The U.S.-China tech rivalry looks likely to intensify, despite ongoing efforts to avoid a tariff war. Among other targets, the Trump administration has taken aim at two aspects of China’s presence in the United States: high-tech investment and students.
In late May, the administration announced plans to reveal new investment restrictions and enhanced export controls for Chinese people and entities. The administration also intends to shorten the visas issued to some Chinese citizens, particularly those studying in high-tech fields Beijing sees as priorities. All these changes are expected in the next few weeks.
It remains unclear exactly how the Trump administration will implement these new measures. It is clear, however, that these interventions target very different aspects of global innovation. While Chinese investment in the United States is still limited, Chinese students and academic visitors in the United States play an important and growing role in scientific and technological advances — in both countries.
Chinese investment in the U.S.: No great shakes
China’s investment in the United States has been limited so far. First-year expenditures for Chinese investments in 2015 and 2016 totaled $35.4 billion, according to the U.S. Bureau of Economic Analysis (BEA). The figure for all countries was $813 billion, making China’s contribution about 4 percent of the total.
Chinese firms also contribute relatively little to research and development in the United States. In 2015, foreign firms spent nearly $57 billion on R&D in the United States, according to the BEA. China’s total was just $545 million.
China’s U.S. investment is also waning. Newly announced investments in 2017 were just $8.7 billion — the lowest level in six years. The drop reflects Beijing’s efforts to rein in outbound investment as well as greater U.S. government scrutiny of Chinese deals. Chinese venture capital investments have also declined, from 188 deals in 2015 to 165 in 2017.
In contrast, Chinese students contribute more and more to U.S. innovation
Chinese students have flocked to U.S. universities in recent years. In 2016-2017, there were more than 350,000 Chinese students in the United States — almost-one third of all international students — according to the Institute for International Education. That was more than five times the total from 10 years earlier.
Chinese students bring not only money but also considerable talent and energy to science and engineering graduate programs. From 1995 to 2015, in fact, students from China earned more science and engineering doctorates from U.S. universities than those from India and South Korea put together, as shown in the graph below.
Chinese students in the U.S. are increasingly valuable to China as well
While Chinese PhD students typically remain in the United States, more and more of China’s overseas students are going home. Beijing reports that the number of students returning to China has approached 80 percent of the number of students going abroad in recent years — up from 31 percent in 2007. This shift reflects opportunities in China as well as the difficulty of securing work visas in the United States.
China also benefits from the two-way flow of academic visitors. In 2017, the State Department issued 39,038 J-1 visas to individuals from China — nearly twice the number issued to U.K. citizens under the J-1 Visitor Exchange Program. Such visas often require recipients to return to their home country for at least two years at the end of the program.
This “brain circulation” between China and the United States has helped generate a dramatic spike in scientific collaboration. The NSF reports that U.S. scientists and engineers published nearly 44,000 articles with Chinese counterparts in 2016, far more than they did with those of any other country.
The United States is right to worry about China’s efforts to acquire advanced technologies. High-tech espionage by Chinese actors remains a real problem. Even legitimate attempts to acquire cutting-edge technology could augment China’s military capabilities.
In some cases, however, tighter controls may disrupt productive collaborations without effectively protecting the U.S. technological lead. Tighter restrictions on Chinese students and visitors, for example, could undercut the two-way flow of brainpower between the United States and China. But if China already has a critical mass of top scientists, and if U.S. scientists publish their results immediately online, it’s hard to say which country would be hurt more as a result.
There are longer-term goals at stake
Perhaps the greatest danger is that the United States becomes so fixated on protecting its technological lead that it neglects efforts to extend that lead. After all, the United States and China are not playing a football game with two minutes left on the clock. They are enmeshed in a complex relationship that will continue indefinitely.
Some analysts call for the United States to invest in its own industrial policy, including spending on targeted research and public-private partnerships. Yet Washington can also encourage innovation without spending money. Maintaining net neutrality rules would help many start-up firms. Welcoming foreign entrepreneurs would help spur new business development.
Measures like these might be unrealistic in Trump’s Washington. Yet if the United States fails to invest in its future, technology controls will not suffice to sustain its high-tech leadership.
Andrew Kennedy is senior lecturer at the Crawford School of Public Policy at the Australian National University and the author of “The Conflicted Superpower: America’s Collaboration with China and India in Global Innovation.” He tweets at @andybkennedy.