China is currently pinpointing the sectors of its own economy where the United States or others could cut off access to crucial technologies and the country’s leaders are accelerating plans to go it alone. The country’s new 5-year plan called for tech development as a matter of national security (China will increase spend by 7% annually, higher than the increase for China’s military).
China Development Bank, the country’s policy lender, said last week that it was preparing over $60 billion in loans for more than 1,000 firms key to strategic innovation and had raised $30 billion for a new government-backed microchip investment fund.
“The United States, which has already climbed to the summit, wants to kick away the ladder,” wrote Zhang Xiaojing, an economist with the Chinese Academy of Social Sciences. The road to the “global peaks of technology,” will not be easy.
One sector that China needs to be concerned about is microchips, China imports the majority of the semiconductors they require (only 15.9 % of its 2020 demand, up .8% from 2014).
China’s premier, Li Keqiang, last week detailed proposals to accelerate the development of high-end semiconductors, operating systems, computer processors, cloud computing and artificial intelligence.
“I think they’re really worried,” said Rebecca Arcesati, a tech analyst with the Mercator Institute for China Studies in Berlin. “They know that without access to those technologies, they won’t be able to reach their targets.”
“China wants to reduce its dependency on the world — not to reduce its trade and interaction but to ensure that it is not vulnerable to the kind of strategic blackmail against China that it has historically used against others,” said Daniel Russel, a former American diplomat who is now a vice president at the Asia Society Policy Institute.
Chinese government-backed hacks aimed at American intellectual property and corporate espionage have further distanced the gap between China and the rest of the world. China has repeatedly referred to the danger of “choke points” where the United States controls key foundational technologies.
At a news conference in Beijing, Xiao Yaqing, who leads the Ministry of Industry and Information Technology, announced a review of 41 sectors for “empty spots” that could cause the tech supply chain to break “during crucial times.”
A Chinese Academy of Engineering official, Ni Guangnan, wrote that China should create a “Chinese system” that could supplant the combined systems of Intel, Microsoft, Oracle and others that have historically dominated computing. China could also use the world’s reliance on its telecom infrastructure technology to “form a powerful deterrent” against future embargoes, he added.
ASML, a Dutch microchips company, known as SMIC, said it had extended a contract to provide equipment to China’s largest semiconductor maker, even though the firm is on the blacklist last year. This shows that other countries may not play along and follow the US lead.
“They’re certainly speaking and acting with a view of discouraging third countries from joining any posse the United States might organize against China,” Mr. Russel of the Asia Society Policy Institute said. The goal is to buy “time needed by China to seal up the remaining vulnerabilities in its armor.”
Mr. Biden’s first conversation with Mr. Xi lasted about two hours and, according to the White House, included discussions about “Beijing’s coercive and unfair economic practices.”
“If we don’t get moving, they’re going to eat our lunch,” Biden said while making the case for the $1.9 trillion economic stimulus plan. Something he said before.
“China’s going to eat our lunch?” he said while stumping in Iowa in 2019. “C’mon, man!”