Nationalism, China Scepticism, and Seeing Through the Hype, By James Reed and Brian Simpson

The new wave of nationalism, like "Make America Great Again" or Europe's populist push, is all about putting your country first, questioning globalist narratives, and eyeing rivals like China with a raised eyebrow. Matthews' article, "China's Tech Power is Overrated,"

https://www.aporiamagazine.com/p/chinas-tech-power-is-overrated

is fuel for us nationalists and China sceptics. It argues China's tech dominance is a mirage, built on shaky foundations that nationalists can exploit to boost their own game. The piece jells with a growing scepticism about China's rise, fuelled by post-Covid distrust in global supply chains and Beijing's heavy-handed moves (like cracking down on Hong Kong or flexing muscle in the South China Sea).

Nationalism today isn't just about borders; it's about owning your economic destiny. China's been painted as the tech giant, with its massive exports and patent piles supposedly outpacing the West. But Matthews calls BS: China's tech scene is propped up by foreign firms, government quotas, and a lot of hot air. This resonates with nationalists who want to "reshore" manufacturing and innovation, such as U.S. tariffs or Europe's push for "strategic autonomy."

Scepticism about China also taps into a broader metapolitics: the West isn't doomed, and Beijing's not invincible. For nationalists, Matthews' piece is a rallying cry to double down on homegrown tech, Silicon Valley's scrappy startups, Germany's precision engineering, or Japan's robotics. It's about betting on freedom and flexibility over China's top-down control. But it's not all rosy. The West's got its own baggage, such as Big Tech's data grabs or reliance on Chinese chips. Nationalists need to fix those weak spots while capitalising on China's stumbles, like the ones Matthews lays out.

Here is a summary on why China's tech juggernaut is not all it's cracked up to be, pulled from Matthews' article:

1.High-Tech Exports Are a Foreign Show:

China's the top dog in high-tech exports, snagging 16.9% of the global share by 2006, beating out the U.S., Europe, and Japan. But hold up, 86% of those exports (2003 data) come from foreign-invested enterprises (FIEs), like Western multinationals or Taiwanese IT giants, using China's cheap labor to assemble stuff!

China's not inventing the goods; it's just the world's workshop. A whopping 93% of its high-tech exports are built from imported parts (think semiconductors or sensors) that China can't make itself. It's like being the guy who puts the Lego set together but didn't design it.

This is a wake-up call for the West to cut reliance on China's assembly lines. Bring chip-making home, like the U.S. CHIPS Act aims to, and watch China scramble without foreign tech.

2.Patent Boom Is Bureaucratic Noise:

China pumps out more patent applications than anyone, outstripping the U.S., Europe, and Japan. But since the 2006 "indigenous innovation" policy, local governments got obsessed with hitting patent quotas, leading to a flood of low-quality filings. A study of 4.6 million patents (1990–2014) found post-2006 patents are mostly minor tweaks, not game-changers.

It's quantity over quality, churning out knockoff iPhones, not inventing the next big thing. U.S. sanctions are also choking China's ability to keep up this patent charade, hitting targeted firms' output.

The West should lean into its edge, real innovation from free markets, not state-mandated paperwork. Nationalists can push for patent reforms to reward breakthroughs, not fluff, and outshine China's numbers game.

3.Subsidies Tank Productivity:

China's thrown billions at R&D and industrial upgrades, but a study of listed firms (2007–2018) shows subsidies made firms less productive. They're propping up clunky state-owned enterprises (SOEs) and zombie companies to save jobs, not spark innovation. Manufacturing productivity growth nosedived from 1998–2007 highs to 1.4% a year (2007–2013).

Subsidies are like bailing out a sinking ship with a teaspoon. New firms, once a growth driver, are now weaker than old ones, and fudged GDP stats (over-reported post-2007) hide the mess.

This screams opportunity for the West. Nationalists can push lean, market-driven innovation, such as tax breaks for startups, not handouts for dinosaurs. China's subsidy flop shows centralised planning's limits.

