China is often portrayed as either unstoppable—dominating electric vehicles (EVs), batteries, and solar panels—or lacking the creativity to push the technological frontier. The United States is either celebrated as the unquestioned AI leader or criticized for losing its manufacturing base and becoming dangerously dependent on rivals. The reality is more complex—and more instructive.
In 2025, China made AI progress under chip constraints, achieved breakthroughs in robotics and quantum computing, and weaponized its control of rare earth processing, yet it still cannot produce a certified jet engine or compete in high-end machine tools. The United States controls 90 percent of AI chip markets and produces far more advanced AI models than China, yet it has lost much of the manufacturing capacity needed to build at scale and depends on rivals for critical materials.
These patterns cannot just be explained by looking at research and development (R&D) budgets or patent counts. The answer is technological dexterity—the ability to build strengths across different technology types, where advantages in one domain compound advantages in others. AI chips enable AI models, rare earth processing enables chip manufacturing, and machine tools enable precision aerospace components. These technologies reinforce each other, but only when the right ecosystems support them.
The urgency is real: China has been playing the long game for decades—systematically building processing capacity in rare earths, scaling manufacturing ecosystems, and investing in the “missing middle” between lab and market—while the United States has too often lost focus on the ecosystem foundations that make technological leadership durable. Success depends on whether America can rebuild these capabilities faster than China continues compounding its advantages.
Technological Dexterity Is the Strategic Imperative
Existing analyses benchmark technology capabilities at a moment in time—counting patents, models, or market shares. This report does something different: It identifies the underlying ecosystem drivers that determine who leads over time.
Technology leadership flows from ecosystems, not individual breakthroughs. Ecosystems are the dynamic combinations of firms, researchers, institutions, policies, and allied networks that turn lab discoveries into factory output and individual capabilities into networked advantages deployed at speed and scale. The report identifies four building blocks of ecosystem strength and uses them to identify the underlying drivers of U.S. and Chinese technology competitiveness:
- Economy-wide fundamentals, such as macro stability, rule of law, and factor markets
- Technology-specific enablers, such as R&D infrastructure, IP rights, standards, and workforce and talent pipelines
- Ecosystem governance, such as public-private coordination and adaptive regulation
- Enterprise strategies, such as innovation cycles, production networks, and intra-firm linkages
The report also identifies four distinct technology types based on two dimensions: breadth of application and production complexity. Achieving technological dexterity—building ecosystem strengths across multiple technology types—is the strategic imperative for the United States:
- Stack technologies, such as AI and advanced chips, which require deep capital markets, collaborative research networks, and platform orchestration
- Precision technologies, such as jet engines and lithography, which demand decades-long partnerships and gold-standard certification regimes
- Production technologies, such as high-end machine tools, which need patient capital and continuous vocational training
- Base technologies, such as rare earth elements (REEs) and batteries, as well as steel and aluminum, which require coordinated supply chains and processing infrastructure
The report compares U.S. and Chinese ecosystem capabilities in one illustrative technology from each category: AI, jet engines, machine tools and rare earth elements. It shows that each of these technology types requires different combinations of ecosystem building blocks.