Asia’s vibrant startup ecosystems are in flux, driven by massive cash influxes and hands-on government intervention. All of this makes them primed to overtake the United States in key sectors such as advanced manufacturing and technologies of the future. DreamingCrypto takes a deep dive with all the changes in Asia’s economic landscape underway. It explores the investment strategies and ecosystem maturity that are driving the region’s rise on the global stage. The emergence of these ecosystems is not just about competition. It may symbolize the beginning of a long-term realignment of the overall global balance of power in terms of primacy in innovation and technology.

The Rise of Asian Innovation Hubs

Many Asian countries are making targeted bets on R&D and infrastructure to create competitive innovation ecosystems. China, for example, has made remarkable strides in high-speed rail, boasting the world's largest network with over 23,500 miles of track. This infrastructure is key not only to developing and deploying transportation innovation, but to enabling the rapid development and deployment of new technologies overall. Finally, Vietnam, India, and Bangladesh have increased their exports of labor-intensive manufactured goods. Over the last ten years, they enjoyed stunning annual growth rates of 15%, 8%, and 7% respectively. It’s no wonder—this remarkable growth is reflective of their soaring global competitiveness in advanced manufacturing.

Investment in R&D

China's commitment to R&D is particularly noteworthy. In 2020, its experimental development expenditures were $291.8 billion or 63.4% of the experimental development level of the U.S. Over the previous decade—2010 to 2020—funding for basic research exploded. Combined, they shot up from just 6.4% of the U.S. level all the way to 19.7%. Now, China’s central government is laying down a stronger R&D intensity gauntlet than the United States. It currently sits at 0.38% of GDP, with the U.S. trailing just a bit at 0.33%. These investments aren’t just about playing defense and getting back to even. They work to establish China as the global leader in key technological areas.

Comparing Ecosystem Maturity

The U.S. is still the clear leader when it comes to technology innovation, but Asia’s startup ecosystems are growing up fast. China has set aggressive targets for domestic content and research/innovation centers. Their goal is to increase corporate R&D intensity, with a goal of achieving 1.5 percent by 2020 and 3 percent by 2025. These targets will help attract new innovation and prevent dependence on foreign technologies. When it comes to research publications, China’s production has grown exponentially. Next year, it’s projected to publish 123.7% more science and engineering articles than the U.S. That was a huge increase from only 68.7% in 2010. While the U.S. remains the worldwide leader in per capita publications in nearly every scientific discipline, China is rapidly catching up. Thus, for instance, in 2020, China wrote 83.1% of the U.S per capita total in chemistry articles.

Strategic Government Support

Clearly, government support has been foundational to the surge of startups across Asia. Policies to promote innovation, deliver capital, and develop a supportive regulatory environment abound throughout the region. Through these initiatives, they seek to bring more domestic and foreign investment. They will help spur promising new technologies and ensure startups have the opportunity to thrive. This proactive approach stands in stark contrast to the more laissez faire approach taken in some Western economies, providing Asian startups an unfair advantage.

Implications for the US

The emergence of Asia’s vibrant—and in some cases, more dynamic—startup ecosystems represents an important challenge and opportunity for the United States. The intensifying competition in manufacturing and technology would drive competition and efficiency in U.S. industries, spurring innovation to keep up or get ahead. It also unlocks new opportunities for working together and joint action. The U.S. federal government has already started to react to these changes. This time around, they used export controls to restrict sales of advanced computer chips and computer chip-making equipment to China. These restrictions are an important part of the Biden Administration’s strategy to slow China’s technological advancement, especially for military applications.

Adapting to Global Shifts

In order for the U.S to stay ahead of the global pack, the U.S. might have to reconsider its investment strategies and policies. Here’s one major way that you can increase investment in R&D. Secondly, foster a better cultural environment for entrepreneurship and innovation and promote collaboration between industry, academia and government. The U.S. needs to shift from a reactive approach to innovation and adaptation. This will be key to emerging stronger in a rapidly evolving global environment.

Investment Strategies Compared

Asia and the U.S. employ different investment strategies, based on their underlying economic structure and priorities. Here in the U.S., venture capital is the lifeblood, with private firms pouring billions into a handful of high-growth tech startups. In Asia, government-backed venture and state-owned enterprises tend to take a much more active role—providing patient capital and strategic guardrails. This variation in prioritizing risk negatively impacts the innovation that gets developed. It has significant implications for how rapidly these innovations are developed.

Contrasting Approaches

  • United States: Focus on venture capital, private equity, and market-driven innovation. Emphasis on short-term returns and disruptive technologies.
  • Asia: Greater role for government-backed funds, state-owned enterprises, and strategic investments in key industries. Emphasis on long-term growth and national competitiveness.

Focus on Specific Industries

What’s more, the kinds of industries that attract the highest level of investment vary widely. In the U.S., software, biotech, and internet-related services are consistently the most appealing sectors to investors. In Asia, there is much more focus on building out the manufacturing base, a commitment to advanced infrastructure and new industries such as artificial intelligence and renewable energy. These differences speak to the different regional strengths and priorities found in each place.

Conclusion: A New Era of Global Innovation

Asia’s historic startup surge is fundamentally changing the dynamics of innovation and technology around the world. Specifically, Asian countries are starting to prepare themselves to face the U.S. in the areas where it matters most. It’s the rocket booster provided by massive investment, unparalleled government support, and a rapidly growing pipeline of talent. Challenges remain, to be sure, but the tide has turned. As Asia steps into a bigger role, this policy shift marks a turning point in a new direction for global innovation. DreamingCrypto will be watching all of these developments very closely so stay tuned. We’ll have more to say as Asia’s story in the decentralized era continues to develop.