How the China vs US technology race is remapping the world

In 2015, it unveiled its 10 year strategy, known as the “Made In China 2025”, which aimed to encourage China to assert its technical independence.

Increasingly, its firms are creating rival products and services to those pioneered in the US. Domestically, such initiatives are viewed as key to accelerating its economy from relying on low-skill manufacturing, mining and agriculture into a high tech economy that could boost GDP and wages.

“There has been a huge human benefit to opening up China, lifting people out of poverty while being good for consumers,” says Matthew Lesh, head of research at the Adam Smith Institute, “but there are elements to balance.” 

China hawks are cynical. The nation’s ambitions, they argue, are to reinforce its techno-authoritarian state that has seen censorship and human rights abuses, such as those in Xinjiang province against Uighur muslims. 

“Their state strategy is ‘unrestricted warfare’,” says Matthew Henderson of the Henry Jackson Society. “They are interested in anything AI related, robotics, unmanned devices, weaponised drones, quantum and supercomputing and anything to do with high-end communications.”

Another concern is if Chinese officials use its Belt and Road initiative (BRI), an international infrastructure spending plan, to lock governments in developing nations to their technological standards. This could create a “split digital ecosystem worldwide”, Dr Nicol Turner Lee, a researcher at Washington think tank Brookings Institute warned in her latest research. 

Smartphone split

While such efforts may affect technologies of the future, right now consumer devices are the focus. The US has repeatedly accused China of stealing technology, and under President Trump, Washington is on the offensive.

This has involved blacklisting firms, such as Huawei, the telecoms and smartphone giant, and putting pressure on allies to drop them as partners.  The US has barred Huawei’s 5G technology, despite the UK and several European countries allowing the Chinese telecommunications giant to continue to work on their telecoms networks.

Last year, it reinforced its rules to prevent blacklisted firms from using US-origin intellectual property, enforcing a split between US technology firms and the Chinese companies they have supplied for years. 

The most obvious impact is in the smartphone sector. Google can no longer work with China’s Huawei to license its Android operating system (the most widely used in the world). This has led Huawei to rapidly develop its own rival operating system, HarmonyOS. 

In December, Beijing ordered all government offices to remove foreign computer equipment and software within three years, potentially impacting HP, Dell and Microsoft. Analysts calculate that American technology companies take $150bn a year in revenue from China. 

The nuts and bolts

Among the most contentious technologies in the struggle between China and the US are semiconductors. The nuts and bolts keeping crucial gadgets and telecoms gear online are at risk of being divided into two camps.

The Made in China 2025 plan lays out its goal of becoming not only a consumer for its electronics assembly plants, but a manufacturer of advanced semiconductors.

The aim is to boost its self-sufficiency in the high tech space to 70pc by 2049. The plans have seen it raise $100bn for its domestic semiconductor industry.

State-backed investors also control 51pc of Arm China, a spin-off from the Cambridge company that builds the semiconductor IP behind billions of smartphones. 

China has also moved “red chip” silicon maker SMIC, a Chinese rival to TSMC, to delist from the New York Stock Exchange and relocate to a new bourse – Shanghai’s STAR market.

But China’s semiconductor ambitions remain under threat. It is still many years from realising its own rival patents, according to sector sources. 

America’s latest round of sanctions also bar foreign firms from supplying Huawei, such as Taiwan’s TSMC, the largest foundry for smartphone chips.

Space race

China is also on the verge from disconnecting itself from GPS. The satellite navigation system, while used almost universally, is run by the US Air Force, making it a strategic challenge for a rival like China. 

China is in the process of launching its own rival Beidou network, which aims to create a standalone rival to GPS.

At a cost of $10bn, the network aims to keep its armed forces secure with their own satellite navigation systems around the globe.

And its technology gathering has also helped fuel more powerful weaponry to rival that of the US. China’s advanced military tech has already made its way into missile defence systems deployed in the South China Sea, says Henderson of the Henry Jackson society. “They don’t have to fire a shot because they are now masters of that technology.”

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