China’s preparation for a tech decoupling needs to go beyond immediate choke points

China needs to encourage new ideas and innovation if it is to chart a long term path through tech decoupling
Tech decoupling risks will come in many forms, including no access to supplies of critical components and an end to Wall Street funding

Zhou Xin

Published: 11:30pm, 14 Feb 2022

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A technology decoupling between China and the United States is becoming a reality, and although China has been taking steps to prepare, these remain far from sufficient.

A key part of Beijing’s strategy to deal with technology rivalry is to identify and fix the country’s choke points, namely critical components or technologies where China does not have a grip on the supply chain.

Washington’s decision to deny advanced chips to Huawei Technologies Co, which hobbled the tech giant’s leading smartphone business, is an object lesson for China about the costs of not keeping core supplies in its own hands.

While this approach makes sense, it should be noted that choke points are often the symptoms of deeper vulnerabilities. Even if China could make all the things that it deems necessary for technological self-sufficiency, from extreme ultraviolet lithography machines to big aeroplane engines, this would only be a temporary reprieve since technological progress is never-ending.

A global tech decoupling will lead to long-term rivalry between two competing systems, not minor skirmishes over a few specific projects. If China is to have a chance in this long-term battle, it must allow new ideas and innovation to flourish so that it can gain an edge and make a change.

The US Congress and the White House are working hand in hand to target China when it comes to the battle over strategic technologies. As such, there is a growing awareness in Beijing that a tech decoupling will involve much more than the current flow of targeted sanctions and trade blacklists.

US President Joe Biden stands during an event at the White House on January 21 to discuss his administration’s work to increase the supply of semiconductors and rebuild domestic supply chains. Photo: AFP

The risks for China will come in different forms. This may be difficulties in securing critical components, as in the Huawei case, or fewer opportunities for Chinese scientists to study and discuss research results globally, or reduced funding support from Wall Street for Chinese technology firms.

With technology at the heart of increased economic competition between China and the US, tech rivalry will likely become the new normal, changing many things that have been taken for granted in the past.

An unpublished report from a think tank at Peking University noted that the challenges for China in a technology decoupling from the US go beyond fixing choke points. The technological progress of China, and many other countries, in the last decades has been achieved by “crossing the river and by touching the stones laid by Americans”, it argued.

In a decoupled world, China will no longer have the reference points and yardsticks to follow, and it will have to fly in the dark to seek breakthroughs. In this rivalry that could decide the country’s fate and the world’s future, China must find ways to unleash the creativity of its people.