Wednesday, December 6, 2023

Containing China’s technology ecosystem will remain a US policy priority

Must read

The most significant achievement of last week’s meeting between Joe Biden and Xi Jinping was that it took place. Xi agreed to crack down on fentanyl exports and resume military communication channels. There was some agreement on working together on managing risks from artificial intelligence. It took six months of ground work by cabinet-level officials and four hours of direct talks between the two leaders to agree on these limited points.

Clearly the non-agreements surpass the agreements. The post-meeting readout by the White House conceded little, saying that the meeting was “candid and constructive” and set the tone at the outset by noting that the US president “emphasized that the United States and China are in competition, noting that the United States would continue to invest in the sources of American strength at home and align with allies and partners around the world.” The Chinese framing was more conciliatory, with Xi saying “that the world is big enough to accommodate both countries, and one country’s success is an opportunity for the other.” The rest of the read-outs are re-assertions of their respective positions. There was no joint statement. At best, the summit was an attempt by both to resume meaningful bilateral diplomacy.

So how come Xi Jinping turned down his cold imperial style and suspended the ‘wolf warrior’ mode of Chinese diplomacy for a meeting where the US conceded nothing? And, why, despite having so little to take back home, the Chinese foreign minister characterised the meeting as “strategic, historic and directional”? It is true that Washington took the initial steps towards high-level engagement from the beginning of this year, but there is a distinct sense that Xi climbed down at San Francisco.

It is too early to say whether the change in China’s approach is merely one of style and rhetoric or represents a substantive softening of its policy towards the US. Xi’s decision to talk is attributed to many causes: a weakening Chinese economy following self-inflicted wounds, domestic embarrassments arising from the sacking of Xi’s appointees, and the strengthening of countervailing geopolitical coalitions like the Quad and Aukus. To this list of contributory factors, I would add the sharpness of the bite of Washington’s technology denial regime.

New York Times journalist David Sanger observed that, “Mr Xi voiced his longest and loudest protests about the cutoff of the fastest computer chips, which Mr. Biden responded would help the Chinese military. The two leaders were at fundamental odds on that issue: What Mr Xi sees as economic strangulation, Mr Biden sees as an issue of national security.” Chinese official media issued a reminder highlighting Xi’s argument that “China’s development is driven by innovation, and stifling China’s technological progress is nothing but a move to contain China’s high-quality development and deprive the Chinese people of their right to development.”

Tech is where China hurts the most. Cutting off access to cutting-edge semiconductors and production technology is a severe blow to the Chinese tech eco-system, potentially setting it back by as much as a decade. The US can impose export controls, sanctions and manpower restrictions to contain China’s tech industry. Beyond restricting some rare earth exports, Beijing has little to retaliate with. The Chinese state can throw money and people at the problem, but that means playing a game of catch up with a competitor that is already a couple of generations ahead. In an industry where time-to-market matters, weakness in the tech war leaves China with multiplying disadvantages.

And precisely for this reason, the US will continue the tech containment of China. Just last month, the US government tightened sanctions on advanced chips and chip-making equipment, making it harder for Chinese firms to build competitive AI products. A couple of days before the Xi-Biden meeting, a bipartisan Congressional commission set up to monitor the national security implications of the US-China economic relationship has recommended greater vigilance, financial disclosure and transparency requirements in a number of areas, from higher education and research to trade logistics. On semiconductors, it has asked Congress to commission an annual assessment of how well export controls are working and to what extent allies are cooperating in containing China.

After the meeting with Biden, Xi charmed a gathering of top business leaders (who were perhaps too eager to be charmed, and not only for the money they’d paid to attend) with a narrative of US-China cooperation and co-existence, but tellingly, said little about economic policy. Some US politicians were infuriated that CEOs were paying so much money to rub shoulders with the Chinese leader, and have demanded a list of attendees from the organisers. I’m sure that the Chinese side too has requested the list for reasons of its own. The irony is that if the tech industry was a bridge between the US and China, the single most important person responsible for dismantling it was the person receiving standing ovations in San Francisco. It will take more than a meeting and dinner for Xi to reverse course.

Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.


Updated: 19 Nov 2023, 06:10 PM IST

Latest article