While Energy Secretary Chu worried out loud about another “sputnik” moment for the United States and President Obama pleaded with the Senate to approve his START treaty with the Russians, Reuters reported that China will investment up to $1.5 trillion over the next five years to target seven strategic industries.  Chu urged the US to pick up spending on R&D in the energy area alone from $5 billion to about $16 billion per year.  Even those sums will dwarf what china plans to spend in its next five year plan to achieve another great leap forward.

Those seven strategic industries include:

 

1.      Alternative fuel cars using fuel cells, CNG, LPG and LNG presumably in a search for domestic unconventional natural gas as an alternative to imported oil.

2.      Biotechnology to keep supply and demand in balance in the future.

3.      Energy technologies like building a smart grid and UHV transmission.

4.      Alternative Energy such as wind, solar, hydropower and nuclear to replace coal.

5.      High End manufacturing including high speed rail and other technologies to extend the reach of manufacturing into the interior and improve supply chain flow.

6.      Advanced materials leveraging China’s dominant position as supplier of 97 percent of the world’s rare earths to grow exports and gain competitive advantage over foreign competitors.

7.      Information Technology including supercomputers like the Tianhe-1, ranked fastest in the world’s in October at 4.7 petaflops per second, nanotechnology and satellites matching or exceeding the U.S. Global Positioning System by 2020.

 

Lest you think this is just an American problem, the WSJ reported that China had successfully cloned Russia’s most sophisticated jet fighters including the Sukhoi-27 fighter jet and now planned to undercut prices on Russian military equipment sales after 20 years of buying the Russian hardware and essentially reverse engineering it and stealing the Russian technology. For companies and countries worldwide seeking access to the Chinese markets this is just the latest lesson in the Hobson’s choice of China’s true intent and the cost of being seduced by it.

Some of these strategic investment choices China is considering are as good for the world as they are essential for China including alternative fuels, alternative energy and energy technologies since we all know that that China knows it must clean up its environmental act not to reduce greenhouse gas emissions for a worried EU or US but because doing so is essential to its continued economic growth and the health of its people.  We should cheer China on and wish it well.

Other Chinese investment strategies focus on the next generation of technologies and skills needed to maintain China’s growth long after it loses its low cost manufacturing advantage to other parts of the world.  Biotechnology, nanotechnology and information technology are logical leaps forward and we should be more surprised if China did not make them.  This is the “sputnik moment” for Secretary Chu and, truth be told, he does the US a great service by speaking out about this.  But his solutions are too timid and shackled by the political correctness of his position.

If America expects to compete successfully with a China leaping forward as these futures imagine then we must position America to do what it does best—innovate, adapt, build and leverage our substantial economic base and market potential. Picking up government spending on basic R&D from $5 billion to $16 billion per year is more than the government should spend and not nearly enough of what America’s industrial giants must spend to win this race.

Fortuitously, America’s great business enterprises are sitting on more than $1 trillion of cash waiting to be invested and unleashed.  Business is hoarding cash because it is too uncertain about Secretary Chu’s boss, President Obama and his policies—and the policies business sees it does not like.  That cash plus the resurgent growth and business transformation it can unleash are more than a match for a growing China.  Competition is good for all—use it wisely.

The policy prescription to beat China is not government spending to rival China’s.  America’s competitive advantage can only be realized when our government gets out of our way and creates the kind of pro-growth, pro-jobs, pro-industrial resurgence to meet or beat China to the high tech finish line.

Imagine a future in which the US Government, US business community, and US consumers are all aligned to regain America’s competitive strategic advantage for another century by digging out of the current economic hole and reinvesting ourselves for the future.  Building that consensus is the key to meeting China head-on and sustaining America’s geopolitical leadership.

The 2010 electoral message from voters to politicians is quit fighting with each other and get back to business—our business future—or else!  The looming 2012 election is all the reminder the new Congress and a humbled President should need to focus, but the voters must keep the pressure on and be prepared to throw the rest of the bums out for those who don’t “get it”!

If you ‘get it’ then ‘just do it!’

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