Xi’s challenge to China – overtake the West’s tech
After Chairman Mao’s “Serve the people” and “Seek truth from facts”, China has a new slogan: “Develop new productive forces.” While it may not be as inspirational as its Communist predecessors, the phrase could be more important, as China seeks to win the global battle to control the future through technology.
The slogan has been personally devised by President Xi Jinping, and the policy it represents looks set to bring Beijing into more direct conflict with the West than any of its predecessors.
Already a leader in the production of mobile phones, chips and electronic devices, China also boasts the world’s biggest electric car manufacturer, BYD, and is looking to harness artificial intelligence to press home its advantage.
Prime Minister Li Qiang said AI was an important component of “new productive forces” on the day last week when he visited the headquarters of Baidu, China’s answer to Google.
The military are also interested. Dele- gates from the People’s Liberation Army to the recent annual meeting of the National People’s Congress, China’s parliament, “stressed the importance of new quality productive forces including AI, unmanned technologies, aerospace and cyberspace in modern warfare”, according to state media.
Throughout the parliamentary session, the slogan was reeled out time and again, as Xi looked on approvingly.
The term conjures up images of old-fashioned communist state planning – a way of running the economy seen by most people in the West as a disaster that helped it to win the Cold War, as well as having plunged the people subjected to it into poverty.
But that same West is waking up to the fact that, in its modern Chinese form, central government involvement in business – in particular in “choosing winners” in key industries – may not have been such a disaster after all.
BYD, a carmaker little known outside the country until recently, has grown to outperform Tesla and Toyota in terms of production. China, which was infamous for its pollution a decade ago, makes 80% of the world’s solar panels, and installs almost half of them.
The United States and the European Union are concerned that if China continues down this path, rather than collapsing economically as the Soviet Union did, it might make their own high-tech economies unviable. Their answer is to try to rein in Beijing’s influence with sanctions and tariffs.
Huawei, China’s leading mobile phone company, recently brought out a new 5G smartphone to rival Apple’s latest iPhone, surprising American analysts who thought that its computer chips did not have the necessary capacity.
The Biden Administration is considering blacklisting computer chip companies that supply Huawei. At the same time, the White House has announced a US$20 billion (NZ$32.8b) subsidy to Intel, America’s home-grown chip manufacturer, to help it to compete.
Xi’s strategy has also alarmed members of the security establishment. The former head of MI6, Sir Richard Dearlove, says that in the modern world of computer chips and internet connectivity, high-tech Chinese imports have made Britain vulnerable to espionage and sabotage by Beijing.
The US is similarly concerned about whether the Chinese government will be able to exploit the popularity of TikTok for its own strategic purposes, and is considering banning the app.
BYD originally made mobile phone batteries. Wang Chuanfu, its founder, visited an automated Motorola battery plant in South Korea in the mid-1990s, took note of everything the robotic arms did there, and set up his own factory, substituting a lowpaid worker for every robot. From there, he branched out into electric cars, before winning funding from the billionaire American investor Warren Buffett.
That tale of private entrepreneurship was set in Shenzhen, a city explicitly founded in the 1980s by the Communist
Party to be a hub for new industries close to the capitalist paradise of Hong Kong. It has long since outgrown the territory it was designed to emulate.
Local and central governments have also handed out tax breaks and direct subsidies, and in the case of BYD, given it a specific boost – it has a monopoly on providing Shenzhen with taxis.
“China has won this cycle of the global automobile race,” said Shirley Yu, a senior visiting fellow in business studies at the London School of Economics. “The global electric vehicle industry has begun its consolidation process since 2024. I think the end landscape will be very much dominated by the US and China.”
Xi is determined to show that this advantage can be maintained as the world develops new industries, such as computer chips, AI and industrial automation, or robots. Dominance is important not just for commercial but military reasons –hence the significance of the words of the PLA delegation.
Despite Western concerns about security, China insists that its high-tech drive is entirely economic, and in part a consequence of a labour force that is in decline, forcing it to rely less on the sort of low-cost labour hired by Wang at BYD three decades ago.
“A great deal of China’s current innovation push is led by Xi,” Yu said. “He believes the hardcore strength embedded in high-end manufacturing is the backbone of the economy.”