China’s technological power – implications and risks

China’s technological power – implications and risks

Technological competition is a central field of us-China power rivalry. Semi-protectionism, technical learning, targeted knowledge acquisition, party-state guidance without control and competition have made China an innovation powerhouse. This has increased China’s influence on standardization. As a result, China’s economic, political, security and ideational power has grown with risks for supply chain resilience, national security, liberal values and technological competitiveness.

Por: Tim Rühlig19 Feb, 2024
Lectura: 17 min.
China’s technological power – implications and risks
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Artículo original en español. Traducción realizada por inteligencia artificial.

Technological competition is a central field of us-China power rivalry. Semi-protectionism, technical learning, targeted knowledge acquisition, party-state guidance without control and competition have made China an innovation powerhouse. This has increased China’s influence on standardization. As a result, China’s economic, political, security and ideational power has grown with risks for supply chain resilience, national security, liberal values and technological competitiveness.

Introduction

The United States and the People’s Republic of China (prc) have entered an era of competition for global power. At the heart of this power rivalry is a struggle over technology leadership in several strategic technologies, notably wireless infrastructure, semiconductors, Artificial Intelligence (ai), the Internet of Things (IoT), and quantum technologies among others. The underlying assumption is that command of these technologies is vital to national competitiveness, national security and the ability to shape global affairs. In 2016, the Central Committee of the Chinese Communist Party (ccp) and the State Council openly stated that “the emergence of disruptive technologies is reshaping global competition and the balance of power.

[…]
Our nation has a rare historic opportunity to catch up and leapfrog ahead, but is also confronting the severe challenge of a widening technological gap” (Central Committee of the ccp and State Council, 2016).

The idea that technological advancement is central to power rivalry is not new. Throughout history, technical knowledge has been a source of state power. Power, defined as the ability to force or persuade others to follow a preferred course of action they would not have otherwise chosen, is influenced by national capabilities. Technological advancement, in turn, can foster national capabilities ranging from economic strength to military capabilities and political reputation.

This is not to say that advanced technology automatically confers power. Intervening variables are multiple, ranging from political strategy to organizational structure, market power or leadership skill set (Lewis, 2022). However, to the extent that research and development of new technology (as well as their application) create real economic returns and accelerate military capabilities, innovation correlates with state power.

This is all the more the case that the digital transformation is penetrating all spheres of political, military, economic and societal life. Digital technologies and connectivity alongside a new industrial revolution are driving the societal transformation.

This paper focuses on China’s technology power. It starts by discussing how the prc’s technology power evolved and what China has achieved. Exploring a concrete example, China’s ability to shape technical standards, is the subject of the following section. The paper closes by outlining a heuristic how China’s technological capabilities translate into power and why this is considered problematic in large parts of Europe.

China – an unlikely technology power

China’s emergence as a technology power presents many countries in the West with a reality they did not expect. For decades, Western digital prowess was largely ascribed to the beneficial combination of liberal democracy and free market capitalism. This combination alone provided the environment for inquiry, openness, and enterprise deemed necessary for technological success. Obviously, as a non-democratic, non-free-market state, China would be unable to emulate this success. As recently as 2014, journals such as the Harvard Business Review could get away with publishing articles on “Why China Can’t Innovate” (Abrami et al., 2021).

This view turned out to have been misguided. Not only do Chinese capabilities now rival those of the eu and the us, but we have also underestimated the skills base that China has rapidly developed as a manufacturer of electronic goods designed or developed elsewhere. For at least the past decade, China has been an integral and irreplaceable part of the global digital ecosystem, with considerable competitive advantages of its own. We therefore need to develop ideas and concepts that can account for China’s competence in the field of technology and, more broadly, for its growing global footprint. This may be difficult, as it removes the centrality of a western narrative that lies at the core of the self-perceptions of states and societies. However, as China has already profoundly reshaped the global digital order, the less time spent on coming to terms with the consequences, the better (Rühlig, 2022).

Today, almost no one continues to hold to the illusion that China is not innovative. Quite to the contrary, many observers assume that China is on an inevitable path to success. The underlying argument is that if China was able to acquire significant technological influence under the unfavorable conditions of authoritarianism, it is hard to see any factor to stop the prc.

Among many other assessments, the critical technology tracker of the Australian Strategic Policy Institute (aspi) finds China to be a technology leader. Measuring research contributions, aspi identifies the prc to lead in 37 out of 44 critical technologies (Gaida et al., 2023).

