Measuring U.S-China Technological Decoupling, and What it Means for the Future
In recent years, the possibility of the United States and China’s economic “decoupling” has become a hotly debated topic among scholars and the media. Photo by Lintao Zhang.
During the first two decades of the twenty-first century, China has risen to world prominence as an international economic power. Building on the miraculous growth driven by investment and production that stemmed from its “open-door” reforms starting in 1978, China completely transformed its economy and has increasingly challenged the United States’ global economic dominance. In 2010, China became the world’s top manufacturing nation, ending a 110-year U.S. lead. In 2014, China replaced the U.S. as the world’s largest economy by purchasing power parity. And in 2019, China demonstrated its immense research and development gains by becoming the nation to file the largest number of international patent applications at the World Intellectual Property Organization.
However, China’s rise to economic stardom could not have been achieved without its heavy integration with the technologically developed world, particularly the United States. When it comes to international trade, science and technology can cross national borders much easier than goods or people. International cooperation can play a large role in propelling technological advancement forward. Within the last three decades, internet protocols, hardware design and manufacturing, software development, and IT standards have evolved within a global system, with countries relying on each other for shared knowledge and techniques. As such, both China and the United States’ technological development fields have benefited greatly from global interdependence.
However, in recent years, the possibility of the United States and China’s economic “decoupling” has become a hotly debated topic among scholars and the media. Their decoupling refers to the “deliberate dismantling—and eventual re-creation elsewhere—of some of the sprawling cross-border supply chains that have defined globalization and especially the U.S.-China relationship in recent decades.” While decoupling is becoming an increasingly popular path, political desires to decouple must not lead to rash decision-making. After years of interdependence, decoupling the two most powerful nations has serious implications, not only for the future of technological development, but for the broader objectives of global cooperation.
Measuring Recent Decoupling
Despite the term becoming an increasingly used buzzword in international economic discussions, decoupling in our globalized world has not been an easy phenomenon to measure. According to research conducted by faculty at the Columbia Business School, one new innovative method to determine decoupling is by focusing on patent technology between the two nations. By using the propensity for “domestic patents in a technology area to cite foreign patents relative to citing their own,” researchers created a measure that indicates the degree of technological decoupling between the U.S. and China. Specifically, the research focuses on three historical “screenshots”—2000, the year before China’s entry to the WTO; 2009, the end of the Great Recession; and 2019, the end of the sample period, which coincides with open attempts of decoupling. By using these three periods of time, researchers were able to chart the development of decoupling over the last two decades as economic rivalry heightened between the two nations.
After integrating comprehensive patent data from the U.S. and China, the study finds that overall, technology integration between both countries steadily increased throughout the first two decades of the 21st century. As expected, during this period, China also exhibited more dependence on U.S. technology than the U.S did on Chinese technology; after joining the WTO and integrating with world markets, China naturally relied heavily on U.S. innovation to aid its growth and development. Interestingly, however, while China’s dependence on the U.S. increased during the first decade studied, its technological integration with the U.S. decreased since the end of the Great Recession. In other words, the propensity for new Chinese patents to cite U.S. technology steadily decreased in the last decade, marking a significant change in the relationship between the two nations.
Understanding These Trends
This research provides a good baseline for how technological decoupling is unfolding between the U.S. and China, and the trends can be applied to predict the future relationship between the two nations. While the unprecedented interdependence between the U.S. and China throughout the last two decades cannot be quickly nor easily ended, the raw patent data reveals one clear indication: technological decoupling has already begun. And because of the intensifying state of economic and geopolitical rivalry both nations find themselves in today, this decoupling will likely gain momentum in the years to come.
As a growing mutual distrust has colored national attitudes in recent years, decoupling is increasingly viewed as a politically favorable path in both the United States and China. Despite their many differences, both Trump and Biden campaigned on a desire for the United States to decouple from China by decreasing the U.S.’s dependence on Chinese products and supply chains. The COVID-19 pandemic has also heightened domestic political rhetoric on decoupling from China and greatly influenced public opinion about the U.S.’ relationship with the nation. An early 2020 poll on attitudes towards China found that 75% of Americans believe the U.S. should end its dependence on China, specifically when it comes to Chinese medical technologies and exports. Moreover, when asked whether they agreed that the U.S.-China trade relationship should change in a post-pandemic world, 72% of respondents agreed, indicating that an overwhelming majority of the U.S. population holds a negative attitude toward integration with China.
Although China benefited immensely from the economic integration with the U.S., which characterized its rise to economic stardom, China now seeks to decrease its dependence on foreign countries for critical technologies and products. From the Chinese perspective, the government considers decoupling from the U.S. as a potential means to achieve greater independence from the West. For the U.S., decoupling from China focuses primarily on discouraging Chinese imports in order to safeguard American jobs and national security. For China, however, decoupling serves a broader objective: it marks a shift in China’s strategic focus from one of economic growth to one of economic control. By decreasing its reliance on foreign technologies, China seeks to promote domestic dominance of Chinese firms and leverage this dominance into global competitiveness, thereby becoming a more independent and powerful economic hegemon.
Ultimately, we know that innovation decoupling has already begun, and because of both nations’ political atmospheres, we can predict that these trends will continue to gain momentum. Although there is a growing political desire within both countries to decrease dependence on each other in this new age of international competition, the immense consequences of innovation decoupling between two world superpowers must be thoroughly considered before it is too late.
Implications for the Future
International cooperation is paramount to properly address the global issues the world faces. However, technological decoupling inhibits the necessary cooperation and integration required to combat challenges that transcend national boundaries. International issues, like the climate crisis and future pandemics, require that the U.S. and China share knowledge, technologies, and innovation with each other in order to be better equipped to solve them.
While there is a natural tendency for nations to decouple on security technologies, there are pervasive consequences when technological decoupling escalates to a point beyond these conventional boundaries. As political tensions rise between the U.S. and China, complete innovation decoupling becomes more and more of a possibility. Technological decoupling in fields such as microchips and semiconductors could set the stage for decoupling in fields such as green technology or antiviral medications. The implications of decoupling and the rhetoric that surrounds it are far-reaching, and when it comes to the U.S. and China’s cooperation on climate change, we have already begun to see its effects.
A decade ago, the cooperation between the U.S. and China was a primary driver for global efforts to combat the climate crisis. The two nations funded joint research projects, shared best practices with regulators and academics, and most notably, made a joint public pledge to “work constructively together for the common good.” Since then, the world has changed significantly. Rhetoric on decoupling has grown. Both nations have become steeped in suspicion of each other’s intentions. And given that technological decoupling has already begun, it is no wonder why this cooperation is gone.
The implications of complete innovation decoupling between the U.S. and China must not be ignored. There is too much at stake. The solutions to adequately addressing global crises rely on changing the existing trajectory of decoupling between the world’s strongest two economies, before it is too late. As the world descends into intense economic and geopolitical conflict, technological development is one area where international cooperation must not be forsaken for rash politics.
Nicolas Lama (CC ‘24) is a Senior Editor at CPR and a sophomore studying Political Science, Economics, and East Asian Languages and Cultures. At the Columbia Business School, Nicolas is an undergraduate research fellow, where he conducts research on the economic and political intersections between the United States and China. He was awarded the Critical Language Scholarship to study Mandarin this summer at the Changchun Humanities and Sciences College through the U.S. State Department with the goal of fostering more future mutual understanding between the two nations.