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Media captionFormer Google boss Eric Schmidt says US risks lagging behind China on innovation

In the battle for tech supremacy between the US and China, America has “dropped the ball” in funding for basic research, according to former Google chief executive Eric Schmidt.

And that’s one of the key reasons why China has been able to catch up.

Dr Schmidt, who is currently the Chair of the US Department of Defense’s innovation board, said he thinks the US is still ahead of China in tech innovation, for now.

But that the gap is narrowing fast.

“There’s a real focus in China around invention and new AI techniques,” he told the BBC’s Talking Business Asia programme. “In the race for publishing papers China has now caught up.”

China displaced the US as the world’s top research publisher in science and engineering in 2018, according to data from the World Economic Forum.

That’s significant because it shows how much China is focusing on research and development in comparison to the US.

For example, Chinese telecoms infrastructure giant Huawei spends as much as $20bn (£15.6bn) on research and development – one of the highest budgets in the world.

This R&D is helping Chinese tech firms get ahead in key areas like artificial intelligence and 5G.

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Dr Schmidt blames the narrowing of the innovation gap between the US and China on the lack of funding in the US.

“For my whole life, the US has been the unquestioned leader of R&D,” the former Google boss said. “Funding was the equivalent of 2% or so of GDP of the country. Recently R&D has fallen to a lower percentage number than was there before Sputnik.”

According to Information Technology and Innovation Foundation, a US lobby group for technology, the US government now invests less in R&D compared to the size of the economy than it has in more than 60 years.

This has resulted in “stagnant productivity growth, lagging competitiveness and reduced innovation”.

Dr Schmidt also said the US’s tech supremacy has been built on the back of the international talent that’s been allowed to work and study in the US – and warns the US risks falling further behind if this kind of talent isn’t allowed into the country.

Tech war

“This high skills immigration is crucial to American competitiveness, global competitiveness, building these new companies and so forth,” he said. “America does not have enough people with those skills.”

The US has been embroiled in a tech cold war with China and in recent months has stepped up its anti-China rhetoric.

This week it revoked the visas of 1,000 Chinese students it claims have military links and accused Chinese tech firms of acting as agents for the Chinese Communist Party – claims Beijing and these companies reject.

The Trump administration has also taken steps to block Chinese tech firms like Huawei and Chinese apps including TikTok and WeChat, saying they pose threats to national security.

Beijing has said this is “naked bullying”, and Dr Schmidt says the bans will mean China will be even more likely to invest in its own domestic manufacturing.

Dr Schmidt says the right strategy for a US-China relationship is what is called a ‘rivalry partnership’ where the US needs to be able to “collaborate with China, while also competing with them”.

“When we’re rivals, we are rough, we are pursuing things. We’re competing hard, we’re trying to get advantage – real competition – which the US can do well, and which China can do well. But there’s also plenty of areas where we need to be partners.”