A recent report by RAND, titled "How the U.S. and China Stack Up in Technology Diffusion," examines the critical aspect of technological diffusion in the ongoing strategic rivalry between the two global powers. The research moves beyond simply identifying which country leads in innovation, focusing instead on which nation is better equipped to spread technological advancements throughout its economy and translate them into sustained productivity gains.
Framework for Diffusion Capacity
The RAND analysis develops an analytical framework to measure national diffusion capacity. This framework is comprised of three key components: actors, linkages, and contextual factors. To assess these, the researchers utilized proxies that serve as metrics for each component. The study then conducted a country-level comparative assessment based on these metrics, exploring two dimensions of technology diffusion: production diffusion (the spread of technology on the supply side of an economy) and adoption diffusion (the spread of technology on the demand and use side).
Divergent AI Strategies
Complementary research from Harvard Business School highlights differing approaches, particularly in Artificial Intelligence (AI). While the U.S. adopts a "frontier-first" strategy, prioritizing powerful foundation models and infrastructure for global dominance, China is focused on deeply embedding AI throughout its economy. This distinction is crucial, as the country that gains the most from AI may not develop the most powerful models but could be the one that most effectively translates AI into productive economic activity.
State Investment in China's AI
Harvard Business School Professor Meg Rithmire's research, co-authored with Hao Chen, details China's state-directed approach to AI investment. This strategy aims to improve industrial efficiency by integrating AI into manufacturing and robotics. Data indicates a significant increase in state involvement, with nearly one in four Chinese AI services crediting some degree of state backing in 2025, a substantial rise from less than 5% in 2023. This approach contrasts with the U.S. focus on developing advanced systems like artificial general intelligence (AGI), which could offer significant geopolitical advantages.
Global Innovation Trends
The Global Innovation Index 2026 from WIPO notes that global R&D expenditure grew by 4.7% in real terms in 2024, with China's total R&D spending slightly surpassing that of the United States. Corporate R&D expenditure reached a record USD 1.5 trillion, with software and AI-intensive firms driving much of this expansion. Venture capital values also recovered, with AI accounting for a significant portion of global VC deal value.
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