4.Diffusion Deficit Kills the Spread:

China's got some flashy tech, like DeepSeek AI, but it is inefficient at spreading it across its economy, what Jeffrey Ding calls a "diffusion deficit." The Global Innovation Index gives China props for R&D but dings it for weak university-industry ties, spotty digital infrastructure, and slow tech adoption. Small firms and rural areas are stuck in the Stone Age.

Innovation's pointless if it's locked in Shanghai's skyscrapers. The U.S. thrives because tech spreads fast, such as iPhones in every pocket. China's lag in digital factories, robotics, and cloud tech is a massive bottleneck, like the Soviet Union's collapse despite early space wins.

The West's edge is its ability to get tech everywhere, fast. Nationalists should invest in broadband, STEM education, and small-business tech grants to widen the gap, leaving China's bifurcated economy in the dust.

Matthews' article is a shot in the arm for nationalists and China sceptics. It says, "Don't sweat Beijing's tech hype, focus on your own turf." China's high-tech exports lean on foreign firms, its patents are a bureaucratic scam, its subsidies are a dud, and its tech doesn't spread worth a damn. This plays right into the nationalist playbook: rebuild Western supply chains, bet on free-market ingenuity, and call out China's bluff.

That said, the West can't just gloat. The West has issues such as chip shortages or Big Tech's monopoly games. Nationalists need to push policies that fix those while hammering China's weak spots, like its foreign tech addiction. It's a chance to flip the script: instead of fearing China's rise, use its cracks to fuel a Western comeback.

https://www.aporiamagazine.com/p/chinas-tech-power-is-overrated

'In both academic and policy debates, China is portrayed as a rising innovation superpower. People claim the country's surging patent filings and dominance in high-tech exports signal its ascendancy. Yet a closer examination reveals that China's tech power is vastly overrated. In fact, the country's rise masks critical weaknesses: its high-tech exports are foreign-led, its patent surge is driven by perverse incentives, its subsidies have failed to boost productivity, and a "diffusion deficit" hinders the spread of new technology across the economy.

At first glance, China's status as the world's largest exporter of high-tech goods seems to validate the "innovation narrative". China's share of high tech exports has been steadily rising since the early 2000s and by 2006, it had outpaced the United States, Europe and Japan—capturing a staggering 16.9% share of global high-tech exports. However, this figure is highly misleading.

The backbone of China's high-tech export machine is not domestic Chinese industry but foreign-invested enterprises. By 2003, 86% of China's high-tech exports were produced by FIEs. These companies—multinational giants and Taiwan-based IT manufacturers—relocated their assembly operations to China to exploit lower labor costs, not technological prowess.

Even more revealing is that 93% of China's high-tech exports involve importing sophisticated parts, assembling them, and then exporting the final products. China is an assembler more than an innovator. Domestic Chinese companies have played only a minor role, and when it comes to cutting-edge components—such as semiconductors or advanced sensors—China continues to rely heavily on foreign technology. In short, China's dominance in high-tech exports is less about innovation and more about China's position within global supply chains (supply chains orchestrated by foreign corporations).

Another commonly cited indicator of China's innovation capacity is the sheer volume of patents. Over the past two decades, China has led the world in annual patent applications, surpassing the US, Europe and Japan.

Yet this patent boom is largely the result of government manipulation. Following the introduction of "indigenous innovation policies" in 2006, local governments were given explicit targets for patent production. The result was a bureaucratic race to maximize patent numbers, regardless of the technological novelty involved. Motivated by perverse incentives, local officials encouraged the mass filing of low-quality patents. Universities, companies and even individuals churned out applications to satisfy official quotas.

A detailed study of 4.6 million Chinese patents between 1990 and 2014 observed a dramatic decline in the novelty and impact of Chinese patents after 2006. Although the volume increased markedly, the substance diminished. The patents filed were often minor variations of existing technologies designed to meet quotas, not advance the technological frontier. So while China's headline patent numbers are impressive, they are largely a mirage—an artifact of state-intervention rather than evidence of genuine innovation.

