US decoupling can’t contain China’s tech rise

By Fang Xingdong Source:Global Times Published: 2018/12/18 17:43:35

Illustration: Luo Xuan/GT


An overall "decoupling" of China and the US seems unlikely, as their massive and extensive economic ties have penetrated into various industries and every corner of life after decades of development. Yet, under the influence of some neoconservatives in the US, there's a rising possibility of "decoupling" in the high-technology field.

On December 1, top leaders of China and the US reached a consensus on a trade truce, giving relief to many pessimists. But on the same day Huawei CFO Meng Wanzhou was detained by Canadian police at the request of the US during a flight transfer, sending shockwaves through the global high-technology sector.

The first development indicates that the US side has basically given up on the strategy of "completely decoupling" from China after the previous round of trade rows; the second shows that the attempt to partially decouple the two high-technology sectors is being put into practice under the careful planning of a group of US politicians.

The Meng incident is far from a simple legal issue. Even US President Donald Trump made it clear that he would intervene in the case if it would help close the trade deal with China.

A high-technology "decoupling" won't be an easy task. It mainly depends on three factors.

The first is whether the US can bear the cost of decoupling and whether this can really contain the rise of China's high-tech sector.

The second is the power struggle between Washington and Silicon Valley. US high-technology companies, mostly in Silicon Valley, are the ones that would pay the price for decoupling, for which the drive is mainly led by Washington politicians.

The third is China's response and the trend of bilateral relations. Decoupling is the unilateral will of some Americans, but every step and response made by China, along with the overall status of China-US relations, may directly affect the realization of US strategic intentions.

The US has realized that a "complete decoupling" between China and the US is impossible. Therefore, selective decoupling is very likely, with the high-technology sector bearing the brunt.

US attacks on China's high-technology sector may not ease because of any agreement reached between China and the US within 90 days.

The US high-technology sector has overwhelming advantages. In the meantime, the rise of China's high-technology sector has entered a critical phase, with technological levels in such fields as internet applications, 5G and artificial intelligence close to that in the US. As a result, some people in the US have begun to take action against Chinese high-technology industries over the past year.

A typical example is their containment of China's 5G technology. The US and its allies have gradually excluded Chinese companies such as Huawei and ZTE from their procurement lists.

But China's high-technology sector is not vulnerable.

First, China has the world's largest internet and high-technology markets. The number of Chinese internet users is 2.5 times that of the US. For major US high-technology companies, the Chinese market is their core market, and even the main source of their profits. Thus, many US companies cannot afford to lose the Chinese market.

Second, through China-US cooperation over the past 30 years, China has built the most comprehensive high-technology industry chain and ecosystem in the world. Decoupling from the Chinese industrial chain will not only hurt the interests of US companies, but will also greatly weaken their global competitiveness.

Third, with its massive internet user base, China has become the origin of many major application innovations. Decoupling in the high-technology area means that the US will not only risk losing the Chinese market and suffer due to the loss of China's industrial chain, it will also miss the opportunity to connect with China's active and innovative application market.

All these would be heavy blows to US high-technology companies. What's more, major US high-technology companies heavily depend on Chinese companies' supplies to expand in the global market. It is difficult for the US to find other partners with such complementary advantages and highly coordinated industrial chains.

There are still key issues that need to be considered and addressed. Will China's high-technology sector lose steam after the US implements decoupling? Will Chinese high-technology companies find alternative products and regain the ability of independent development if the US cuts off core technology?

Short-term shocks and pain are inevitable. But in the long run, China's high-technology sector can still establish strong competitiveness. Moreover, high-technology industrial chains in Europe, Japan and Israel can still be reliable substitutes. So the US decoupling is likely to lose China while failing to contain its rise.

The author is director of the Center for Internet and Society at Zhejiang University of Media and Communications and founder of Beijing-based technology think tank ChinaLabs.


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