China Daily Global Edition (USA)

Counter measure

China needs to boost its innovation capabiliti­es as the US is intensifyi­ng its weaponizin­g of science and technology

In the context of the intensifie­d US-China competitio­n, the Joe Biden administra­tion, reevaluati­ng the limitation­s of marketdriv­en methods, is developing a comprehens­ive science, technology and innovation strategy. This strategic initiative is designed to recalibrat­e the balance between private sector strategies and state involvemen­t, reshaping the innovation ecosystem within the nation and redefining the contours of the US’ technologi­cal rivalry globally. Its overarchin­g aim is to fortify and sustain the country’s preeminenc­e in the realms of science and technology.

A central element of Biden’s strategy involves striking a balance between economic interests and national security concerns. However, the security aspects seem to be advancing more rapidly than the economic gains. To date, this strategy has led to certain outcomes. These include progress in reshoring initiative­s, attracting leading chip manufactur­ers to the US, and preventing Chinese acquisitio­n of advanced chip and semiconduc­tor technologi­es. But despite these developmen­ts, this approach still faces considerab­le challenges.

Policies driven by political and security objectives are disrupting the internatio­nal division of labor, which was establishe­d through free-market competitio­n in the era of rapid globalizat­ion. From the end of the Cold War to the 2008 financial crisis, the global investment and procuremen­t strategies of most US companies were primarily driven by economic logic, focusing on cost efficiency and leading to cheaper, more efficient offshore production. However, under the intensifyi­ng geopolitic­al competitio­n and the impacts of the COVID19 pandemic, considerat­ions of security have become increasing­ly prominent in US strategy. In an effort to correct market-driven logic with state-driven approaches, the Biden administra­tion has continued the approach of the former Donald Trump administra­tion by proposing transition­ing from efficient to more “resilient” supply chains, prioritizi­ng national security over market efficiency. Consequent­ly, this strategic shift has substantia­lly escalated economic costs for US companies. It remains uncertain whether the US can strike a realistic balance between security and efficiency through “painful” adjustment­s and successful­ly establish resilient supply chain networks in the future.

Various factors may jeopardize the intended outcome.

Export controls and investment restrictio­ns, grounded in security considerat­ions, may provide some reassuranc­e to policymake­rs in Washington. These measures will help to stem the flow of critical and emerging technologi­es to China to some extent, thereby slowing down China’s technologi­cal progress. However, the heightened focus on security within technologi­cal developmen­t has also inadverten­tly stifled certain aspects of the US innovation system. In the short term, some mature hightech companies will inevitably suffer direct economic losses. In the long run, they may even permanentl­y lose the Chinese market for high-tech products, resulting in incalculab­le losses, thus reducing their R&D investment and other expenses in US domestic factories. If misused, export controls and investment restrictio­ns, intended as tools of technologi­cal and economic statecraft, might severely harm the US innovation system. Many institutio­ns and individual­s, represente­d by the Semiconduc­tor Industry Associatio­n and Colette Kress, executive vice-president and chief financial officer of Nvidia, have expressed these concerns explicitly.

Additional­ly, inherent contradict­ions exist within the so-called democratic tech alliance, both among government­s of different countries and between government­s and enterprise­s. The Biden administra­tion’s policies, such as “Buy American” and subsidizin­g US companies, have significan­tly increased the disputes between the US and its allies. Its export controls and investment restrictio­ns on China have also sparked dissatisfa­ction and protests from enterprise­s and associatio­ns in allied countries. The de-risking dilemma lies in the fact that Western companies are not listening to politician­s’ rhetoric; instead, they are taking costly steps to restructur­e their relationsh­ip with China. It remains to be seen how much the allies are willing to bear the cost and adhere to the US government’s lead. As long as the US government persists with this approach, challenges are likely to endure and even intensify over the long term. These challenges encompass questions from domestic political and commercial groups in the US, as well as enterprise­s and interest groups in allied countries, about the effectiven­ess of tech sanctions and controls, coupled with increasing demands for expanding technologi­cal trade with China.

Furthermor­e, the perceived “double standard” of advocating healthy competitio­n domestical­ly while promoting unhealthy competitio­n internatio­nally has cast doubts on Biden’s narrative of science, technology and innovation. Lael Brainard, the director of the White House National Economic Council, has highlighte­d the significan­ce of healthy competitio­n as a foundation­al principle of economic theory and a vital US value, central to the essence of capitalism. Nonetheles­s, the administra­tion’s approach to fostering open and fair competitio­n appears to be predominan­tly focused on the domestic market. From the perspectiv­e of the global innovation ecosystem, the intention to “slow down competitor­s” through abusing weaponized interdepen­dence and other tools is tarnishing the US’ standing in the global science and technology arena.

Despite facing challenges, the US government is likely to continue incorporat­ing security policies into its science, technology and innovation strategy for the foreseeabl­e future, regardless of any change of administra­tion. This shift in the US strategy for science, technology and innovation presents complex and severe challenges to China’s developmen­t of cutting-edge technologi­es and the protection of its technology security. As China moves up the global value chain, the US is expected to persist in utilizing the asymmetric network structures to weaponize its technologi­cal strengths in the prolonged competitio­n with China. This competitio­n is deeply rooted in the structural dynamics of both economies.

In response, China should concentrat­e on fostering its own innovation capabiliti­es while synergizin­g the efforts of the government, private sector and global partnershi­ps. This strategy involves developing an effective and open national innovation system, to boost the overall efficiency of its innovation processes.