America Is Losing the Innovation Race

James Farley, Ford’s CEO, said that seeing China’s electric vehicle industry was “the most humbling thing I’ve ever seen,” because the technology, costs, and quality of Chinese vehicles are years ahead of the United States. Here's the flip side: for decades, we have thought of China as a gigantic factory that copies, not creates. Yet today, for the first time, China is ahead of the United States not only in production but also in innovation in key technologies: electric vehicles, batteries, robotics, and even hypersonic missiles, which the Pentagon calls “the best in the world.” The notion that the future of science is American is crumbling in the face of the data. In less than a decade, the “Made in China 2025” plan has transformed the country from a follower into a leader in strategic sectors. The driving force? Massive, centralized investment across the entire innovation value chain: from basic research to universities to large-scale production. The story of this transformation has clear protagonists. On the one hand, there is Xi Jinping, who has made basic science the key to technological autonomy. He quadrupled research funding between 2013 and 2023, bringing it to $57 billion. On the other hand, there is Vannevar Bush, the scientist who convinced Roosevelt to fund university research during World War II, paving the way for wonders such as radar, penicillin, and the internet. Bush used to say: “New products do not emerge fully developed; they arise from new principles stemming from basic research.” For decades, this vision has made American universities hotbeds of innovation. Today, however, the tide has turned. After more than 80 years as the undisputed leader, the United States is losing ground – and not just because of its rivals. In recent years, U.S. policies have cut funding, restricted visas for foreign students, and politicized research. Harvard, for example, is cutting the number of PhD students in science in half. The brain drain is no longer directed solely toward Europe: since 2024, at least 85 American scientists have already moved to Chinese institutions. Here is a sobering fact: In 2016, among the top ten universities in the world for scientific publications, five were American and only one was Chinese. In 2025, nine out of ten are Chinese. Moreover, according to the Australian Strategic Policy Institute, China now ranks first in research quality in 66 out of 74 technologies considered strategic. Another key point: China now produces more PhDs in science and engineering than the United States – 53,000 compared to fewer than 45,000 in 2022. And while the United States has historically attracted talent from around the world, visa restrictions and political uncertainty are now prompting both students and professors to look elsewhere. But it's not just a question of talent. The underlying problem is that the U.S. market rewards rapid investment and software, while innovations that take years and billions to reach the market—such as new materials, clean energy, and advanced hardware—often lack patient capital. In China, on the other hand, the government invests directly in the riskiest phase of technology development, including through public-private funds that have mobilized hundreds of billions over two decades. This strategy has its limitations: political pressure can stifle creativity and create overproduction bubbles, but for now, the balance is positive. Who has tried to change things in the United States? Rafael Reif, former president of MIT, created “The Engine,” an accelerator to fund “tough tech” companies: companies that have to invent both the product and the factories to produce it. One example: Commonwealth Fusion Systems, which got its start at MIT through “The Engine,” is building the first commercial nuclear fusion power plant with the help of Google and $3 billion raised after the initial investment. But these cases remain exceptions. Many U.S. frontier projects have been halted or slowed down by changes in administration or sudden budget cuts. One case in point: In 2025, a company that aimed to revolutionize cement production to reduce global emissions—Sublime Systems—had a $87 million grant from the Department of Energy canceled as soon as the administration changed. And customs tariffs designed to boost industry often have the opposite effect: they dampen the desire to innovate and close off markets. Here is the perspective that few consider: The true strength of the United States has never been private capital alone, but rather its ability to combine public vision and private investment in a stable, long-term manner. From World War II to COVID-19 vaccines, turning points have come when the government has been able to act as a partner, not as an arbiter or a master. Today, we need an institution with a single mission: to fund and develop strategic technologies, shielded from political cycles and capable of taking risks on projects that the private sector would not touch. The future of science could be written in Chinese—not because China is more free or more creative, but because it invests where others have stopped believing. If you abandon science without patience, you hand the future over to those who are willing to wait. If you think tech leadership is all about fast money and software, look at who is building the new foundations of the world: China is already doing it. On Lara Notes, there is a gesture you won't find anywhere else: I'm In. It's not a heart; it's not a thumbs-up. It's your statement: This concerns me. And if tomorrow you tell someone that China now produces more PhD students in science than the United States, you can note it down on Lara Notes: Shared Offline is the way to say that conversation mattered. This Note comes from Foreign Affairs: you have saved over 30 minutes of reading time.