CHINA’S TECHNOLOGICAL rise, brought about by an authoritarian state actively guiding a market-oriented industrial base with access to global supply lines, is unlike anything in history. That does not necessarily make it unstoppable, or world-beating. But the possibility that it will provide a definitive edge in technologies vital to 21st-century success makes the West anxious.
America, in particular, is unsettled by the prospect of Chinese technological capabilities that might erode its geopolitical dominance. Behind their legitimate concerns that China has stolen IP and that some of its companies cheat, American politicians worry that China’s approach to technological development can produce results which America’s mostly market-led model cannot.
It is true that China has shown that a determined state can do much to accelerate the appropriation, diffusion, development and large-scale implementation of new technology and technology from elsewhere. It is also true that the processes by which it does so can be damaging—the state can misallocate resources, follow foolish fashions, refuse to accept that it is barking up the wrong tree. Patronage lends itself to corruption. China shows all these failings and more.
At the same time, alignment between the state and the companies that develop and build technologies is important not just because it allocates, or misallocates, funding. The state may call on technology to answer questions that the market, left to itself, would not. In China the alignment between government policy and corporate technology development can be seen in the shift towards electric vehicles, largely to cut air pollution. Government-led invention has a strong history in America, too. The network which became the internet was developed to test new approaches to military communication. But it has fallen from fashion.
Some suggest that the world could divide into techno-camps, with the current system in which most technology spreads globally unpicked—“decoupled”—into competing systems, one controlled by America, another by China. This would be very hard to bring about. Published research, patents, people, contracts, supply chains and technical standards all link Chinese technology to that which underpins all the other advanced economies—and vice versa. The location of the mind fomenting the next world-changing invention is impossible to predict. China can capture supply chains and rule its markets with an iron first. But it cannot capture all the world’s ideas.
Indeed, contributing at the highest level requires the country to change. A smallish cadre of researchers with some independence will often be more effective than an army of boffins required to optimise their output to hit political targets, as can be the case in China. This does not mean that freedom of political thought is necessary for high levels of technological achievement. Rather it suggests that when you use your time to hit mandated goals you will skip real invention in favour of political box-ticking.
One reason not to fear imminent decoupling is that, even at its most successful, China’s model of technological development can proceed only so fast. When a technology is complex and expensive, progress is slow, as is shown in the manufacture of semiconductors. Even assuming you know how to build and run a cutting-edge chip factory, it takes tens of billions of dollars to do so. It also requires close co-operation with an array of high-tech suppliers who are already tightly bound to the existing market leaders.
Since China will not be capturing a large slice of the semiconductor manufacturing pie any time soon, and because semiconductors are vital to future economic growth, the world’s existing locus of chip production gains heightened strategic importance. That the locus is Taiwan—over which China claims sovereignty, and where America has enough influence to urge restrictions on exports—further complicates the situation. Both American and Chinese firms rely on Taiwan for chip supplies, adding to its potential as a cause of conflict. If the tension between America and China keeps ratcheting up, the island nation could well come under pressure from both sides to curtail its supplies to the other. Any meddling risks upsetting the existing delicate balance and leading in a dangerous direction.
That would have been unthinkable a decade ago. At that time China’s technological progress was mostly unopposed by other powerful countries, which profited from it. But the age of perceived mutual benefit is over. It is hard for the world’s powerful countries, particularly America, to tolerate a China with a global outlook, access to advanced technology and real geopolitical heft. America has reportedly already started pressing the Taiwanese to restrict chip exports to Huawei, the Chinese tech giant, though the Taiwanese government denies it.
America should be careful about such interventions. A clumsy attempt to kneecap Huawei has shown that the Trump administration has little grasp of the dynamics of the technology ecosystem in which it is intervening. Its understanding of other aspects of Chinese technological development is probably even hazier. The threat posed by a technologically enabled Chinese Communist Party is real. In responding to it, America must be sure not to become its own worst enemy.■