Question

In a knowledge economy, knowledge is the intensive factor of production. Comparing China and America, which country do you think has competitive advantage in a knowledge economy, China or America? Explain and justify your answer.

Answer 1

America has a competitive advantage compared to China in a knowledge economy. Let's look at the knowledge base of two economies United States and China are different based on three seperate dimensions of knowledge, (a) knowledge technology system development, (b) knowledge innovation performance, and (c) knowledge innovation input.

From the innovation angle, the dimension of knowledge technology system development involves innovation diffusion and application involving innovation in output and efficiency. Other than the difference in input, the main reason for the large differences between China’s and America’s knowledge-based economic developments is because of China’s slow innovation diffusion and weak innovation performance. Leading to weakness in Chinese knowledge-based economic development.

The knowledge-based economic development index of the United States is at a high of 91.4 making it leading country in knowledge based economic development. Compared with the US China’s 36.07 index is very low.

Looking from a second perspective, the biggest disparity between Chinese and American knowledge-based economic developments lies in the knowledge technology system development index, respectively 24.25 and 91.52, a difference of 67.27. The reason for this is that China's ICT infrastructure is also very weak, and ICT applications are not popular and are at a quite low level in particular.

Also, the number of ICT original innovations in the United States is much greater than in China. As per a survey made by the China Network Information Center (CNNIC), over 30% of Chinese enterprises do not know how to deal with e-commerce or are even aware of e-commerce. There is a great disparity of original technical innovation between China’s and the United States’ knowledge-based economic development.

In an another reason, the knowledge-based economic development disparity between China and the United States lies in technical innovation input and innovation performance. Those two indices are respectively 54.65 and 51.38. The main cause of the lower Chinese knowledge innovation investment index is the low level of research and investment ability. Compared with the same index of 95.00 for the United States, China's research development index only reaches 33.70.

Compared with the innovation investment in China, America’s knowledge innovation performance dimension is much greater. Chinese innovation performance is very weak. Chinese patent output index only reaches 27.18. Of the patents granted by the State Intellectual Property Office of the People’s Republic of China, only 16.2% were granted to native citizens and enterprises. China's innovation contribution is also weak. The related index only reaches 27.6 and the productivity index is only 2.72 compared to the 109.8 of the United States.

Hence when compared through various dimensions it turns out that America has a competitive advantage compared to China in a knowledge economy.