Competition between the US and China: what really matters? – Community News
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Competition between the US and China: what really matters?

The United States (US) and China are competing for dominance in technology. America has long been at the forefront of developing the technologies (bio, nano, information) that are central to economic growth in the 21st century. In addition, American research universities dominate higher education worldwide.

In Shanghai Jiao Tong University’s annual Academic Ranking of World Universities, 16 of the top 20 institutions are located in the US; none are in China. But China is investing heavily in research and development and is already competing with the US in key areas, not least artificial intelligence (AI), where it aims to be the global leader by 2030.

Some experts believe that China is well placed to achieve that goal, due to its vast data resources, lack of privacy restrictions on using that data, and the fact that advances in machine learning require more trained engineers than advanced scientists. Given the importance of machine learning as a general-purpose technology affecting many other domains, China’s gains in AI are of particular significance.

Moreover, Chinese technological progress is no longer based solely on imitation. The administration of former US President Donald Trump has punished China for cyber theft of intellectual property, forced IP transfers and unfair business practices. The US pushed for reciprocity, arguing that if China could ban Google and Facebook from its market for security reasons, the US could take similar steps against Chinese giants like Huawei and ZTE. But China is still innovating.

After the global financial crisis of 2008 and the subsequent Great Recession, Chinese leaders increasingly believed that America was in decline. China abandoned Deng Xiaoping’s moderate policy of not stepping up and bidding time and taking a more assertive approach, including building (and militarizing) artificial islands in the South China Sea, economic coercion against Australia and withdrawing its guarantees in respect of Hong Kong.

In response, some people in the US started talking about the need for a general “decoupling.” But as important as it is to wrap up technology supply chains directly related to national security, it’s a mistake to think that the US can completely decouple its economy from China without incurring huge costs.

That deep economic interdependence makes the US relationship with China different from its relationship with the Soviet Union during the Cold War. With the Soviets, the US played a one-dimensional chess game in which the two sides depended heavily on each other in military matters, but not in economic or transnational relations.

With China, on the other hand, the US is playing three-dimensional chess with vastly different power distributions at the military, economic and transnational levels. If we ignore the balance of power in economic or transnational administrations, not to mention the vertical interactions between administrations, we will suffer.

A good China strategy should therefore avoid military determinism and include all three dimensions of interdependence. The rules for economic relations will have to be revised. Well before the pandemic, China’s hybrid state capitalism followed a mercantilist model that disrupted the functioning of the World Trade Organization (WTO) and contributed to the rise of disruptive populism in Western democracies.

Today, America’s allies are much more aware of the security and political risks associated with China’s espionage, forced technology transfer, strategic commercial interactions and asymmetric agreements. The result is greater disconnection from technology supply chains, especially where national security is at stake.

Negotiating new trade rules can help prevent that disconnection from escalating. Against this backdrop, middle powers could come together to create an information and communications technology trade deal open to countries that meet basic democratic standards.

One size doesn’t fit all. In areas such as nuclear non-proliferation, peacekeeping, public health and climate change, the US can find common institutional ground with China. But in other areas it makes more sense to set its own democratic standards. In the long run, the door may remain open for China; but the US has to accept that the time frame can be very long indeed.

Despite China’s growing power and influence, working with like-minded partners would increase the likelihood that liberal norms will prevail in trade and technology. It is important to build a stronger transatlantic consensus on global governance. But only by partnering with Japan, South Korea and other Asian economies can the West shape global technology trade and investment rules and standards, creating a more level playing field for companies operating abroad.

All things considered, the economies of democratic countries will surpass those of China well into this century; but only if they pull together. That diplomatic factor will be more important than the question of China’s technological development. When assessing the future of the US-China power balance, technology matters, but alliances are even more important.

Finally, a successful US response to China’s technological challenge will depend as much on domestic improvements as it does on external action. More support for research and development is important. Complacency is always a danger, but so is a lack of confidence or an overreaction driven by exaggerated fears.

As former MIT Provost John Deutch puts it, if the US achieves its potential improvements in innovation potential, “China’s great leap forward will probably be at best a few steps toward closing the innovation leadership gap that the United States currently enjoys.”

Immigration will also play an important role in maintaining America’s technological edge. When I asked former Singaporean Prime Minister Lee Kuan Yew in 2015 why he didn’t think China would outshine the US, he pointed to America’s ability to tap into the talents of the entire world — an opportunity hampered by the ethnic Han Nationalism of China. It’s no coincidence that many Silicon Valley companies have Asian founders or CEOs.

With enough time and travel, technology inevitably spreads. If the US allows its fear of technical leakage to cut itself off from such valuable human inputs, it will lose one of its greatest advantages. An overly restrictive immigration policy could severely curtail technological innovation – a fact that should not be lost in the heated politics of strategic competition.