The coming tech battle
Moves against China’s efforts to acquire cutting-edge technology are not confined to the US and the repercussions of this titanic struggle will be felt around the world
China’s efforts to acquire cuttingedge technology are disconcerting |
Arriving in Beijing, I knew I would not be able to connect to Google, Facebook or Uber. As strange as it was to go without these staples of online life in the West, it was even stranger to find that local Chinese didn’t seem to feel deprived at all.
They search through Baidu, get their social media fix on WeChat, hail rides on Didi, curate news through sites like Toutiao. The Chinese government has carved out an alternative internet universe with its own brands, rules and culture, in which privacy doesn’t exist.
But its real ambition is to break out of this parallel universe and dominate not just the internet but the technology industry worldwide. To contain Beijing, the US and its allies are fighting back with a campaign of techno protectionism, opening a perilous new front in the global trade battles. President Donald Trump is the unlikely leader of the fight against Chinese tech dominance.
Even allies miffed by Trump’s steel tariffs remained largely supportive when he imposed $50 billion (Dh183.6 billion) in tariffs on China — and only China — in response to its predatory tech trade practices, then threatened another $200 billion if Beijing followed through on a promise to retaliate. Trump has endorsed intensified review of Chinese investment in American technology and of American tech exports to China.
The president’s tough stand on trade with China may be more popular than he is. The overwhelming consensus in the West is that Beijing is catching up illegitimately, by forcing companies that invest in China to share their best technology, or dispatching hackers to steal it. Though borrowing from the leading tech power is a standard development strategy, the scale and organisation of China’s campaign makes the threat feel new.
Beijing has banned some foreign competitors like Google and Facebook outright, and regulated others so heavily that they have been compelled to sell themselves to Chinese rivals (Uber) or forced to consider pulling out of China (Amazon.com). In essence, China has created domestic internet monopolies that are generating enough cash in their vast local market to finance aggressive expansion abroad.
Last year, Beijing rebranded the manufacturing centres of the Pearl River delta as the ‘Greater Bay Area’ and began urging the main cities there — Shenzhen, Guangzhou and Hong Kong — to cooperate to become China’s rival to Silicon Valley, which the Chinese would like to make the lesser Bay Area. In Beijing, the buzz was about how ‘Created in China’ is replacing ‘Made in China,’ with some claiming that Shenzhen is now more innovative than Silicon Valley in key industries.
Instead of just assembling simple goods from parts built elsewhere, China is now increasingly seen as a cutting-edge designer and developer of artificial intelligence, drones and other advanced technologies. Among the world’s 20 largest internet companies by market capitalisation, 11 are American and nine are Chinese, and the Chinese giants are proliferating fast, up from two just five years ago.
The Trump administration has moved to restrict Chinese tech expansion in several ways. An executive branch committee that reviews investments for security threats recently blocked attempts by a Chinese company to buy MoneyGram, a money-transfer company. In another case, that same committee’s concerns about potential Chinese influence over global mobile networks helped scuttle Broadcom’s proposed takeover of the chip maker Qualcomm.
Global concerns
Many Western allies have already taken similar steps. Germany is tightening investment rules for Chinese firms and protesting the restrictions German firms face in China. Australia is reportedly considering banning Chinese firms from working on its 5G rollout because of national security concerns.
The European Union recently imposed new data protection rules written largely to give consumers more control of information now in the hands of corporate giants like Facebook, but also to guard against the spread of a China-like surveillance state. Meanwhile, many countries are going the opposite way, copying elements of China’s external barriers and internal surveillance tools: Russia, Brazil and other countries are requiring foreign internet companies to put servers in those countries, where they are easier for the government to monitor and control.
This is how a digitally interconnected world could die by a thousand cuts, and techno-protectionism may get a further push during the next global downturn.
The trade wars that broke out after 2008 have involved mainly non-tariff or “stealth” trade barriers, including cheap state loans and subsidies for favoured industries.
The latest surveys of American investors and manufacturers show that their biggest concern is the threat of a trade war. The risks from deglobalisation are growing. If the current skirmishes turn into a fullblown trade war, blame will fall heavily on the thousandth cut. But the real fault will lie with the 999 that came before.