US-China competition isn’t defined by military strength, but relative innovation capacity – Outpacing China is the only way to prevent a war.

The United States and China are in a growing competition, perhaps verging on conflict, but it is not a nineteenth century competition between empires for control of territory and resources. Unlike great power competition in previous centuries, the focal point is not military strength or territorial expansion. This conflict is over control of the modern levers of power—global rules and institutions, standards, trade, and technology. The ability to create new technologies, particularly digital technologies (given their importance for politics, security, and economic growth) have become key factors in the U.S.-China relationship, which is marked by close commercial cooperation and deep governmental distrust. This disparity creates unavoidable tensions.

The link between technology, innovation, national security, and international power is now widely recognized. When Vladimir Putin says that the country that leads in artificial intelligence (AI) “will be the ruler of the world,” it is hyperbole, but hyperbole that confirms that political leaders recognize that the ability to innovate is a potent source of national power. In the digital age, national security and national power have different requirements shaped by technological change and cyberspace.

Innovation has become a central element of its international influence. This is not new—the U.S.-Soviet space race was a contest of the ability of different systems to produce new technologies, but those were unique government programs. Technological competition today is as much between companies as states. A country’s ability to innovate and produce advanced technologies provides economic strength, military power, and an intangible benefit of perceived leadership.

Both China and the United States have advantages and disadvantages in this contest, and while it is usual to focus on quantitative aspects—such as the number of engineers or patents and spending on research and development (R&D)—these are not the key determinants of technological competition between states. This competition is a contest of ideas on governance for investment, innovation, and the internet. The internet and global connectivity not only reshape the environment for competition but also create political and market forces that both nations find difficult to control.