Innovation paradigm upgrade

Fostering new quality productive forces entails national advances from engineering-intensive development to science-driven synergies

The 2026 two sessions — the annual plenary sessions of China’s top legislative and political consultative bodies — have outlined the country’s science and technology development blueprint for the 15th Five-Year Plan (2026-30) period. Against the complex backdrop of the tech competition between China and the United States, marked by sectoral divergence and regional stratification, the two nations are advancing along different innovation trajectories, each with its own strengths. For China, the key to its next-stage transformation hinges on whether it can achieve a paradigm upgrade from “engineering-intensive” innovation to “science-driven” innovation, and foster synergy between technological innovation and the expansion of domestic demand.

The China-US tech competition is unfolding across four dimensions: original innovation (breakthroughs), applied innovation (iteration), technological autonomy and security, and global influence building, each featuring complex and interwoven dynamics.

The US maintains a leading edge in original innovation in areas such as semiconductor design and quantum computing, boasting formidable strengths in advanced R&D and the development of core software ecosystems. China has overtaken the US in sectors including green and low-carbon technologies, hypersonic technology and electric vehicle batteries, while demonstrating globally acclaimed speed and efficiency in applied innovation and industrial deployment. With the world’s largest industrial robot installation base, as well as the ongoing testing and operational rollout of advanced systems such as autonomous vehicles and electric vertical takeoff and landing aircraft, China’s iteration capability has become its core foundation in the global tech competition. This landscape has forged differentiated competitive moats for the two countries: the US dominates innovation architecture and standard setting, whereas China leads in industrialization and market penetration, with neither side likely to decisively outpace the other in the near term.

In discussions on China-US innovation divergence, it is critical to avoid treating original and applied innovation as opposing or hierarchically ordered. In reality, the evolution and eventual dominance of a technology are not determined at inception, but are shaped through continuous iteration in large-scale market applications. The new energy vehicle sector serves as a telling example: Japan pioneered original breakthroughs in hydrogen fuel cell technology but failed to align with market demand in China and the US; consequently, the global electric vehicle industry is now dominated by Chinese and US’ brands. The historical experience of the US further validates this logic. Although the US had become the world’s leading manufacturing power as early as the beginning of the 20th century, it still lagged significantly behind countries such as Germany, the United Kingdom and France in terms of the number of Nobel laureates by the end of World War II. The establishment of US global economic and innovation leadership did not primarily stem from being the leading source of basic science, but rather from its world-leading capabilities in applied translation, iterative improvement and large-scale industrialization.

China’s current innovation capacity boundaries are clearly defined. In engineering-intensive sectors, it has attained global top-tier competitiveness by leveraging strengths in complex system integration, large-scale manufacturing and rapid supply chain responsiveness. Advances in areas such as high-speed rail, ultra-high-voltage power transmission, 5G infrastructure and power battery mass production are continuously unleashing the “engineering innovation dividend”. However, in science-driven sectors that hinge crucially on basic science breakthroughs and original theoretical contributions, China remains in catch-up mode: the Nature Index 2024 shows that while China’s total output of high-quality research papers exceeds that of the US by about 45 percent, its publication volume in the two top journals — Nature and Science — stands at merely 30 percent of the US level. Among the top 20 companies worldwide publishing high-quality scientific papers, half are located in the US, while only three Chinese companies make the list.

This innovation path divergence is rooted in decades of China’s industrialization trajectory, institutional design, market incentives and talent supply structure. China’s industrialization strategy has been centered on the large-scale application of mature technologies, aligning with early-stage development goals of employment creation and capacity building — whereas the long-cycle R&D investment required for science-driven industries was inconsistent with development priorities at that stage. The government-led model has demonstrated institutional strengths in large-scale projects, yet institutions and cultures that foster bottom-up, trial-and-error exploration for scientific innovation are still evolving. The long-standing “quick monetization” logic in the domestic market creates structural tensions with the “patient capital” essential for scientific innovation. While higher education has cultivated a large pool of technical talent for engineering, academic ecosystems featuring free exploration and failure tolerance — critical for basic science breakthroughs — require further reforms.

The US has built solid barriers in science-driven fields through a collaborative innovation network of national research institutions, top universities and enterprises. Engineering dividends have underpinned China’s rapid catch-up in the first half of the innovation race; yet fostering new quality productive forces ultimately entails an innovation paradigm upgrade from engineering-intensive to science-driven development.

Beyond differences in innovation capabilities, competition increasingly extends to the material and industrial foundations that sustain technological development. The China-US tension over rare earths epitomizes this competition in innovation and resource strategies, and underscores China’s technological autonomy and industrial chain advantages in key sectors.

The US once dominated the global rare earth industry, but that dominance gradually declined due to soaring environmental costs. Positioning rare earths as a strategic resource, China has achieved significant technological breakthroughs. Current China-US rare earth competition is characterized by a split between light and heavy rare earths. Though the US has achieved partial self-sufficiency in light rare earths, it faces a structural weakness of “having light, lacking heavy”, constrained by multiple factors including resource endowment, separation technology, incomplete industry chains and environmental costs — making breakthroughs challenging in the short term.

China, by virtue of its heavy rare earth resource advantages, decades of technological accumulation, a well-developed rare earth supply chain, and an expanded global network of resource and production capacity in Southeast Asia, plays a central role in the global heavy rare earth supply chain, while gradually strengthening its influence in pricing and standard-setting. In response to US “decoupling” attempts in rare earths, China is upgrading its rare earth strategy from “resource control” to “dominance in technical standards plus control over high-end material supply”. It is consolidating its core strengths by promoting high-value, green industrial development and deepening global cooperation across the entire industry chain.

China’s competitive edge in technology extends beyond irreplaceable strategic resource endowments (such as rare earths) to encompass world-class engineering integration capabilities, a wealth of talent and engineering professionals, efficient industrialization rollout and application-oriented innovation fueled by its super-large market — all of which provide solid foundations for navigating China-US tech competition and achieving sci-tech self-reliance.

Over the next five years, China’s priority is to consolidate these differentiated strengths to shore up its competitive foundation with applied innovation, and address gaps in science-driven innovation by ramping up efforts across institution building, capital investment, academic ecosystems and talent cultivation — thereby driving a systematic upgrade of its innovation paradigm. By achieving the coordinated development of engineering-intensive and science-driven innovation capabilities, China can forge a distinctive path to sci-tech self-reliance amid the restructuring of the global innovation landscape and secure a more proactive position in global tech competition.

The author is an associate professor at Guanghua School of Management at Peking University.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.