"China’s economy is intertwined with that of the United States in other ways. China today owns about 4 percent of US national debt, because of its large trade surplus and need to maintain foreign exchange reserves. Its system of state capitalism has started to produce companies that are competitive on the global stage and look to opportunities worldwide. The Fortune Global 500 list of the world’s largest public companies for the first time in 2020 included more companies based in mainland China and Hong Kong (124) than in the United States (121).
Through extensive industrial policy, China is making large investments in R&D and innovations, and is starting to close the gap in its aim to become a technology superpower, in areas including advanced communications and 5G, artificial intelligence, and biotech, among others. Historically, the United States had led the world in technology research, development, and commercialization since World War II, and still does. However, US federal R&D funding as a share of GDP peaked at over 2 percent in the 1970s and has declined since, falling to 0.7 percent in 2018
American companies continue to expand private-sector investment in R&D, but their ability to compete in areas of innovation as well as infrastructure investment that requires long-term investment decisions, while meeting shorter-term market expectations, is already being tested. The challenges facing the American model of capitalism in the 21st century in a multipolar global economy go beyond the United States.
