Does China's Technological Innovation Affect China–US Relation, or Vice Versa?

ABSTRACT This study investigates the causal relationship between China's technological innovation (CTI) and China–US relation (CUR) using full‐sample and subsample Granger causality tests. This study revealed that CTI has both positive and negative effects on CUR. CTI has enhanced China's economic strength by promoting industrial upgrading and enhancing China's international status, which has had a complex impact on CUR. In contrast, CUR has a positive effect on CTI. The deterioration of CUR affects China's technological R&D, industrial chain supply and patent application, reducing the speed of China's innovation. In addition, the analysis determines the interaction results of two variables in multiple subperiods and verifies the channels of influence, which deepens the understanding of the relationship between them. China's improved technology will lead to higher prices for imports into the United States, which could hurt American consumers. In recent years, the United States has adopted a policy of ‘decoupling’ from China's economy, which has made CUR tense. US economic progress has been somewhat impacted by trade cooperation between China and the United States, which has been directly impacted by the conflict between the two nations. Facing complex international circumstances, the development of CTI and CUR should be coordinated. China and the United States should use a peaceful dialogue to resolve long‐term technological disputes. China's government should fully use multiple resources to support technological innovation.