Tuesday, December 22, 2020

A Brief Review on the US-China Tech Cold War

Kai-Ming Chang
Assistant Professor, Center for General Education,
National Taichung University of Science and Technology 

Since the United States adopted the pivot to Asia–Pacific policy in 2009, the interactions between the two superpowers, China and the US, have become more and more complicated. The Trump administration, which took office in 2017, adopts the strategy of limiting and balancing China’s influences as a key foreignpolicy. After launching a trade war on China, the US imposed sanctions on ZTE Corporation in mid-2018, indicating that technology has become another key battlefield between the US and China. In the past two years, this conflict, which was named as the Tech Cold War by the media, has gradually spread to the aspects of network security, mobile communication and establishment of cyber forces.

Although some observers predicted that the outbreak of novel coronavirus might lead to a temporary mitigation of strategic confrontation between the US and China, in reality, Washington and Beijing are trying to place the blame on each other for the spread of epidemic. President Trump and senior US officials have repeatedly accused China of covering up the epidemic and passing the damages onto other countries. Strong language such as “Chinese Virus” which is directed against China is frequently used in their speeches.

At the same time, the US and China have not stopped promoting scientific and technological research and development despite the heavy anti-epidemic workload.
They have gone even further and attempted to apply the technology to epidemic prevention. For example, the Chinese government has continued to expand its
investment in such technology projects as 5th Generation Mobile Networks in the face of severe epidemic. Meanwhile, artificial intelligence technology is being used  to develop the "regional epidemic prediction system" and "pneumonia auxiliary diagnosis system." The US government is cooperating with Amazon, Microsoft, Google and other enterprises to explore the possibility of collecting and analyzing epidemic information with artificial intelligence technology to support decisionmaking in epidemic prevention. Some US enterprises have developed preliminary epidemic detection systems using Edge Computing technology. All these attempts aim to transform the technological advantages of the US into its epidemic prevention strength.

Therefore, the outbreak of novel coronavirus did not effectively alleviate the confrontation between the US and China, nor did it dissolve the Tech Cold War between both sides. Instead, the outbreak ushered the tech war between the two superpowers onto a more concrete and pressing stage of competition.

When the trump administration imposed sanctions on China's representative technology companies such as ZTE Corporation and Huawei, it put forward various criticisms on China’s security and human rights protection. The US accused China of expanding its strategic influence by technology, damaging cyber security, stealing intellectual property rights and theft of users’ personal information and privacy. Although the accusations are legitimate to a certain extent, it is not true to say the US fully based its policy considerations on the above reasons. If the US government attaches so much importance to the information security and privacy of internet users, at the same time of imposing sanctions on China’s enterprises, it should demand local technology enterprises such as Google and Facebook to make improvements in this regard. After all, there have been many instances in which those American enterprises infringed users' privacy or even abused resources to intervene in politics and stirred up controversies. In the final analysis, the competition for technological advantages is the real reason for the US to launch this Tech Cold War.

In the past decades, China's investment in technology research and development has increased significantly, and has drastically narrowed the gap between China the US in terms of overall scale. More importantly, the Chinese government has adopted the development model of "the government leads and the whole nation dedicate" in the fields of key technologies. Through direct interventions of the government, human and material resources are concentrated under powerful leadership, striving to achieve breakthroughs in research, development and innovation. Some media outlets described this model as the technology field’s reproduction of China’s Olympic training, in which China committed the whole nation’s resources into nurturing Olympic gold medalists. In recent years, China has made remarkable achievements in certain technologies with strategic value, such as 5th Generation Mobile Networks, Quantum Communication, artificial intelligence and gene editing. Although China may not be leading other countries in terms of level in technology, it renders bolder practical applications on relevant technologies, and is less constrained by ethics and human rights protection. This is conducive to the accumulation of practical data and commodification experience.

Although the US still holds leading advantages in information technology, China's momentum to catch up in key areas and its strong ambitions to pursue the status of a powerful country in technology have made quite an impact on the perception of the American political elites and the public. Some media outlets have described this as another “Sputnik Moment” of the US. The US society is consumed by the severe anxiety of falling behind the competitor. In addition to the anti-China sentiment in the political circles, President Trump and many senior US officials have repeatedly expressed concern about the momentum of China’s technological advancement.

From the point of views of many American political elites, it is a normal phenomenon that China gradually climbs up in the global value chain with the development of the country. However, the problem is that China's technology industry has largely grown under the umbrella of state power, and this industrial ecology has distorted the market mechanism. Robert E. Lighthizer, the US trade representative, mentioned that fair business competitions with foreign countries were acceptable to the United States, but the competition initiated by China involved political manipulation. He accused the Beijing authorities of setting various unfair policies, forcing the foreign enterprises to transfer technology and intellectual property rights to Chinese enterprises, in order to gain competitive advantages. Lighthizer pointed out that this is not acceptable to the US.
Therefore, from the US’s perspective, the Tech Cold War launched by the Trump administration is merely a response to the unfair competition policies adopted by China for many years. Furthermore, the US is taking measures to stop Chinese
technology enterprises from acquiring critical technologies and products, just
like the way China has blocked Western technology enterprises such as Google
from entering its domestic market by administrative means. However, from the
perspective of China, the Xi Jinping administration regards reducing its dependence
on foreign technology as its strategic goal. Even if China encounters resistance
from the US side, it will continue to strive for technological independence and
develop a highly independent technology supply chain. Therefore, the Tech Cold
War is just at its beginning stage. It is bound to be more intense in the future, and
its scope of influence will continue to expand.

