In late July, the Royal Institute of International Affairs hosted a fascinating webinar focusing on China’s attempts to achieve technological self-reliance, or the ability to foster indigenous tech industries, from semiconductors to electric cars. The webinar was lively, with diverse panellists covering everything from the US-China trade war to the migration of Chinese tech workers back home. But one key question was missing – can China actually achieve technological self-reliance?
There’s certainly a strong possibility that it might. As Martin Jacques pointed out a decade ago in his controversial book When China Rules the World, China has a very different mindset and sense of mission compared to the west. Added to this is a unique drive, springing from memories of the Opium Wars and the Century of Humiliation, that could push the Chinese to achieve technological self-reliance at all costs. ‘Nationalism’ (as far as that western concept can be applied; China is a civilization as well as a nation) could well push China to create indigenous tech industries. Simple economic self-interest will also play a role: after recent American policy moves, China can no longer rely on seamless trade with third parties like Taiwan, Japan and the Netherlands, all of which are yielding to US pressure to suspend the transfer of advanced chips and chipmaking equipment.
China is already well-exposed to the latest innovations and key technologies, as a global centre for high-tech manufacturing. With widespread experience in manufacture and assembly, it should be a fairly straightforward matter to replicate the latest advances: China has a longstanding reputation for reverse-engineering and IP theft, and is notorious for its copycat technologies. Whatever the legal implications of these practices, they have set China up well for self-reliance.
China also has the human capital to achieve a degree of technological self-reliance. Tens of thousands of Chinese nationals have trained at leading schools like Stanford, MIT, Edinburgh and Imperial College London; or worked for western tech giants like Google, Apple, Amazon and Microsoft. Nor must the Chinese necessarily go overseas to learn and work: top-tier Chinese universities like Tsinghua have world-leading IT programmes, while the domestic tech industry was long an incubator of talent until recent crackdowns. China has a small number of foreign tech workers to draw on as well – including Americans. However, new US laws forcing American citizens working for targeted Chinese companies to resign or face prosecution are wreaking havoc on the foreign talent pool (try getting a visa for that new job in Silicon Valley after a few years in Shenzhen). The US has, over the last two years, quietly declared war on Chinese science: at the same time that Americans are increasingly forbidden from working with certain Chinese partners, racially-tinged investigations and prosecutions of Chinese scientists resident in the US are causing many to return home.
Fourth, China has the natural resources for technological self-reliance. It dominates the supply chain for the rare earths that are vital components in everything from smartphones, TVs and fridges to the most advanced fighter jets, alongside the critical minerals that will enable the transition to clean energy. While it struggles to replicate Taiwanese successes with high-end chips, China has a strong base for producing low and mid-range chips. With their backs to the wall, it is more than conceivable that China may make the necessary breakthroughs for high-end chip design and fabrication in a few years. Because of its dominance of rare-earth processing, China is not as vulnerable to hostile foreign states cutting off its supplies as some might imagine – in fact, it could easily cut off others itself. Those shiny new chipmaking plants in Arizona are white elephants if they can’t be reliably supplied – yet the US is years from regaining the ability to source and process rare earths at scale.
However, there remains a strong possibility that China may not achieve technological self-reliance. First and foremost among the challenges facing China is the American-Dutch-Japanese strategy of cutting off access to semiconductors. In response, China has begun to stockpile as many older-generation legacy chips as it can – but supplies will eventually dry up, especially as the US moves to encircle and restrict China by piling pressure on third parties not to sell. Instead, China will have to create and fabricate chips in-country, which may not happen quickly: Chinese drive and technical ability are unquestionable, but there is a relatively poor record of innovation compared to the US. This is in large part because the US easily attracts global talent – including, ironically, from China – by huge salaries and a high quality of life for those who earn enough. Finally, China is having great trouble incorporating its young people into the economy, with at least 1 in 5 Chinese young adults currently unemployed. The situation is severe enough that the government has recently suspended reporting the youth unemployment figures – and no one hides good news. If you can’t find a place for future workers in your economy, good luck stimulating real, sustainable technological self-reliance.
Taken together, there is a chance that China might become technologically self-reliant, but it is by no means certain – especially considering the impact of western strategy and the youth unemployment factor. But even if China faces serious obstacles, countries like the US cannot just sit back, relax and consider the job done. The silent tech war will continue.
Finally, it is interesting to consider just what Chinese technological self-reliance will mean to different stakeholders. What the US considers a threat to national security could instead be a boon for certain members of the Chinese elite, who would stand to benefit, even if it means exploitation for low-paid factory staff. It may attract investment from neutral actors like Singapore. Chinese tech is already widely exported to emerging markets, especially in Russia, Africa and the Middle East, where western market shares have fallen considerably. A realist might conclude that a drive for self-reliance might not cut China off from the world, but rather cut the west off from the rest. Watch this space.
