China Trends
China Trends
U.S. containment drives China to move faster towards technological independence: U.S. analyst
In recent years, the United States and some other Western countries ramped up their efforts on China in the fields of science and technology in a fear of China’s rise.
Will their efforts succeed? And how can Chinese high-tech firms make through the containment posed by the U.S. on them? Are there any negative impacts that the U.S. firms and customers may receive from the U.S.-proposed de-risking from China?
Tom Pauken II., China Trends’ host, has recently talked to Andy Mok, a U.S. long-term analyst on technology, to see what his takes are on those issues.
Tom：Hello and welcome to this episode of China Trends. I'm your host, Tom Pauken II, here in Beijing.
In recent years, some Western countries, particularly the United States, have raised alarm bells over China's rise in the fields of science and technology. They have hinted at supporting the containment of China or to pursue a so-called de-risking from the Chinese market.
But are such strategies a reasonable or a winning strategy for Western countries? Will the West prevail by disconnecting from the Chinese high-tech sector? And what will the true impact be, not only on China, but also for the world at large?
Well, today in the studio, I'm so happy to be joined with Andy Mok through a video link.
Andy is a senior research fellow at the Center for China and Globalization. He has been a long time technology analyst.
Tom: Andy, thank you very much for joining me today.
Andy: Great to be with you, Tom.
Tom：What do you believe is the real motivation for the West to forge ahead on disrupting China's science and high-tech industries?
Andy：Well, that's a great question, Tom. So I think we first have to separate what we mean by the West. So, I would say that a lot of the the energy, the motivation to “contain China, suppress its rise” is actually coming from the United States. And of course the U.S. exerts a tremendous amount of influence, as well as the ability to pressure and even coerce many other countries in western Europe and around the world. So I think if we think about why is the U.S. doing this, I think first of all, we have to understand the roots of American power. So the U.S., in some senses, is the opposite of China in that it is a large country with tremendous natural resources. But relatively speaking, not that many people. Whereas in China, it's a large country with relatively limited natural resources, but lots and lots of people. So, what does this mean for the United States to maintain its global hegemony? The most important thing is technology, and it has long rested on its ability, whether it's in the military sphere, in the economic sphere, even in the diplomatic sphere, to have a technological edge over not only who it sees as its adversaries, but even its allies.
So when we see a country like China, or when the U.S. sees a country like China, closing the technology gap, it becomes very alarming. And even from the U.S. perspective, an existential threat that it must stop at all costs. And what we see what the U.S. is doing is engaging in an escalating set of measures to slow down, stop, and even reverse China's technological rise. And these measures are becoming increasingly desperate as each round of measures failed and even backfire.
Tom：You made reference to U.S. allies. I'm sure you've noticed this already for Europe that the U.S. has increased pressure on them. Why is it that the U.S. is ramping up pressure against its own allies? As you mentioned, with weakness now that the U.S. is at a weak stage and at the same time?
Andy：Well, I think what the U.S. has recognized, again, whether this is militarily, diplomatically or economically, it is no longer enough on its own to fight China. I think this in it of itself is an acknowledgment of defeat that once upon a time, the U.S. on its own, its own economic power, its own military power, its own diplomatic power, far exceeded any of its adversaries and potential adversaries.
And now we see explicit recognition by American officials that they cannot do this on its own. Therefore, the need to deepen, strengthen alliances, shift to new alliance models, where traditionally, it was a hub and spoke, where the U.S. was the center. Now, to more of this so-called lattice framework, where there's multiple groupings, whether that's the QUAD, whether that's the indo-pacific, whether that's NATO, etc and etc. So I think it really as coming from a place of weakness, Tom, why we see so much pressure, on not just European countries, but countries like Japan and South Korea as well.
Tom：Would this mean that China can succeed if the U.S. continues to ramp up pressure and takes even stronger measures on de-risking from Chinese high-tech firms?
Andy: Well, I think what we've seen and the evidence is startlingly clear that none of this is working. And in fact, it's accelerating China's rise, or, I guess, move towards technological independence. Again, this is a tragedy for American business. So look at the Huawei situation. So when the United States levied unprecedented sanctions, economic attacks against Huawei. It was widely believed, even in china, that this would be the death of Huawei. And yet, Huawei demonstrated exceptional resilience and resourcefulness, not only launching successful new business lines, but in the process of launching these lines, in parallel, cleanse their supply chain of American technology and products. So today, in their traditional, strong areas of say, smartphones, they rebound. So we see this, I think, happening again and again, that these measures the U.S. is taking uh are actually backfiring and costing American companies.
Tom：So, obviously, the U.S. strategy here is not working, why do they keep increasing the pressure with this backfire already happening?