Neither doomed to fail nor inevitably successful

In contrast to such perspectives, I argue that the prc is likely neither on an inevitable path of success nor doomed to fail. For a proper assessment, one needs to consider the conditions that led to the prc’s innovativeness. Five elements can be considered decisive:

First, partial protection of its markets for foundational and emerging technologies allowed China to absorb new trends from the West while protecting Chinese firms. The most prominent example is the Great Firewall that shields China’s internet. Mostly seen as a tool of censorship and discourse control, the Great Firewall also has a commercial function, selectively protecting China’s internet companies from foreign competition. While the internet is not freely accessible, the Great Firewall is easy to circumvent by means of virtual private networks. In other words, the Great Firewall is porous enough to allow innovation in without opening the Chinese internet sector.

Second, learning from the Western ecosystems has played an enormous role in China’s innovation. Through means such as the Thousand Talents program, China has systematically aimed to attract ethnic Chinese talents back from Western universities and innovative companies to go back to China (Lewis, 2023). Engineers returning to China brought to the prc not only specific expertise but also experience how innovation ecosystems function in the West.

Third, targeted acquisition of know how has been important to complement a lack of Chinese innovation capabilities. The prc has used both legal and illegal means to do so. China’s practices range from knowledge transfer as a condition of market access (Holmes et al., 2015:1154-1193) and acquisitions of high-tech companies by Chinese firms (Braw, 2020) to IP theft by means of espionage operations.

Fourth, China’s party-state has made use of relicts of China’s past as a planned economy without replicating detailed planning. For example, the prc’s Five-Year Plans signal party-state priorities to domestic actors (Heilmann, 2018). The state-dominated financial sector is unleashing enormous financial resources to serve the central leadership’s policy priorities. Equally, local party-state feels encouraged to allow experimentation in fields of technology priorities – not least allowing for targeted deregulation that favors innovation in specific technology fields.

Fifth, China’s market is characterized by severe competition. The prc may not be a free-market economy, but the strong engagement of the party-state does not imply there is no competition. Instead, different regions strongly compete over market shares. An innovation-savvy society further incentives companies to satisfy high consumer demands.

This implies that central party-state guidance is combined with commercial competition among companies. Europeans tend to discuss the role of us corporations in a critical way, but China is not a monolithic actor either. The public-private divide merits attention. While there is a considerable degree of proximity between Chinese corporations and the party-state, the recent regulatory wave targeting the digital sector demonstrates that it is incorrect to see Chinese corporations as a mere manifestation of ccp interests (Creemers, 2023). Even within government, security bodies have different interests to the military, or to the technological bureaucracy.

These “ingredients” have made the prc an innovation powerhouse that cannot compete on efficiency but on scale. As a result, China has a strong position in the supply chains of emerging and foundational technologies and in this, some argue, may have surpassed that of the West (Allison et al., 2021).

When one considers more recent developments, however, the conditions favoring China’s innovativeness are put into question. New data regulations are an example of tighter control over of the semi-protected market (Tong & Xintong, 2023). Learning from the West gets more difficult as export controls also explicitly target cooperation in research and development (Kleinhans et al., 2023). Similarly, investment screening complicates foreign acquisitions and China’s market is rather closing at a time of decreasing growth rates. Hence, market access become a less efficient tool to incentivize technology transfer. Finally, newly created institutions such as the Central Science and Technology Commission rather signal tighter party-state oversight instead of light signaling (Mok, 2023). The crackdown on private companies such as Alibaba in recent years has also put into question the confidence of private entrepreneurs.

Despite these unfavorable conditions to China’s innovativeness, the prc is anything but doomed to fail. The five “ingredients” of Chinese innovativeness continue to generally persist despite gradual challenges. Only time will tell to what extent the changing conditions are negatively impacting China’s capabilities to innovate. Furthermore, one should not underestimate China’s abilities to adapt.

China’s standardization power – strong but not dominating

One example of China’s growing influence in technology is its ability to shape technical standards. A number of documents and statements provide evidence of the strategic importance that the prc political leadership attributes to technical standardization. Setting the technological rules, including on technical standards, is explicitly integrated into political ambitions to shape international affairs (Jinhong, 2018). In 2020, for example, Shu Yinbiao, a leading Chinese technical standardization official, argued that the ability to shape international technical standard-setting is a reflection of a nation’s power and competitiveness (China Huaneng Group, 2020). Similarly, technical standardization has been an integral part of macroeconomic planning in the prc for quite some time.

To enhance its standardization ability, China has carefully studied Western approaches, selectively amended these practices to serve its own state-permeated economy. The result is a strategic presence of Chinese party-state institutions and a politicization of technical standard-setting (Rühlig & Brink, 2021:1196-1221).

