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China Is Planning for a World Without US Technology

China is releasing billions of dollars for its tech industry to borrow. It is listing the sectors where the US or others could cut off access to crucial technologies. China has unveiled and laid out ambitions to become an innovation superpower obliged to no one.

In anticipation of efforts by the Biden administration to continue to challenge China’s technological progression, the country’s leaders are planning to go it alone, seeking to address insecurities and vulnerabilities in the country’s economy that could hinder its ambitions in a wide range of industries, from smartphones to jet engines.

China has even made ambitious plans before in 2015 but it has been falling short of its goals. With most of the countries becoming cautious of China’s behavior and its growing economy, Beijing’s drive for technological independence has taken on new perseverance. The country’s new five-year plan called tech development a matter of national security, not just economic development.

The plan vowed to increase spending on research and development by 7 percent annually, including the public and private sectors. That figure was higher than budget increases for China’s military, which is scheduled to grow 6.8 percent next year. This has led to an increase in competition with the US.

The spending vows followed the four wild years during which Donald J Trump angered the Communist Party leadership under Xi Jinping by restricting access to the US technology for its corporate giants, like Huawei.

The experience has toughened a view that the US is determined to undercut the country’s advancement and that China can no longer rely on the West for a stable supply of the technologies for its economic growth.

Rebecca Arcesati, a tech analyst said, “They are worried. They know that without the access to those technologies, they will not be able to reach their targets.”

Zhang Xiaojing, an economist with the Chinese Academy of Social Sciences said, “The US, which has already climbed to the Beijing Summit, wants to push away the ladder.”

As Xi describes China’s aspirations, the road to the world of technological global peaks is definitely uphill. In the previous five years, the government provided 2.5 percent of the GDP for research and development.

One area that China has struggled with is microchips. Surprisingly complex products have troubled Chinese businesses. According to US semiconductor research firm IC Insight, China’s domestic chip production grew by only 15.9 percent of chip demand in 2020. In 2014, barely higher than the 15.1 percent share it accounted for in 2014.

China’s premier, Li Keqiang, last week presented proposals to accelerate the development of high-end semiconductors, operating systems, computer processors, and artificial intelligence.

The new strategy rebrands the country’s previous Made in China campaign, which sought to push it to the lead cutting-edge technologies. It set plans to produce 70 percent of the core components that Chinese manufacturers need by 2025.

Daniel Russel, a former American diplomat who is now a vice president at the Asia Society Policy Institute said, “China wants to reduce its dependency on the world.”

A confrontation has been growing for more than a decade. After Edward Snowden’s revelation about the National Security Agency’s hacks on US companies, China’s policy of relying on foreign technology gained momentum in 2013.

Companies in the US have complained about the technology transfer policy. Chinese government-backed hacks aimed at US intellectual property have further raised tensions. China has in the past used corporate espionage to support economic interests, including in the high-tech fields that the government previously preferred.

The latest intrusion against the government used Microsoft email systems. Tentatively linked to Chinese hackers, it will sharpen the split in the tech world.

Chinese officials have emphasized the danger of choke points where the US controls key technologies. Xiao Yaqing, Chief of Ministry of Industry and Information Technology, announced a review of 41 sectors that could break the tech supply chain during crucial times.

The China Development Bank, the country’s policy lender, said last week that it was preparing over USD 60 billion in loans for more than 1,000 firms key to strategic innovation.

A Chinese Academy of Engineering official, Ni Guangnan said that the country should create a Chinese system that could replace the combined systems of Intel, Microsoft, Oracle.

The tech supply chain remains complex experts warned. The race between the US and China over microchips has triggered a chip shortage that recently hit the auto industry.

Neither country can imminently acquire true self-reliance in technologies for running a modern economy and military. Many US allies have been content seeing their companies take advantage of the Chinese market.

Earlier this month, ASML, a Dutch company said it had extended a contract to provide equipment to China’s largest semiconductor maker. The extension showed how there are limits to the US’ ability to cut off supplies.

Such decisions could continue to frustrate President Biden, who has named China as the country’s significant foreign policy challenge.

The hopes Chinese leaders had about a diplomatic reset after the Trump rule seem to have already faded.

Biden’s first conversation with Xi lasted for two hours. As per the White House, the conversation included discussions about Beijing’s unfair economic practices.

Biden has warned that the US needs to keep up with China on investments in infrastructure, some in support of tech industries, including electric vehicles. He said, “If we don’t move on, they will eat our share.”

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