Andy：That's such a great question, Tom. I think that this is a very important question to understand, in my view. I think that the U.S. feels it has no other choice that it's painted itself into an ideological corner in that the American, how the U.S. sees itself, is as an exceptional country. In some sense. It is very different from other countries in that. It is a state, but not a nation, meaning that you look at France, you look at China, many other countries in the “old world”, there's centuries, if not thousands of years of shared cultural heritage and history that makes a nation. And of course there is a political entity of a state. And I think part of the issue with the U.S. is that because it is so diverse that it has such profound schisms. And so they need for an outside enemy to unite the people is I think an important force. I think there are also powerful, political factions that certainly benefit the military industrial complex of course is is an obvious one.
So, again, I think that this is actually not in the self interest of many Americans, and certainly not in the self interest of the country as a whole whole. And yet here we are. So your question is a very good one, Tom.
Tom：Thank you. And so changing the framework now to about solutions and suggestions. What are your suggestions for Chinese companies, in regards to their strategy, to counter the West high tech disruptions on China?
Andy：And I think from a company perspective, I think it requires tremendous resourcefulness and resilience. So we look at again what Huawei did, focus on areas that are less impacted while you develop processes, manufacturing, supply chains that are cleansed of American technology and products or invulnerable to future sanctions.
Tom：What's the U.S. and European-owned technology companies? What's their negative business impact from these high-tech disruptions of china?
Andy: Well, We have to look at this sector by sector. Semiconductors of course get a lot of attention because they are seen as the foundation for the modern economy, the modern military. And here, semiconductor companies in the U.S. have been the market leaders, the technology leaders. And this leadership comes from the ability to invest a very large percentage of revenue into R&D for the next generation of products.
So, what happens is that if you then reduce revenue opportunities in China and for some of these companies, the Qualcomm, etc, they have upwards of 20%, 30%, 40% of revenue coming from China. So a loss in revenue could severely undermine their long term technological competitiveness.
Tom：Sure. And how are Chinese high-tech companies adapting to the rising trade protectionism coming from the West?
Andy：I think they're adapting in a number of ways. So we've seen companies look to directly engage with political leaders in the U.S., whether that's the White House, whether that's different branches of Congress, the House (of Representatives), or the Senate, etc. That's one way, certainly. Other ways are, again, looking at alternative corporate structures. Tech accompany have a headquarters or at least a regional headquarters outside of China. These are perhaps more corporate type structures and of course there's branding as well. So you know developing brands, products, that are seemingly more generically American, perhaps. So I think there's a number of ways that businesses are adapting to this.
Tom：What do you think can be done to improve China's ability to boost China’s image to the west.
Andy：Well, I think you know what China has been doing and I may be in the minority here saying this. Actually, it has been very, very effective in that. If we look back to 10, 15 years ago, most people, most of us would have been laughed out of the room. Had we said China's approach is effective, it's working, it's improving the lives of ordinary Chinese. It is growing companies that are globally competitive. So I think what China can do is keep doing what it's doing, frankly.
Tom：Sure. And though disrupted by some Western countries, Chinese high-tech companies have still achieved good results. China has also introduced new quality productive forces this year. Could you tell us more about this?
Andy：Well, of course, I mean we look at companies like Huawei that have become globally successful. We look at Chinese EV companies, BYD, NEO, XPENG, etc, that have been at the forefront of technology, but not just technology, but marketing, product design. So clearly, I think there are areas, solar panels of course, is another area that is a little bit more obscure, but clearly China is a leader there as well, that there's no doubt that China's leading. And, again, if we look back to the recent Beijing auto show, where you know there is, I believe only a single American journalist, but yet that person went back to the U.S. to report that the technology, the product design, the quality are all amazing.
So, again, I think the tide is turning the perceptions are lagging indicator and it takes time. But I think what Chinese tech companies in particular, are doing a fantastic job. And again, we only need to look at Tik Tok, despite its political troubles, but look at the traction it's gotten in the U.S., how central it is to so many peoples, personal lives and businesses. And I think we can only expect more of this in the future.
Tom：And a final question. How can China and western countries cooperate in the high-tech fields?
Andy：I think certainly you know many, including myself, hope for greater cooperation. And in one sense, there's room for optimism in that the only Challenge is political. If we can see a shift in political stance in the United States, we can expect a much brighter future. And while maybe it’s hard to imagine, I think that the American political establishment can only defy reality for so long.
And in my view, and I've been giving briefings on this to major global financial institutions, other entities, that the U.S. will succumb and already is succumbing to China, not with a bang, but with a whimper. And this is the world that business executives and investors should be positioning themselves for.
Tom: Thank you, Andy Mok, for your amazing insights today. We had some great discussions about US-China relations, high-tech issues and disruptions.But also we discussed a lot about what are the proper solutions for improving US-China relations and how to make technology cooperation even better with China and the West.
Also, thank you everyone for watching China Trends. I'm your host, Tom Pauken II. and I will see you next time.