming out of these institutions.

Even at a government level, spending on research is growing by double digits annually. It is said that China is preparing a multi-billion dollar initiative to further domestic AI advances with moonshot projects, startup funding, and academic research. From a US$2 billion AI expenditure pledge in the little-known city of Xiangtan to matching AI subsidies worth up to of US$1 million in Suzhou and Shenzhen, billions are being spent to incentivise the development of AI.

In comparison, the Trump administration’s proposed 2018 budget includes a 10% cut to the National Science Foundation’s funding for US AI development programs, despite the previous administration’s commitment to increase spending.

Attitudes of US investors appear to reflect a growing concern. 28% of investors we surveyed ahead of our RISE event next month cited China as the main threat to the US tech industry. It’s a significant figure as China’s influence continues to grow, but of further surprise was the 50% of all respondents who believed the US would lose its predominant position in the tech world to China within five years.

Confidence in the US dominance of the tech world is failing.

RISE: Where East meets West

Four years ago, I wanted to create a conference that could bridge the gap between East and West and showcase the innovation taking place across both marketplaces. RISE is now the leading tech event in Asia welcoming 15,000 attendees this year. We recognize the truly global nature of technology. I think RISE is as important as ever so we explore the real world possibilities from the level of innovation we’re seeing from both China, the US and all over the world.

I think medium term it’s prudent to be at the very least cautious on American innovation. Historically what has set the United States apart has been its capacity to course correct. I’ve no doubt the US will find a new course. But as it stands, China is in the driving seat.

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TechNode Guest Editors represent the best our community has to offer: insight and perspective on how technology is affecting business and culture in China

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