From a macro perspective, the Tech Cold War between the US and China is merely a derivative of the transformation in the economic and trade interactions between the two countries. Several decades ago, when the US and China were at the upstream and the downstream of the supply chain respectively, they had formed a close and interdependent relation. The interdependent relation sometimes served as a buffer in the volatile political competition between the two countries. However, as China's industries upgrade, the positions of the US and China in the supply chain has get closer even partially overlapping, and as a result, economic competition gradually outstrips cooperation. Not only did economic cooperation and trade lost the function of buffering, but they also turned into major reasons of political friction between the two countries. This transformation of industrial positioning from interdependence to competition and confrontation is fully applicable to the history of US-China relations in the field of technology.

It is worth noting that while the US tightens China's access to American technology, China has also adopted similar regulatory measures in the technologies industries that have achieved considerable results. As the Tech Cold War get more and more intense, one possible prospect is that the US and China will block each other from acquiring its own technology products. Furthermore, they will develop independent research and development mechanisms and commercial systems.

The situation may be satisfactory for the political elites of both countries as it meets their strategic expectations of technological independence, but the innovative resources for science research will also be dispersed due to political factors. The allied countries of the US and China are forced to take side in the Tech Cold War, and thus lose the freedom of choice in technology policy and application. The countries would not be able to adopt technology products that meet the actual needs of the country and will only be allowed to follow the footsteps of the US or China. In the long run, the world may be vaguely split into two factions at least in the field of technology.

Faced with the enormous pressure from the US, Xi Jinping and many Chinese political elites have shown self-confidence to the outside world, but China is facing many difficulties in this competition.

Through long-time observations of industry developments, we can acknowledge that China's technology industry has advantages in technology application and pricing strategies. However, the industry lacks independence in core technology development, and cannot get rid of the reliance on Western enterprises. While some observers believe that in the medium and long-term, the US’s ban on Chinese enterprises may become the momentum to accelerate China’s effort towards technological independence; the development of the matter may not be so promising. After all, at a time when the Western countries were not yet highly aware of China's rising in technology, China did not manage to achieve significant progresses in its own development of core technologies. Some of the important items which China claimed to be domestic products, such as chips, are actually imitations or modification of foreign products. As the US strengthens its control of technology trade with China, China's ongoing path to technological independence will be blocked by more obstacles.

At the same time, China's domestic market has developed into a localized product ecosystem that differs from the international community, due to the adoption of isolation policies for many years. In spite of this, for such enterprises as Huawei which strive for breaking into the international markets, the impact from American regulations is still enormous. Taking mobile operating system as an example, it is very difficult to convince international consumers from various countries to move away from the iOS and Android systems and accept such new systems as Harmony OS developed by Chinese manufacturers, as the older systems are mature, stable and have been used for many years. Even larger enterprises, like Microsoft and Nokia in its heyday, lost the battles when they tried to create their own systems. Regardless of how the Chinese government and technology enterprise like Huawei promote the advantages of their products, the attempt to challenge the position of Western technology products is certainly an uphill struggle, and the same situation will be applied to the competitions of other technical products.

In the background of the competition in technology between superpowers, the discussion of China’s low ability in technological innovation will inevitably lead to another weakness: the rigidity in political system.

In the last century, the US had engaged in a fierce competition in technology with the Soviet Union. Although the Soviet Union led the race for a period, its scientific strength had gradually declined as the competition lengthened. The United States won the Cold War at the end and became the world's leading technological hegemony. In reviewing the history of the Cold War, the critical role of political systems can be noticed. The despotism of the Soviet Union had allowed the government to dominate the management and distribution of national resources, and to concentrate on the pursuit of breakthroughs in critical technology development. However, the ubiquitous control also restricted the freedom of the researchers, and as a result, they were not able to explore other technical fields and their innovations were limited. In contrast, the US provided an open environment for the free exchanges of views between professionals from the government, colleges and relevant industries, which led to many innovative ideas, and create profound competitive advantages. In addition, unlike the communist states which place a high value on obedience, research institutions and the technology industry in the US maintained a certain degree of competition between each other. The pressures of competitions turned into a powerful engine which accelerated advancements.

Will China today also gradually lose this Tech Cold War due to the rigidity in its political system? There is a possibility. The high-speed development in China’s internet technology industry since the 1990s has largely benefited from the economic foundation and liberal atmosphere brought by the “reform and opening up”. Researchers and many entrepreneurs have been able to unleash their creativity, while the fierce business competition has also pushed the technology enterprises to compete in developments of various products and services. However, since 2012, the Chinese government gradually tightened its control on political ideologies and the economic system, and suppresses the space of free development for private enterprises and research institutions. In this context, even though China can use its political power and direct its national resources to some key projects and achieve R&D results, its overall technological research and development capacities may fall behind of its rivals in the long run.

To China, winning or losing this Tech Cold War probably means much more than the success or failure in technology. China’s economy showed signs of regression since 2012, and many media outlets predicted that China could not escape the Middle Income Trap, and that was when the development of the technology industry turned the situation around. With strong official support in a society culture which pays less attention to human rights protection, the digital economy led by technology enterprises offset the decline in traditional manufacturing industries and created a great number of jobs. Some surveys in 2017 showed that China had risen to be the world's fastest-growing digital economy, which indicates that the technology industry bears unparalleled importance to China today. In other words, if China loses the Tech Cold War, the foundation of its economy will also be severely hit. This may also be one of the reasons why the Trump administration has chosen technology as a key battlefield for the US and China competition.

To summarize, the Tech Cold War between the US and China, which the international community is witnessing, is a struggle between superpowers that has endured longer than many had expected and is more important than many had imagined. The results of the competition will have a profound impact on the ebb and flow of powers between the two countries, and have huge influences on the prospects of international relations. It is a major topic which deserves close observations of every country.

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