As America staggered through the final stretch of a bitter and divisive US presidential election last month, China was putting the finishing touches on carefully drawn plans for economic recovery, an enhanced military, and crucially, increased technological self-reliance.
The proposals, outlined in the Chinese Communist Party’s latest Five Year Plan, highlight a key challenge for president-elect Joe Biden at the outset of his four-year term.
President Trump’s efforts to kneecap Chinese technology have only partially succeeded. Ironically, they may ultimately accelerate China’s development in key cutting-edge technologies such as artificial intelligence, chipmaking, 5G, and biotechnology.
Foreign policy experts say the US needs to confront China on issues such as market access, forced technology transfers, and human rights. But many say America’s approach to China badly needs a reboot. To out-compete Beijing, and its aspirations as a global tech power, they say the president needs to do more than just hold China back.
“The entirety of our strategy can't be about simply cutting China off, in part because China will develop other alternatives,” says Susan Shirk, chair of the 21st Century China Center at the University of California, San Diego.
Shirk says the US needs a more nuanced understanding of what it’s trying to achieve with its China policy. For instance, besides preventing China from dominating in 5G, the government should have a clear strategy for advancing its own 5G industry. She also argues that the US officials dealing with China increasingly need a deep understanding of technology—just as expertise in nuclear weapons was key to US policy toward the Soviet Union during the Cold War.
The timing of the Chinese Communist Party’s Central Committee meeting—on the eve of the US election—shows that President Xi Jinping’s plans are independent of who occupies the White House, says Jude Blanchette, the Freeman Chair in China Studies at the Center for Strategic and International Studies.
“Most of what we do is about countering China, but most of what China does, it's not about countering the US,” he says. “It's about China pursuing its own strategic objectives over the longer term.
The Trump administration has dealt aggressively with China on trade as well as technology. The administration ramped up sanctions on the Chinese telecommunications giant Huawei, which is seen as a threat because of its leading role in supplying 5G hardware and because of supposed ties to the Chinese government that make it a security threat.
The latest sanctions, imposed in August, bar the export of chips made with US fabrication equipment and software to Huawei, a maneuver that effectively cuts off the company’s supply of cutting-edge processors for devices such as smartphones. The US has also succeeded in persuading some European allies to remove Huawei’s technology from their wireless networks.
The Trump administration’s record on other Chinese tech issues is mixed. In October 2019, the administration restricted exports to Chinese AI companies, which it accused of supplying surveillance technology used for repression of Muslim minorities in Xinjiang. The administration’s assault on Chinese-owned video-sharing company TikTok, based on questionable claims of security risks, led to a forced sale to Oracle and Walmart that has since devolved into a confusing mess.
Restricting Chinese companies from acquiring chips with US technology has only deepened China’s commitment to spend big to advance its own chip-making capabilities. The OECD says the Chinese government invested more than $200 billion in its domestic chip industry between 2014 and 2018. That was already set to grow under Beijing’s Made in China 2025 plan, which calls for 70 percent of chips to be produced domestically by that year. It may still take decades or more for China to advance in this area, however, given the engineering challenges involved with manufacturing the latest silicon components.
“The Chinese government will be forced to focus more on technology and innovation,” says Huiyao Wang, president of the Center for China and Globalization, a Beijing-based think tank, and an adviser to the Chinese government on economic issues.
Wang says China has to advance technologically to boost its citizens’ standard of living, and will seek to increase trade and cooperation with other countries even if the US remains hostile. “Artificial intelligence, big data, the internet, 5G—those things are powering future growth,” he says.
A big question for Biden is whether he will double down on current restrictions or loosen them and adopt a more subtle approach. Those on both sides of the political divide increasingly agree that a more assertive approach towards China is needed. Years of policies aimed at encouraging China to open its market, change its policies on technology transfer, and abide by international norms on human rights have apparently failed. Even so, there is a consensus among many experienced China hands that the US needs to be more strategic.
“The steps they've taken have been almost entirely defensive,” says Anja Manuel, a former State Department official and a cofounder of Rice, Hadley, Gates & Manuel, which advises businesses on foreign policy.
Despite an acrimonious presidential campaign and election, Biden is likely to find bipartisan support for efforts aimed at challenging China in technology. “I think they take a similar playbook but seek ways to make it more multilateral,” says Eric Sayers, an adjunct senior fellow at the Center for New American Security. Sayers says this could, for instance, involve coordinating chip-export controls as well as manufacturing alliances with Japan, South Korea, and Taiwan.
Manuel and others suggest the US boost investment in R&D, which has sunk to record lows in recent years. US government R&D spending now stands at about 0.7 percent of GDP, compared with 2 percent of GDP during the Cold War. “My firm view is that you solve this by doubling down on what we do best,” Manuel says.
Blanchette agrees, saying the US needs a form of “technology industrial policy,” even if it isn’t called that. “This is where I think China has forced a reckoning,” he says.
Manuel says the US should identify other areas of technology that are crucial to its competitiveness, international influence, and economic growth and where China has an upper hand. She singles out financial technology as an area where China has innovative fintech giants like Ant Financial, and where US companies are hampered by competition from incumbents and existing financial infrastructure that China lacks. “If the US—and the West—don’t allow really innovative fintech companies [to flourish], we’re going to have another 5G moment on our hands,” Manuel says.