The Biden administration was wrong to present the US-China competition as a technological competition. Indeed, in most areas, there is no technological competition between the two countries. There is only China’s dependence on the United States, a much more technologically advanced nation with much more technologically advanced allies and trading partners. And it’s in America’s interest to keep it that way and to maintain — and even expand — America’s technological advantage.
The lack of technological superiority means that China’s economic progress is subject to other countries supplying it with critical chips and capital goods. This is why China has been working to reduce its dependence on foreign suppliers and to produce more technology at home.
In addition to economic reasons, the ability to produce its own key technology would allow China to continue to pursuing its geopolitical ambitions unrestrained, such as its self-declaration of sovereignty over Taiwan and the South China Sea.
By contrast, reducing dependence on foreign technology is not a problem for the United States. Instead, given the dependence of many countries on American technology, the priority for America is to improve its current technology to always keep other countries behind.
China’s late start is the main reason for its lower technological level. The Communist regime did not begin to actively promote the development of industry until the 1980s. Learning from the experience of the East Asian Tigers – the four highly developed economies of Hong Kong, Singapore , South Korea and Taiwan – China has stepped up its efforts in encouraging foreign direct investment in assembling products such as smartphones, laptops, computers, etc., in China.
Although it has inserted itself into the global production network to manufacture these goods, China has not profited much from being the global assembler and low value-added supplier. Instead, China’s export-driven economic development, based on the use and assembly of capital goods and industrial components from foreign countries, has locked the nation into technological dependence on – vis-à-vis foreign countries.
According to data from the Economist Intelligence Unit.
The United States was China’s fourth-largest source of electrical machinery imports in 2021, after Taiwan, South Korea and Japan. This dependence can also be seen in China’s haste to store equipment from the United States last year before new US export restrictions take effect.
Moreover, the dominant role of the United States in the upstream side of the technological production network has enabled it to limit the sales of high-tech goods to China by its intermediary partners. A typical example is the american ban on Taiwan’s TSMC and South Korea’s Samsung to export semiconductor chips to Chinese tech maker Huawei. The United States was able to do this because both companies use American technology to manufacture their chips.
China’s heavy reliance on foreign technology is also evidenced by the huge amount it pays for the use of intellectual property in recent years. according to the Chinese Ministry of Commerce. The United States is China’s main source of intellectual property.
The data of the Economic Analysis Office showed that US intellectual property exports to China have tripled over the past decade, making China the largest buyer of US intellectual property in the Asia-Pacific region. For comparison, US imports of Chinese intellectual property were just $3 million in 2020, a fraction of the nearly $8.3 billion in US exports to China.
And the United States extension of licensing requirements in 2020 has not deterred China from buying licensed technology from America. According to the US Bureau of Industry and Security, the number of license requests from China for the purchase of “tangible items, software and technology” increased from 3,747 in 2020 to 5,923 in 2021. The total amounts paid for these requests increased from $106 billion to $545 billion. As a result, license amounts per application have increased from $28 million to $92 million. In addition, the average processing time in 2021 was 19 days longer than in 2020. In other words, US export restrictions have made it more expensive and time consuming for Chinese companies to obtain licensing approvals from the United States.
In trying to reduce China’s dependence on foreign suppliers and produce more technology domestically, the country’s leaders believe that money can solve everything. Although his research and development expenses as a percentage of its gross domestic product has been remarkable over the past year, government-dominated R&D spendingincluding R&D spent by state-owned enterprises, have yet to result in significant technological breakthroughs for China.
Obviously, money is not the only means available. But China weak regulatory environment to protect intellectual property and the authoritarian mode of governance have discouraged innovation in the private sector.
China’s attempts to acquire foreign technologies through theft or coercion show that it is unhappy with its current technological advancements. He understands that slower technological progress means slowing economic growth, which could challenge the political legitimacy of the Chinese Communist Party in the future. It also means the suboptimal development of a directly competitive military with the United States and an internal surveillance infrastructure essential to the Communist Party’s hold on power.
For a high-tech laggard like China, the direct transfer of technology from more advanced countries is the most effective way to raise its level of technology. However, due to declining foreign investment in manufacturing and fewer joint ventures there, China is today less able to rely on foreign investors alone to climb the technological ladder. As is the government has stepped up its intervention to help Chinese companies acquire technology from the United States.
China’s rapid economic growth over the past decades is based on its adherence to global supply chain network, where the United States and its allies hold high technology. China Direct political confrontation with the United States. only exposed its weakness in this solid technological hierarchy and its unbreakable dependence on the United States. This is something the United States can build on and leverage our strategic advantage.
This piece originally appeared in The daily signal