China is entering a golden age of innovation

“Going forward, hardcore innovation will become increasingly important. This might not be widely understood right now because society wants tangible results. When those who achieve hardcore innovation become successful and recognized, society’s collective attitudes will change. We need more successful cases and some more time.”

In the summer of 1959, the American National Exhibition in Moscow’s Sokolniki Park welcomed two special visitors: Soviet Premier Nikita Khrushchev and US Vice President Richard Nixon.

In front of a model home filled with modern appliances and furniture, the two engaged in the historic “Kitchen Debate.”

Nixon argued that most American blue-collar workers could easily afford such a home and its appliances, with homes typically replaced every 20 years as consumers upgraded to better ones. “The American system is designed to take advantage of new inventions and new techniques,” he said.

However, Khrushchev sidestepped Nixon’s point and focused his critique on distribution issues [economic benefits]. [Several] decades later, the outcome of the Cold War [the collapse of the Soviet Union in 1991] offered a phased resolution to this debate.

From McDonald’s to Coca-Cola, Hollywood to Nike, American companies’ innovations in consumer goods proved more effective than [the Soviet Union’s] rockets or atomic bombs in shaping the global imagination and fostering a widespread desire for a particular way of life.

Andy Warhol, the father of pop art, once observed: “What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest.

“You can be watching TV and see Coca-Cola, and you know the president drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke too. A Coke is a Coke, and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same, and all the Cokes are good.”

America’s ultimate victory in the battle for hearts and minds was rooted in the innovative society Nixon had proudly championed.

Today, Chinese products, from TikTok, Shein, BYD and DJI to the global contributions of AI models like Qwen and DeepSeek — are irresistible due to their better quality and lower prices.

If a new “Kitchen Debate” were to occur today, China could confidently declare: ‘The Chinese system is designed to take advantage of new inventions and new techniques.” Facing this claim, some Americans—or those who support America’s ideology—might be provoked.

They might say something like “innovation and creativity cannot be planned,” followed by obscure theories of Ronald Coase [A British economist (1910-2013) whose theories focused on the nature and efficiency of companies], creating an “amusement atmosphere.”

[In a short story by Chinese writer Lu Xun in 1919, people enjoyed an “amusement atmosphere” by making fun of unemployed scholar Kong Yiji, who likes to use old Confucius words.]

Why was the market’s “invisible hand” [suggested by Scottish economist Adam Smith in 1759] defeated by the “visible hand” [which refers to the Chinese government’s significant role and direct intervention in the economy] in driving innovation?

The transformation of Made in China is making the answer increasingly clear. While corporate profits disproportionately direct America’s top talent into a handful of industries, China’s industrial policy has evolved far beyond outdated stereotypes.

By fully leveraging market forces and empowering private enterprises, the government is focused on addressing market failures and sharing innovation costs with individual firms. Besides, US capitalism has been shifting its attention away from the manufacturing sector for a long time.

Comparing R&D investments between China and the US vividly illustrates the value of China’s industrial policy.

According to the US National Science Foundation, American companies invested $692.7 billion in R&D in 2022, while China invested 2.39 trillion yuan ($354 billion). The gap was significant even if the figures were adjusted for purchasing power parity.

However, a closer look reveals the uneven distribution of the United States’ investment in innovation: only slightly more than half of its corporate R&D spending went to manufacturing, and within that, about one-third was invested in the pharmaceutical sector.

In contrast, over 80% of China’s corporate R&D investment flowed into manufacturing, with the information and communication technology (ICT) sector accounting for 20% of the investment, the largest among all other manufacturing sectors.

The investment strategy that “concentrates on a particular industry and diversifies on companies” not only ensures a healthier distribution of talent and financial resources but also creates an environment where Chinese companies can leverage relative advantages, much like the ancient strategy of “Tian Ji’s horse racing.”

[In ancient times, Chinese strategist Sun Bin suggested his friend Tian Ji, a general of the Qi state, rearrange the deployment of his horses so that Tian’s strongest horse could win King Wei of Qi’s average horse while Tian’s average horse could win the King’s weakest horse. Although the King’s strongest horse still beat Tian’s weakest horse, the King lost the overall race. The King later appointed Sun as chief military adviser.]

What is more important is that the collaboration between traditional and emerging industrial sectors can create synergy and lead to powerful innovation.

A good example is how China’s ICT and machinery manufacturing sectors have prompted the rise of the country’s new energy vehicle industry.

Today, China is entering a golden age of innovation. Millions of STEM graduates from its universities and trillions of yuan in annual R&D investments—both domestic and international—are fueling a diverse corporate ecosystem.

The ecosystem includes dozens of supergiants, hundreds of unicorns and gazelle companies, and nearly 15,000 specialized and innovative “little giants.” The depth and resilience of “Made in China” or “Created in China” are growing.

This multidimensional innovation network avoids the rigidity of Soviet-style central planning and the negative effects of America’s laissez-faire approach. It naturally gives rise to a new paradigm of modernization. The Kitchen Debate [in 1959] seemed to be an accurate prophecy.

When Chinese new-energy vehicles shine at the Munich Auto Show, DJI’s drones fly over the Amazon rainforest and TikTok fosters a sense of belonging among young people across ideological and linguistic divides, the world is witnessing a quiet but profound paradigm shift.

This is not a Cold War-style ideological confrontation nor a simple race for technological supremacy. Rather, it is humanity’s reimagination of innovation and inclusive progress in the digital age.

Herein is the lesson of “Made in China 2025”: when technological innovation becomes affordable and accessible, and industrial upgrading creates new opportunities, a development miracle can happen.