China aims to break US high-tech stranglehold

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Xi’s 14th Five-Year Plan will bristle with future technology funding in a move to dominate the sector

By Gordon Watts  – Asia Times

Tech-tock … tech-tock. The countdown has started for the Ministry of Science and Technology to compile its wish-list for China’s next five-year blueprint.

Major “industrial players” will be asked for their input before the S&T drafts its 14th Five-Year Plan from 2021 to 2025. They will include Alibaba, Tencent and Baidu, or the BAT grouping, along with Huawei and ZTS, as well as a host of state-owned enterprises.

Every department of President Xi Jinping’s administration will go through this procedure in the next few months to highlight key areas, or sectors, worthy of government investment.

High-tech will be at the front of the queue. In November, a 147.2 billion yuan, or US$21 billion, mega-fund was rolled out to upgrade the manufacturing industry as part of an estimated $110 billion research and development budget.

Yet those numbers will be dwarfed by the spending figures for the next five-year plan as China goes head-to-head with the United States for future tech supremacy.

“In 2020, science and technology relations will reach another critical point,” Li Zheng, of the China Institutes of Contemporary International Relations in Beijing, said earlier this month. “In recent years, the contradictions and differences between the two countries in this field have risen significantly.

“The United States regards the rise of Chinese technology as a threat and is setting obstacles to the free flow of technology, data, capital, markets and talent between the two countries through legislation and executive orders [from US President Donald Trump],” he added.

“Some scholars worry that China and the United States may decouple in the technology arena in the next 10 years. The technology industry chain of the two sides will be broken, and replaced by incompatible technology standards, products and services,” Li wrote on China-US Focus, an academic website.

But then, science and technology will be the “critical battlefield in” this “great power competition,” according to Trivium, a policy research site in Beijing, specializing in China’s political and economic landscape.

For the S&T, six industries have been earmarked, including energy, IT, manufacturing and biopharma.

“All technologies should service national strategies, including competitiveness in core technologies and national security,” Trivium pointed out. “[But] forecasting which future technologies will be most important in a given sector is no easy task.

“This is one way for the government to get industry insight and know-how, while also offering various stakeholders a chance to lobby industry regulators,” it added.

Again, this is an integral part of Beijing’s policy as it “tools up” for a new Cold War with Washington. At the heart of the dispute will be future technology.

Already the opening salvos have been fired after China’s 5G trail-blazer Huawei was placed on a blacklist in the US. The telecom giant was branded a “national security threat,” along with surveillance groups Hikvision and Dahua, the ultimate eyeballs on the walls after receiving lavish government contracts.

Starved of American semiconductors or chips, Xi’s government has reacted by calling for a “self-sufficient” drive in crucial components. The battle lines have been drawn at home and abroad.

“If China achieves persistent or widening technological advantages in emerging fields, this could allow its firms to act like monopolies outside the country [through the controversial Belt and Road Initiative], shaping global technology standards to their own benefit and providing economies of scale that boost their revenues, expand their data pool, and fuel future R&D advantages,” James L Schoff, of the Carnegie Asia Program, and Asei Ito, of the Institute of Social Science at the University of Tokyo, wrote in a brief entitled Competing With China on Technology and Innovation.

Right in the vanguard is Huawei, the second-largest smartphone manufacturer in the world.

While a pariah in the US, the company founded by former People’s Liberation Army officer Ren Zhengfei is forging ahead of its Western rivals such as Ericsson and Nokia.

Nearly half of the group’s 65 commercial deals for ultra-fast 5G networks are with European customers, despite its alleged links with Beijing.

Up to three-quarters of the 400,000 base stations that Huawei has sold have also been signed off after the Washington ban.

“The Chinese government, together with state-owned banks, will continue to extend loans to both Chinese companies and governments of BRI member states to fund the deployment of telecoms infrastructure across the BRI,” a Fitch Solutions study said.

“State support has allowed these Chinese companies to enter many new markets and offer subsidized prices, edging out competing telecoms equipment suppliers such as Ericsson and Nokia. In many developing BRI markets, the deployment of communications networks at the lowest cost will take precedence over any fears of Chinese telecoms gear potentially being weaponized,” it added.

Tech-tock … tech-tock.

 

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