Posted by: mulrickillion | January 2, 2012

Will China Outsmart the U.S.?

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Employees at Suntech Power Holdings Co.’s factory in Wuxi, Jiangsu Province, China. Qilai Shen/Bloomberg News.

By Adam Davidson, Dec 28, 2011 — Three months before the Japanese attack on Pearl Harbor, Angus Echols, a member of DuPont’s executive committee, began shaping the chemical giant’s plans for the coming decade. The U.S. would soon be at war, he explained in a series of memos and high-level discussions, and the company needed to aid the effort. But it also needed to think far ahead. When the war ended, Echols argued, women would want to buy cheap stockings. And where was DuPont on this crucial matter?. . . .

These days, all successful U.S. businesses have become innovation-based companies.

As consumers, we don’t care if our products are invented in the U.S. or in some other country. But as a work force, we should. While much has been written about Chinese factories’ stealing U.S. manufacturing jobs and destroying our businesses, the two countries have reached an uneasy, unspoken economic agreement over the past decade. American firms find they can compete with low-cost manufacturing by constantly developing new products. This has worked out well for U.S. companies — though, notably, not for U.S. manufacturing workers — because there are much fatter margins in owning the intellectual property of a hot new thing than there is in churning out a huge volume of cheap components. And these higher margins manifest themselves in higher salaries for American workers.

Partly as a result, the U.S. still dominates the world of research and development, as it has for more than a century. The country spends nearly double the annual R.-and-D. budgets of Japan and Germany combined. But China’s decade long rise from a nonplayer in R. and D. to the world’s second-largest spender poses a serious threat. A recent study by the Battelle Memorial Institute, a research firm, predicts that China’s spending will match ours around 2022. In research terms, that is effectively today.

China already has plans to focus on exciting but vague ideas now — like green energy and bio- and nanotechnology — that will most likely become products in the 2020s. . . .

Will China Outsmart the U.S.? – NYTimes.com

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