King's College London

In the recent past, the mantra was straightforward. America innovates, Europe regulates, and China imitates. The Chinese writer Yu Hua in the 2000s criticised the mindset of his fellow citizens as one where “counterfeit” and “fake” were the default. The Silk Alley in Beijing was famed as a place to pick up copies of anything from the latest luxury bags, to the most up-to-date video games and DVDs. As an official working at the British embassy in Beijing around the turn of the century, it wasn’t uncommon back then to have visiting dignitaries make this one of the main stop-off points, even if part of their aim was to lecture Chinese officials on intellectual property infringements.

Times have changed. With the appearance of DeepSeek earlier this year in China, a non-state company with only 200 people based in the city of Hangzhou, Chinese AI capacity became globally influential. A trillion dollars disappeared from the value of US companies working in this area, as the cheaper, newer Chinese version fell from a clear blue sky. Even Chinese President Xi Jinping took note, hosting the founder of the company, Liang Wenfeng, at a meeting of the non-state sector this February.

That China might one day become an innovator was never properly contemplated, at least until very recently. In the 2000s, British education ministers did praise the ability of Shanghai schools to produce numerate, highly skilled students who were able to reach into the top of world rankings for their ability in maths. And from this time, British universities started to enjoy the arrival of an ever-increasing wave of Chinese students, many of whom did specialise in engineering and STEM subjects. But the assumption remained that to really be creative and innovate, for all the talk, China would need a more open, liberal environment, for ideas to have the space to be explored, contested, and engaged with.

Not much attention was given to one of the very clear trends that was emerging. From a time when less than 1 per cent of the people attended a university, and there were only 122 nationally as recently as the 1990s, to the People’s Republic experiencing an education revolution from 2000. There are now 3,000 universities, with an enrolment between the ages of 18 and 25 of 60 per cent. The government’s education budget has doubled in the period since 2012. And Chinese universities like Peking and Tsinghua have relentlessly risen in the global rankings, even as many western counterparts have been marching the other way.

The great infantry of China’s transition to what the Beijing government wants to see as a high-value, high-tech, developed economic model in the next decade are the people who have come from this system: the 5 million STEM subject graduates that are produced each year – twice as many as its nearest competitor, India, and 10 times more than the US – are the single most important asset that the country now has. In the past, when economic reforms started in the early 1980s, the main resource was plentiful cheap labour. It was the migrant workers from the rural areas – up to 250 million of them by 2010 – who worked in the vast factories making Apple iPhones and the kinds of electronic white goods and laptops that then got shipped to the US and Europe. The Premier of the country in the late 1990s, Zhu Rongji, said that China was the “factory of the world” at this time.

But now it wants to be the thinker of the world, and to create technology and innovative methods that will compete with, and even overtake, those of the developed world. In AI, life sciences, and quantum computing, China is largely regarded as being world-class. It has reached this position by a combination of big increases in state funding (research and development budgets rose to US$498 billion in 2024, increasing most years by 8 to 10 per cent since 2015) along with strategic input from the central government. This has nurtured hubs for placing universities and businesses together, and caused a key focus on electric vehicles, driverless vehicles, and robotics. In 2023, China overtook Germany as the largest user of robots in factories and commerce. It also became the world’s largest producer of EVs the same year.

There is a story about a factory owner in the 1990s who produced tractors. He is asked by a visiting political leader why he chose the name “Flying forward” and gives his reply as: “We ran out of reverse gears, so they can only go in one direction.” One might say the same thing about Chinese technology innovation. China has the funding, the institutes, the human capital, and the market to support this. Finally, it also has the incentive, as the US places greater and greater restrictions on what sort of cooperation and what kind of technology can be shared with its main competitor. Necessity is the mother of invention, and it seems, in China’s case, it is bringing forth a new generation of researchers and technologies that the outside world cannot afford to ignore.