The U.S.-China relationship will define the world order for decades to come. This has long been true, but U.S. President Donald Trump’s aggressive pursuit of a trade war with Beijing has pushed the relationship to its inflection point. The U.S. has now officially labeled China a “strategic rival,” but this is a great power rivalry unlike any the world has seen before. For hundreds of years, geopolitics largely operated along the lines fleshed out by the ancient Greek historian Thucydides—as one global power falls and another rises, clashes ensue. But China is not interested in supplanting the U.S. as the world’s preeminent global military power, and it is far from clear that it could even if it wanted to—the U.S. currently outspends China roughly 3-to-1 when it comes to defense outlays according to the Stockholm International Peace Research Institute (SIPRI). And while this great power rivalry has been playing out in the economic sphere recently, modern economic theory shows that economic growth can (and should) be positive-sum—when countries work together, the global economic pie grows larger and everyone receives a bigger slice. Furthermore, the globalized and interdependent reality of 21st century economics makes a sustained economic fight between the two countries too costly for either side to pursue indefinitely. But there is one area where China and the U.S. are destined to clash, and that is over technology.
China and the U.S., two models compared
China is the first country that has a legitimate claim to being a technology superpower on the level of the U.S. Beijing has spent the last two decades making access to the billion-plus Chinese consumer market contingent on Western companies transferring their technology to Beijing for the right to operate within Chinese borders. It’s a policy that has transformed China into a cutting-edge technology power, boosted by instances of technology and intellectual property theft by Chinese hackers and state-backed corporations. It’s also a result of massive investment by the Chinese government in its own tech capabilities—today, more of the world’s top 500 supercomputers are Chinese rather than American. But what is causing real concern among Western policymakers is not how far China has come in terms of technological prowess but how far it can go, particularly in the all-important field of artificial intelligence (AI). Beijing treats AI as THE strategic sector for the future and has spent years dedicating resources and orienting policy accordingly, much in the way the U.S. treats certain military defense technologies. The U.S. unveiled its AI strategy this past February, and the U.S. approach to AI so far falls along traditional lines—preference for private sector taking the lead, with government providing support for education and some limited research and development.
This may be insufficient in the face of China’s bolder strategy, particularly when considering the structural elements undergirding the tech race between the U.S. and China. In China, it’s the government that’s investing in scientists, whether it be directly or through protected/favored champions like Alibaba or Tencent. What’s more, AI development in China takes advantage of the huge stores of data generated by the massive uptake of e-commerce and mobile payments systems. When it comes to AI, such data is critical—developing AI for the future is accomplished through iterating pattern recognition, where the scale of the data available becomes decisive, even if the quality of that Chinese data might be suspect compared to global data used by Western researchers.
As for the U.S., the government isn’t the one leading the charge on AI developments—private companies in Silicon Valley are, limiting the direct potential benefits for Washington. This distinction is critical, as are its downstream effects: American AI researchers publish their breakthroughs, which means that they are as easily available to their Chinese counterparts as to their fellow Western colleagues. U.S. entrepreneurs avoid iterating on the same research as opposed to making new and different discoveries, which is problematic for AI development at this stage where practice is still making perfect.
The lesson of the tariff war
And the nature of democracy makes it hard for the U.S. government to throw its weight behind a technology that has the potential to displace hundreds of thousands of workers—or to use another term, voters—for the sake of national geopolitical strategy. Beijing, with its ability to better control tech and Chinese society, doesn’t have the same concerns, and in general the government and populace are eager to embrace the latest technology, both for better governance and for improving citizens’ quality of life.
All that said, the best and most innovative minds are in Silicon Valley and the West, and just because the state of AI today is about big data collection and iteration doesn’t mean that will be the case even five years from now. Which means that despite all of Beijing’s current advantages, it’s still too early to tell which side will win the tech race.
Against this backdrop, the trade war between the U.S. and China continues to play out. And while there’s plenty of reason to believe that a deal ultimately gets struck—there’s too much money at stake as well as political capital for it to drag out indefinitely, for both sides—the trade war will have one lasting legacy: it has taught Beijing that it is vulnerable to a sudden hardening of U.S. politics. That’s certainly true when it comes to agriculture exports, but it’s especially true in the field of technology, where the tightening of screws has forced Chinese state champion ZTE to near collapse and is causing untold headaches for Chinese telecom/tech power Huawei. The tech competition is most certainly underway, and both sides know it; brace for more regulatory battles from here on in. Technology, more than any other single issue, is the biggest geopolitical fight in the world today. And both China and the U.S. are dug in.
The author: Ian Bremmer
Ian Bremmer is the President of the Eurasia Group, a leading global political risk research and consulting firm, which he founded in 1998 with a capital of only $25,000. The company now has branches in New York, Washington and London and works with a network of experts and resources all over the world. The Eurasia Group provides financial, corporate, and government clients with information and insight on how political developments influence market trends. Bremmer created Wall Street’s first global political risk index and has written a number of books, including Every Nation for Itself: Winners and Losers in a G-Zero World, which details risks and opportunities in a world without global leadership. He also wrote the national best-seller The End of the Free Market: Who Wins the War between States and Corporations? and The J Curve: A New Way to Understand Why Nations Rise and Fall, selected by The Economist as one of the best books of 2006. Bremmer is also a contributor to The Financial Times, A-List and Reuters.com and writes The Call blog on ForeignPolicy.com. He has also published articles in the Wall Street Journal, Washington Post, New York Times, Newsweek, Harvard Business Review and Foreign Affairs. He appears regularly on programs on CNBC, Fox News Channel, National Public Radio and other networks.
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