Technological competition between the United States and China is a defining feature of contemporary strategic rivalry and will shape the future distribution of economic and geopolitical power. When considering this competition, the key question is not only, “Which country leads in technological innovation?” but also, “Which country is better able to diffuse technological advances across its economy and convert them into sustained productivity gains?” In this report, we examine the two countries’ potential technological diffusion capacity to understand the broader trajectory of U.S.-China competition.To measure diffusion capacity, the authors develop an analytical framework comprising three components of national diffusion capacity: actors, linkages, and contextual factors. They then populate the framework using proxies that serve as metrics for each component. Finally, the authors conduct a country-level comparative assessment based on these metrics. They explore each metric through two dimensions of technology diffusion: production diffusion, which refers to the process through which a new technology spreads in the production and supply side of an economy, and adoption diffusion, which describes the spread of technology on the demand and use side of the economy.
Key Takeaways
The United States holds an overall advantage in diffusion capacity
- The United States performs stronger across six of eleven framework metrics: research organizations, enterprise dynamics, research-enterprise linkages, absorptive capacity, intermediary organizations, and legal-commercial institutions.
- In terms of production diffusion, the U.S. model is market-led and network-driven, producing a flexible innovation system capable of translating new technologies into commercial applications across diverse sectors. In terms of adoption diffusion, the United States demonstrates strong absorptive capacity and benefits from large enterprises and advanced intermediaries that facilitate technology uptake.
China’s diffusion system is not weak, but it holds fewer structural advantages than the United States
- China leads in two framework metrics: research–research linkages and state policy coordination.
- Data limitations might undercount the informal mechanisms that characterize China’s system.
- In terms of production diffusion, China’s model is state coordinated, enabling rapid resource mobilization and large-scale technology deployment in strategic sectors. However, selective, policy-driven linkages constrain broader research–enterprise integration. In terms of adoption diffusion, China has built a coordinated architecture that enables rapid and large-scale deployment of technologies, but adoption quality remains uneven with evidence of shallow or compliance-driven uptake and persistent regional and firm-level disparities.
For both countries, there is an adoption gap among nontechnology small and medium-sized enterprises
- U.S. and Chinese technological diffusion are uneven and geographically concentrated; there are persistent gaps among smaller firms and less developed regions.
RESEARCH: Assessing Chinese and U.S. Technology Diffusion Capacity