China’s technology ambitions may upset global trade order
New York Times
Jane Perlez, Paul Mozur & Jonathan Ansfield
November 09, 2017
When US President Trump arrives in Beijing, he will most likely complain about traditional areas of dispute like steel and cars. But Washington officials and major global companies increasingly worry about a new generation of deals that could give China a firmer grip on the technology of tomorrow.
Under an ambitious plan unveiled two years ago called Made in China 2025, Beijing has designs to dominate cutting-edge technologies like advanced microchips, artificial intelligence and electric cars, among many others, in a decade. And China is enlisting some of the world’s biggest tech players in its push.
When concerned officials in Washington began blocking China’s ability to buy high-end technology last year, one American company found a way to help its Chinese partner. The company, Advanced Micro Devices, avoided scrutiny by licensing its exclusive microchip designs, rather than selling them. The Chinese partner got access to the technology to make its own products. Advanced Micro Devices got a big payout.
The rules of global commerce are changing — and China and the United States are racing to create a future that aligns with their own distinct visions. The result could be an overhaul of 20th-century trade rules for a 21st-century global economic order, in which money, ideas and influence could become as closely watched and tightly regulated as hard goods packed on a ship and sent abroad.
Even before the Communist Revolution, China obsessed about absorbing foreign technology as a way to end a century of humiliation and restore its national strength. But Made in China 2025 is more ambitious than anything the government has ever attempted, a national industrial policy that aims to project a new type of global might and influence.
China is directing billions of dollars to invest in research at home as well as to acquire innovative technology from abroad. A Beijing-directed semiconductor fund is thought to have more than $100 billion at its disposal, while another plan aims to grow China’s artificial intelligence companies into a $150 billion industry by 2030.
Such efforts have some American government officials and business leaders calling for a rethinking of how the United States approaches trade. Lawmakers are pushing for tougher rules on technology purchases, which do not usually cover the types of deals that China increasingly prefers. Officials are also investigating whether China is stealing intellectual property.
“There are a few US companies that have been leaning too far about sharing technology with countries that are potential enemies of ours,” said Wilbur L Ross Jr, the US secretary of commerce. “I don’t think that’s a very good idea. I think it’s the ultimate short-termism to give up very valuable IT in order to get a few quarters or a few years of improved sales.”
ROBOTS AND RICE COOKERS
China looks to the West for much of its technology. Even some of its most sensitive systems that run government computers, banks and laboratories use chips from Intel and Qualcomm and software from Microsoft or Oracle, a dependence it sees as a longterm vulnerability.
The government hopes to change that. It is backing the effort with money: $45 billion in cheap loans for its companies, $3 billion for advanced manufacturing efforts and billions more in other financial support, according to the Mercator Institute for China Studies, a German think tank.
Made in China 2025 “is going to have substantial resources and focus devoted to it, especially at the local government level,” said Kai-Fu Lee, a prominent venture capitalist in Beijing. The goal is not simply to beat the US.
China is preparing for a day when cheap manufacturing no longer keeps its economy humming. It wants to embrace industries offering skilled jobs that do not blacken its skies and cloud its rivers. The plan itself has specific targets and quotas. By 2025 it envisions China meeting nearly three-quarters of its own demand for industrial robots and more than a third of its demand for smartphone chips. Other targets cover new-energy cars, like electric cars, and high performance medical devices.
The template for Made in China 2025 was cribbed from a German government plan called Industrie 4.0, which calls for greater automation and the growing use of “smart factories” doing sophisticated work with fewer people. And the deal that woke up the world to China’s plan was a German one.
Where tech cannot be purchased, the government wants Chinese companies to extract it from foreign firms through deals or tough new laws.
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