China under technological pressure from Washington

China-US tech war

The American plan, approved by the Senate on Tuesday, to counter China in the technological field is not just another chapter in the Sino-American trade conflict. It is a major turning point that could have profound implications for Beijing, explain several experts.

Washington wants to put nearly $250 billion on the table to fund its technology war against China. The Senate overwhelmingly approved on Tuesday, June 8, a vast bill to remain “competitive” in the 21st century, investing heavily in advanced technologies while trying to slow down Beijing’s efforts to catch up or even overtake the United States.

“Do we want the world of tomorrow, shaped by those who will master the technologies of the future, to reflect our democratic vision, or are we going to let an authoritarian model like the one advocated by Xi Jinping [the Chinese president] take over?” said Chuck Summer, the Senate Democratic majority leader. “We are engaged in a competition to win the 21st century and the starting gun has been fired,” added Joe Biden, the US president.

Semi-conductors: a major issue

This very aggressive tone has strongly displeased the Chinese officials, who were quick to express their “deep indignation”. “We resolutely denounce this American vision of China as an enemy,” said Wang Wenbin, spokesman for the Chinese Ministry of Foreign Affairs, interviewed by Reuters.

Beijing also has reasons to be upset by the content of the American plan. Especially by the commitment to release 54 billion dollars to develop the American semiconductor industry. The current shortage of these chips, which impacts a wide range of sectors – from the automotive industry to the manufacture of washing machines, smartphones or even electronic toothbrushes – has amply demonstrated their crucial role in the global trade chain.

Chinese semiconductors

But it has also become a major issue in the economic clash between China and the United States. “These semiconductors are essential for the equipment needed to deploy 5G; and control of this technology at the heart of applications such as connected cities, electronic cars or artificial intelligence, is one of the main battlegrounds between Washington and Beijing, “said Mary Reynard, a specialist in the Chinese economy at the University of Dakota.

For the time being, China remains very dependent on American know-how in this field and must, moreover, import these chips from countries allied to Washington, such as Taiwan and South Korea. Beijing has decided in recent years to invest in this sector, but the U.S. announcement “probably means that China will have to spend even more money if it hopes one day to catch up and gain some independence in this regard,” says Zeno Leoni, a specialist in Sino-American relations at King’s College London.

The plan voted by the Senate also includes provisions to counter certain Chinese companies in particular. The text provides for no longer importing drones built by Chinese groups “with a link to the military sector”, and wants to prohibit members of the U.S. administration to download TikTok, the social network created in China that is all the rage among young people.

Provisions that may seem anecdotal, but “it is a clear signal to Beijing that the time of vexatious measures against Chinese companies were not an anomaly of the Trump era,” said Andrew Small, a specialist in Chinese foreign policy at the German Marshall Fund in Berlin.

The state back as “in the cold war era

Beyond its content, the very existence of the text and its general philosophy pose a threat to China. Chinese authorities “might have hoped that the strong political polarization in the United States would complicate the adoption of any major text, but the large majority that supported this plan demonstrates that on the issue of competition with China, there is a bipartisan consensus,” notes Andrew Small.

This is all the more significant because this bill illustrates a change in the United States’ approach to countering China. “Until now, Washington has adopted a reactionary strategy that consisted of piecemeal sanctions on companies or the introduction of tariffs. With this plan, the United States is moving towards a more proactive approach, where the State is more involved in defining the strategic sectors to be supported – such as quantum computers, artificial intelligence and automation,” summarizes Zeno Leoni.

“We haven’t seen the U.S. government get so involved in defining priority technology sectors since the Cold War,” says Andrew Small. For Mary-Fran├žoise Renard, “on many points, this program resembles an American version of the ‘Made in China 2025’ plan, which in 2015 set out Beijing’s roadmap for becoming the world leader in technology.

Beijing is thus faced with a new reality in which the American superpower is somehow copying the Chinese dirigiste model to increase its technological advantage and limit Chinese companies’ access to its innovations. In short, “this means that more than ever, China will have to invest so that the technology it needs is Chinese”.

From a financial point of view, this is not a problem since Beijing’s pockets are deeper than those of any other country. “But it also means that China will have to train more people to conduct the necessary basic research, and this is not easy, because it has some catching up to do and it is not the most attractive sector in terms of remuneration for young researchers,” notes the expert from the University of Dakota.

In the short term, this new U.S. strategy to counter China could penalize Beijing in this technological race. But if the Asian superpower succeeds in adapting to it, “it may be beneficial in the longer term because it is forced to accelerate its process of economic transformation to become technologically independent,” concludes Zeno Leoni.