Chips are down in confronting China’s tech challenge

Washington and its partners need to limit decoupling while investing more in ‘resilience’

High-tech decoupling between the United States and China is deepening. While Chinese controls on high-tech trade and investment are nothing new, American restrictions are increasingly striking.

Last year, the US government introduced new measures to limit China’s ability to access advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.

The US government has now announced plans to screen US investments in Chinese entities in several high-tech sectors. While decoupling reduces some risks, it also generates new ones.

Overseas restrictions incentivize Chinese firms to cooperate with Beijing’s techno-nationalist projects. The same restrictions mean that foreign firms face fewer opportunities to profit and collaborate in China.

It is also unclear how far US allies will accompany Washington as it travels down the decoupling road.

Supply chains

The United States and its partners need to carefully limit decoupling while investing more in resilience – the ability to bounce back in the face of adverse actions or events, whether those emanate from China or elsewhere.

The recent G7 meeting marked a welcome step in this direction, as it called for “enhancing global economic resilience,” particularly to supply chains and critical infrastructure. But actions speak louder than words, and they have been grossly inadequate.

Resilience can take a range of forms. One consists of the ability to absorb adverse events without suffering damage.

As China makes efforts to acquire advanced technology and other kinds of sensitive information through illicit means, for example, other countries must become more capable of repelling these efforts.

Cybersecurity has become crucial to combat data leaks. Photo: File

This threat will only worsen as new technologies, including AI and quantum computing, make it easier for Chinese intelligence to capture and make use of foreign data in the future.

Yet the United States and Australia, among others, continue to lack comprehensive privacy protections, making it easier for foreign governments to access information about individuals working in sensitive areas and target their espionage operations accordingly.

Multilateral cooperation on cybersecurity falls well short of what is needed.

The world also faces a massive shortage of cybersecurity expertise. Globally, there are 4.7 million cybersecurity professionals, but 3.4 million are still needed.

Another form of resilience involves adapting to shocks to reduce their impact. China’s emergence in high-tech supply chains could well increase its leverage over other countries, while also giving it greater ability to shape how new technologies work.

Silver bullet

In response, the world’s advanced democracies are renewing their own capacities for high-tech leadership and investing in a range of new industrial policies.

But industrial policy is no silver bullet, and it can easily go wrong. A key question is whether the governments involved have developed the capacity to make such policies work.

In this context, it is concerning that the US government has yet to develop systematic mechanisms to assess the country’s capabilities and opportunities in technology and to evaluate the supply chains needed to produce critical products.

Huawei has been hit by a raft of US sanctions. Photo: File

National industrial policies also need to be combined with more fundamental transformations, and in particular, closer cooperation among like-minded countries. While some efforts in this regard are underway, a great deal remains to be done.

The development of Open RAN telecom networks offers one example. Simply put, Open RAN creates what could be more flexible and less expensive systems.

It may also generate new alternatives to Huawei and other Chinese suppliers of advanced telecom equipment. This potential has already prompted support from the United States, the United Kingdom, and Japan.

Yet the future of Open RAN remains unclear. It is hardly free of Chinese technology. The O-RAN Alliance, the multinational body developing technical standards for Open RAN, includes dozens of Chinese companies, including some targeted by US trade restrictions.

In the future, state-supported Chinese firms could become leading Open RAN suppliers. While the US and various partners have pledged to work together, it remains uncertain how much cooperation will develop.

High-tech areas

In the meantime, the US$1.5 billion that Washington has pledged to promote Open RAN has been called “a drop in the ocean.”

Responding to China’s rise requires much more than decoupling in sensitive high-tech areas.

It also requires Washington and its partners to develop much greater resilience, both individually and collectively. While some initial steps have been taken in this direction, don’t be fooled – the real work to make resilience a reality is yet to be done.

Andrew B Kennedy is an Associate Professor in Policy and Governance at the Crawford School of Public Policy at The Australian National University. This article draws on his latest publication, The Resilience Requirement: Responding to China’s Rise as a Technology Power.

This article is republished from East Asia Forum under a Creative Commons license. Read the original article here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.