Given the importance of innovation for economic growth, China has poured enormous resources into R&D subsidies and industrial upgrading initiatives. However, the results have been disappointing.

A study of Chinese publicly listed firms between 2007 and 2018 found that government subsidies, including those explicitly aimed at fostering innovation, simply failed to enhance productivity. On the contrary, firms that received subsidies often became less productive over time. Rather than bolstering "winners", subsidies have served to prop up less competitive firms, preserving employment and avoiding politically sensitive bankruptcies. Indeed, subsidy allocation patterns suggest the government is just as concerned with supporting large state-owned enterprises as with cultivating dynamic firms in the private sector.

Chinese government subsidises.

Despite its scale and ambition, China's industrial policy has largely failed to promote the kind of firm-level productivity gains that technological leadership demands. And China's economic fault lines are compounded by a broader slowdown in the manufacturing sector. From 1998 to 2007, manufacturing total factor productivity grew rapidly—driven by firm entry, competition and market liberalization. Yet from 2007 to 2013, TFP growth collapsed to just 1.4% annually, about a third of the earlier growth rate.

This slowdown is pervasive: it cuts across industries, regions and ownership types. Most significantly, the contribution of new firm entry to productivity growth—once a major driver of dynamism—has all but disappeared. And new firms today are less productive relative to incumbents, a possible harbinger of stagnation. Moreover, official data on manufacturing output and GDP have become increasingly unreliable, with growing evidence of over-reporting and statistical manipulation after 2007. This further obscures the state of China's economy, making it difficult for even informed observers to assess the country's potential.

China's economic growth is overstated.

Some have argued that the AI system DeepSeek showcases China's capacity for genuine innovation. Yet despite its strengths, DeepSeek reflects China's strategy of capitalizing on second mover's advantage. And US sanctions are making this strategy increasingly precarious. Research indicates that American export restrictions have limited both the volume and quality of patents produced by targeted firms.

Even if China were generating many innovations at the frontier, it faces another weakness: a "diffusion deficit". According to a paper by Jeffrey Ding, while China has become more innovative (albeit to a lesser extent than official figures suggest), its ability to diffuse innovations across its economy remains poor. Note that diffusion refers to the spread and adoption of new technologies throughout industries, firms, and regions. It is the often neglected but essential process that transforms isolated breakthroughs into economy-wide productivity gains.

Measured by global indices, China performs well in indicators of innovation capacity but lags way behind in diffusion capacity. For example, in the Global Innovation Index, China ranks near the top in R&D spending and patents but falls dramatically when assessed on university-industry collaboration, digital infrastructure penetration, and the application of new technologies across firms.

This gap matters. Historically, powers like the US succeeded not just because they invented new technologies but because they rapidly and broadly diffused them. In contrast, the Soviet Union, despite initially leading in key sectors like space technology, failed to do so—contributing to the country's stagnation and eventual collapse. China's "diffusion deficit" suggests a similar vulnerability.

Its economy remains bifurcated, with world-class tech giants in major cities, but slow technological adoption across thousands of small and medium enterprises, particularly in rural areas. Digitalization of industry, cloud computing uptake and industrial robotics adoption all lag developed economy standards. If China cannot close the diffusion gap, it will struggle to sustain high productivity growth or compete effectively at the technological frontier—regardless of how many patents it files or how much R&D it funds.

China's reputation as a tech powerhouse is built on selective and often misleading indicators. Impressive high-tech export figures are driven by foreign firms. Surging patent filings reflects bureaucratic manipulation. Billions in subsidies have failed to meaningfully boost productivity. And the broader economy is suffering from an acute "diffusion deficit". Innovation is about more than just invention; it's about embedding new technologies in a wide range of firms and industries.

Let me offer a more realistic assessment. While China's economic success is undeniable, its emerging status as an innovation frontrunner is undeserved. And without overcoming the weaknesses outlined above, it is unlikely to overtake the US any time soon."