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The tech cold war: Inside the US battle against Chinese technology

Cold War
Credit: Anaïs De Busscher

Yesterday aluminium and steel. Today microchips and apps. Tomorrow, two superpower visions for the world, and a choice for the rest of us?

The showdown between China and America has shown its true colours. What began as a spat over tariffs is now a rolling maul in which it is hard to disentangle technology from diplomacy; supply chain from sphere of influence; espionage from innovation. The brand symbolism of Google vs Huawei is becoming geopolitical substance.

Fittingly so. For Huawei’s story mirrors China’s own; its dependence on Google’s expertise reflects China’s own dependence on American invention during its rapid modernisation. And now that apparent lifeline is being cut off, Huawei’s response is telling: “We’ve been planning for this.”

The defiance of Huawei’s founder, Ren Zhengfei, has its roots in the strategy of Deng Xiaoping after China faced a diplomatic backlash following Tiananmen Square in 1989. Then Deng outlined his celebrated 24-character policy: "Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership."

It became known as the “hide and bide” strategy.  But according to Graham Allison, a former US assistant secretary of defense for policy and plans, the policy’s adoption within the Chinese military had a punchier translation: “Get strong, then get even.”

Huawei, like China, has been getting strong. The company has been stockpiling microchips, where China is still playing catch-up, and can crow about 5G, where it is confident that tens of billions of pounds spent on research have given it, not America, the global strategic advantage for years to come.

It is not just Huawei and 5G. The days when Chinese innovation was exclusively about what used to be called “C2C” – “Copy to China” - are over. In many areas Western firms are themselves scrambling to develop technology to match that of Chinese counterparts.

Hikvision cameras, for example, are the heart of the Chinese surveillance state, and can be spotted in subway stations, on buses, outside government offices, inside residential compounds, and even in dusty rural villages. Founded in 2001, Hikvision emerged from a Chinese government research institute. But its cameras can also be found in Britain and American, across Europe, Africa and Australia.

The West also turns to China for its eyes in the sky. DJI is the world’s leading drone manufacturer, used by everyone from holiday makers to major news networks to capture aerial footage.

And Beijing has also moved swiftly to ensure that, like America, it has more than just silicon chips to bargain with. Meng Wanzhou, who is Ren Zhengfei’s daughter, may currently be under house arrest in Canada awaiting extradition to America on charges she broke sanctions on Iran. But just days after her arrest, two Canadians, Michael Kovrig and Michael Spavor were detained in China on espionage charges.  

It all seems evidence of what Allison, the ex-US assistant secretary of defense, described four years ago as the Thucydides Trap - the idea that rising and ruling powers are destined for conflict. He identified 16 cases such rivalries in the last 500 years, 12 of which led to war.

Britain was involved in seven of those 16, from the Napoleonic Wars to the fight against the Nazis. Only twice, with America in the early 20th century, and since Germany’s reunification, has the challenge posed by a rising foreign power not led this country into conflict.

Pointing to catastrophes like 1914, Allison reflected how apparent stability could crumble with dizzying speed and that subsequent wars were usually fantastically destructive - for both sides. "On the current trajectory," he concluded, "war between the United States and China in the decades ahead is not just possible, but… judging by the historical record, more likely than not.”

Xi Jinping, the Chinese president who has shrugged off the garb of the continuity candidate to become his country’s most influential, revolutionary leader since Deng himself, claims not to believe in the Thucydides Trap. “There is no such thing,” he once said, only to continue: “But should major countries time and again make the mistakes of strategic miscalculation, they might create such traps for themselves.” It sounded like a warning.

If the current superpower fallout has been dizzyingly rapid, it’s worth noting that so has China’s rise. Only 40 years ago, China’s GDP was 10 per cent that of America by purchasing power parity. On that measure China passed America’s GDP in 2014. At the turn of the millennium, China’s manufacturing output was a quarter that of America. By 2017, it was greater than America and Japan combined. That shift in power was exacerbated by the financial crisis, when Western economies flatlined but the Chinese economy continued to grow, and rapidly.

Xi, meanwhile, has secured and redoubled Communist Party control and announced an ambitious, assertive foreign policy through his “Belt and Road” infrastructure initiative across Eurasia. Combined with his determination to create a stronger domestic (rather than purely export-based) economy, it is clear he is not prepared to settle merely for leading a wealthier country. China under his rule must be mighty too; must, as he declared 18 months ago, “move to centre stage”. For many years, the West assumed that such a move would inevitably be accompanied by a liberalisation of Chinese politics. Wrongly.  Modernisation has not involved westernisation.

Not that there is not an ongoing cultural battle between China and America - one which it might seem the home of Hollywood and the iPhone could hardly lose. But, as Martin Jacques has pointed out, from the education of children to care of the elderly, China offers third countries a tempting, and successful, alternative. Westerners might imagine that, like those in other autocracies, Chinese citizens chafe at the undoubted bonds placed upon them. But Pew polling suggests otherwise. To our eyes, the repressive, undemocratic Chinese government has a legitimacy problem. But in China the Party is the country, having founded the People’s Republic in 1949, and is no less legitimate than the nation itself. Democracy is irrelevant.   

Instead, Jacques argues, what is prized instead is the “proactive, competent and strategic state”. And as Kai-Fu Lee, former President of Google China, puts it, the Chinese government is proving just that, with its “ability to pick out certain long-term goals and mobilize epic resources to push in that direction...in sharp contrast to a US government that deliberately takes a hand-off approach.”

So while China last year spent $300 billion importing computer chips, it is straining every sinew to catch up, notably in chips designed specifically for AI processes, through companies like Horizon Robotics, or Cambricon.

Lee identifies other areas where China is already eclipsing the West, from mobile payments to its sheer scale, which gives it an unassailable advantage in generating data, and thus training AI models.

Not that the Chinese state is not wasteful or, indeed, stifling. For every Huawei and Hikvision there are many failures or companies, like battery and electric car producer BYD, which are good at evolution, but bad at disruption. Tesla it ain’t.

Yet as Elizabeth Economy points out in her book The Third Revolution: Xi Jinping and the New Chinese State, Beijing’s strategy of pump priming its domestic tech sector has a familiar ring to it. China, she writes, has the “wherewithal to accept suboptimal economic and efficiency outcomes generated by non-market practices in the near-term to try to ensure market dominance in the long-term.”

In other words: subsidise prices to conquer markets then reap your profit. That, from Uber down, happens to be the first commandment of those Western tech firms whose brazen CEOs have never had any qualms about boasting they want to crush their adversaries and rule the world.