US-China Tech Wars - Trade Wars Are Now Turning Into Technology Wars
Beijing’s Made in China 2025 program triggered the increased technology war between the US and China. Started by Trump, Biden is transforming into the tech war.
- (1888PressRelease) June 24, 2021 - A zeal to become a technology leader has turned into a most crucial area of competition between the two most influential economies of the world ie The US & China. The US and China are now fully involved in the technology war, started under the Trump administration but it is continuing under US President Joe Biden.
Initially, it was a trade dispute, but soon it turned into a leadership war in providing core technologies like 5G, artificial intelligence (AI), and semiconductors. In fact, Biden has considered US tech competition with China as the most essential front in the struggle between democracy and autocracy.
Until April, the market was in a dilemma regarding a near-term trade deal between the US & China and currently, the investors are wondering whether this recent growth in the tension signifies that the US-China relationship is changing irreversibly into a permanent competition.
Regardless of what happens next, 2019 is not likely to witness the end of this unexpected rivalry between these two nations.
There has been considerable economic competition between the US & China, but still a full economic decoupling appears impractical due to the scale of the economic & financial relationship between these two. Ultimately, technological decoupling is much more likely to make its way especially in technologies with national securities.
After more than four decades of convergence, the US and China are competitors in several areas such as economy, defense, technology, and ideology. Among these areas, technology is likely to be the most disputable one. When Washington started blocking China’s access to core US-dominated technologies like semiconductors, it highlighted Beijing’s endeavors to “de-Americanise” its supply chain, resulting in a threat to America’s long history of R&D and invention with its global position of tech leaders for decades.
In addition to this, the global pandemic of Covid-19 even increased the tension between these two nations, enabling Biden to review US supply chains for core products like chips, batteries, rare earth, and medical supplies. Bills seeking a noticeable increase in the US investment and R&D expenses in core tech have also got affected by bipartisan support in Washington.
China is ensuring its dominance in many areas of scientific research & their commercial adoption, and this technological progress is the root cause of US-China rivalry. The key question here is what triggered the US-China tech war?
Analysts are forming an opinion that the release of the Made in China 2025, which highlighted Beijing’s agenda of dominating about 10 manufacturing & industrial areas with a focus on transforming the country from a “manufacturing giant into a world manufacturing power” triggered this tech war. Focused especially on the Chinese semiconductor, telecoms, aerospace, and biotech industries, had been treated as a “technological containment” policy by Washington, including a prohibition on US companies to sell core technologies & equipment to China, as well as restraining China’s investments in the US tech firms, reducing sales of Chinese tech products in the US and the associated countries.
Apart from that, several events such as fines & sanctions imposed on Chinese telecoms leader ZTE regarding selling US technologies to Iran or a report from the US Trade Representative consisting of China’s alleged theft of the US intellectual properties as well as Huawei Technologies's dominance in 5G technology have contributed to this tech war between the US & China.
Decoupling in the offerings
The tension between the US & China has resulted in assumptions about a possible decoupling between the two most powerful economies in the world, which somehow revolves around free trade. Over the last two years, the US & China have deeply relied on each other, China is becoming the US factory and the US is the largest market for Chinese products.
Trump’s “America first” policy, followed by the US-China trade war, calls for a decoupling that would reduce US dependence on Chinese-based supply chains. In the beginning, the decoupling was dismissed because these two economies are extra-linked with each other. However, both nations have found agreed grounds in terms of a limited decoupling, that already exists to an extent in terms of Facebook and Google being banned in China, and Trump’s attempt to ban Chinese social media like TikTok and WeChat.
China’s efforts to cope up with the impact of the US initiatives
China is looking forward to tech-self sufficiency. After Huawei’s ban on buying US chips and SMIC was restrained from buying US technology, Beijing is shifting its focus on gaining semiconductor self-sufficiency. Though a technological decoupling is yet to be seen, a major decoupling is unlikely to take place shortly. These two economies rely on each other, they need to protect their interests.
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