It is likely take a generation for China’s per capita GFP to approach even half that of the US. The crux of the matter is technology. The world’s five technology powerhouses, in terms of spending on research and development are the US, Germany, Japan, South Korea and China. Although China has the benefit of scale, after adjusting for the size of its population and economy, it lags behind the other four. It is South Korea that punches above its weight. The technology race is shaped by three factors, investment, human capital and institutions.

Although China’s corporate-driven R&D spending has grown rapidly as a proportion of its economy, it still lags behind many East Asian and Western counterparts. South Korea, Japan and Germany have higher R&D intensity while the US is still the foremost in scale. Contrary to perceptions, a lower proportion of R&D in China is directly funded by the government than that in Germany or the US according to OECD data.

China has been producing many science and engineering graduates; in 2016 it produced 4.7 million graduates in STEM (science, technology, engineering and mathematics), greatly surpassing America’s 568,000, according to World Economic Forum data. However, despite the rapid expansion of its higher education system, the overall quality of Chinese universities still lags behind the US.

China’s population is ageing while the US is being replenished by immigrants. The US has a distinct advantage in attracting talent from around the world. From graduate students to faculty universities. Can China attract international talent?

Hong Kong is the obvious destination of choice in China for global talent, especially in finance and law, given its open media access, low tax and wide English usage. Unfortunately Hong Kong is not known for its hi-tech industries and it is expensive place to live.

There are vibrant hi-tech ecosystems in many Chinese cities, where, housing is more affordable. Preferential housing for talent is already in place in Shenzhen and elsewhere, but taxes are much higher and access to the global internet is restricted.

China should consider setting up “special innovation zones’ – such as in the Greater Bay Area or Hainan – where international internet access is unfettered and qualified foreign talent may pay low taxes. However, good and affordable international schools are also essential to make these zones attractive.

Chinese companies could set up R&D centres around the world. Just as multinational corporations have set up R&D centres in China to access its large pool of engineering talent, Chinese firms may do the same overseas. Russia or Spain, for example, may offer value for money. Importantly, what China needs is quality rather than quantity.

Besides financial reward and career prospects, global talent is also attracted to lifestyle, China could set up international innovation parks in places such as Bali, Jeju Island in South Korea, or New Zealand. At the same time, while based in resort-like facilities near beaches or mountains in these locations, international talent could undertake projects for Internship.

Tsinghua University and Peking University have long been top feeder schools for science and engineering PhD programmes in the US. China needs to attract more of its best and brightest graduates to return home. Whether trained locally or overseas, China has the largest pool of young engineers and scientists. China’s engineers have achieved formidable technological progress so far. The issue is whether they can develop their potential to the fullest.