US-China tech war: Beijing calls the America Competes Act a product of Cold War mentality

China’s foreign ministry spokesman called the competition bill from the House of Representatives a result of a ‘Cold War and zero-sum mentality’
The bill, which earmarks billions of dollars in funding for chip-making and scientific research, must now be reconciled with a similar one from the Senate

US-China tech war

Yaling Jiangin Shanghai

Published: 11:00am, 8 Feb 2022

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Following the passage of a US bill that stands to intensify a technology rivalry with China by trying to boost American competitiveness, state media and officials across the Pacific criticised the document as evidence of Washington’s “Cold War mentality”.

The America Competes Act of 2022, a 3,000-page bill passed by the House of Representatives on Friday, earmarks US$52 billion in funding for semiconductors, US$45 billion to strengthen supply chains of critical goods, and US$160 billion for scientific research and innovation. It also includes a long list of motions addressing concerns over alleged human rights abuses in Xinjiang, a crackdown on democracy in Hong Kong and heightened tensions over Taiwan.

The act will be reconciled with a similar bill called the US Innovation and Competition Act that was passed in the Senate last June. That bill allotted US$250 billion in funding for similar causes. Once reconciled, the final bill will go to President Joe Biden, who is expected to sign it into law.

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Chinese foreign ministry spokesman Zhao Lijian said on Monday that China firmly opposes the bill because it is “filled with a Cold War and zero-sum mentality, undermines China’s development paths and policies, champions the rhetoric of competing against China, and makes indiscreet remarks on Taiwan, Xinjiang, Hong Kong and Tibet”.

“We have expressed multiple times that how the US intends to develop and strengthen its competitiveness is its own business, but please do not make this about China and use it as an excuse to interfere with China’s internal politics and harm China’s interests,” Zhao said. The remarks are similar to those made last year by his colleague Wang Wenbin, who commented on the Senate competition bill.

The bill’s passage is just the latest way in which the world’s two largest economies are locking horns in an intensifying competition, which could shape the future of global supply chains.

Semiconductors remains a particularly contentious area. From the early 1990s through 2020, the US share of global chip production fell from 37 per cent to 12 per cent. It is projected to decline another three percentage points by 2030 unless government support can reverse the trend.

China, meanwhile, is estimated to see its share of chip manufacturing grow from 12 per cent in 2020 to 28 per cent by 2030, according to statistics from the US Semiconductor Industry Association.

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Under the bill’s semiconductors division, the House plans to set aside about US$50 billion to encourage investment in US facilities for fabrication, assembly, testing and advanced packaging of semiconductors, and to support semiconductor research.

The bill has also earmarked US$160 billion for other types of scientific research and innovation. This money would fund areas that include wireless supply chain innovation and science laboratory infrastructure needs, along with other research related to science, technology, engineering and mathematics.

Meanwhile, China recently unveiled a counter move. The country’s State Council, the government’s cabinet, published a major plan last month to boost the country’s global competitiveness in the digital economy before 2025 in areas ranging from communications to e-commerce. Under the plan, the government aims to enhance China’s basic research capabilities in “strategic areas” such as sensors, quantum information, communications, integrated circuits, key software, big data, artificial intelligence, blockchain and new materials.

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Debate about technological decoupling between China and the US has been on the rise, raising questions about which economy would take a bigger hit in such an event.

A think tank at China’s Peking University pulled a report last week that concluded the country would likely be the one to suffer more from a tech decoupling. However, the 7,600-character report published by the school’s Institute of International and Strategic Studies found that both the US and China would suffer losses.

Additional reporting by Che Pan.