China’s efforts to increase its influence over international standardization have yielded divergent degrees of success. In terms of technical leadership positions that are crucial to setting the agenda and shaping the standardization process, the prc has gained influence in the International Standardization Organization (iso) and the International Electrotechnical Commission (iec). While China’s share of leadership positions in iso and the iec is still below that of leading European countries and the us, the prc’s proportion is constantly growing. The prc is keen to lead iso standardization work in strategic economic sectors.

Although China has increased its presence in iso and the iec, the prc is far from dominating the two organizations. In the International Telecommunications Union’s (itu) Standardization Sector (itu-t), China’s influence is more apparent. In terms of technical leadership positions, China has gained a strong role in itu-t. Study Group chair positions are almost equally distributed among leading itu-t members. In the study period 2022–2024, the prc fills one of 11 chair positions. Only Japan and South Korea have gained two seats each. Of the much higher number of study group vice-chairs, China secured 8.7%, ahead of South Korea (7.7%), Argentina, Japan, and India (5.8% each) in the current study period. China’s share of leadership positions in the itu-t working groups (including the Conformity Assessment Steering Committee) is even higher. In the study period 2022–2024, China has the largest share of chairmanships (24.2%), followed by Japan (15.2%) and South Korea (12.1%). If the vice-chairs are taken into account, China’s lead becomes even clearer. While China’s share amounts to 23.5%, the uk (9.8%), as well as Argentina and Tunisia (7.8% each) follow at a great distance.

If contributions to and work items submitted to itu-t study groups are considered, China’s engagement appears dominant. In 2021, Chinese entities submitted 54.4% of all contributions to itu-t Study Groups (cira, 2022:22-23).

Just like in iso and iec, China’s influence on itu standardization varies across technology sectors. As a relative latecomer to international standardization, China is focusing its efforts on strategic sectors and new technologies that are yet to be standardized (Rühlig, 2023a).

Despite all these Chinese successes, the prc is not dominant in all technical standardization within the itu. For example, China was a latecomer to the standardization of quantum technologies and failed with its “New IP” proposal in the itu. Similarly, it took the Standardization Administration of China (sac) until May 2020 to propose the establishment of a national blockchain standardization Technical Committee that mirrors the work of iso at national level. The respective international Technical Committee was established in 2016.

This exemplarily demonstrates that China has gained enormous influence over the rules and standards that shape new technologies, but it is far from dominant.

China’s digital technology power: a heuristic

China’s technological capabilities and abilities to shape technical standards has increased. This is the result of at least four sets of influence factors that strengthen the prc’s power more broadly (Rühlig, 2022).

Economically, China’s party-state sponsorship for Chinese companies has tilted the playing field and distorted competition. Chinese tech firms benefit from preferential treatment and lower data protection and environmental standards. Patents and deployment of new technology has massive distributary effects. As a result, China’s state-centric standardization policy to enhance its digital industrial competitiveness through standard-essential patents undermines the competitiveness of market economies.

Politically, China – just like other countries in the past – can leverage political concessions from technologically (over-)dependent third countries. For example, if a given critical infrastructure in a third country is based on Chinese technical standards that are not in conformity with other standards, the country relies on Chinese suppliers to maintain and further build out the critical infrastructure for decades to come.

In the security field, Chinese growing global deployment comes with risks resulting from espionage to technical hacking and social media-based influencing operations, and the security concerns that result from China-based hardware vendors or manufacturing chains. Furthermore, the incorporation of Chinese digital equipment could be accompanied by cyber-insecurities that enable espionage and sabotage by the prc.

Ideationally, technology is not value neutral. Hence, China’s technological stronghold calls into question whether the governance principles of the digital technologies that are increasingly penetrating entire societies reflect liberal and democratic values. 

This has induced concern in Europe and beyond. At least four sets or risks need to be distinguished (Rühlig, 2023b):

Risks to global supply chain resilience: The global value chains of many, if not all, emerging and foundational technologies are characterized by a transnational division of labor. No region is in control of all production steps or its supplier markets. Thus, to strengthen security of supply, it will be necessary to strengthen the resilience of global value chains in order to reduce second- and third-order negative impacts in case of supply disruptions. Strategies to strengthen resilience vary greatly between specific global value chains, such as semiconductors, batteries or quantum computing, depending on their individual characteristics.

Risks to national security: Failure to reduce strategic dependency or loss of strategic capacity might have (in)direct negative impacts on national security. Strategic dependencies in foundational technologies, such as semiconductors, or general-purpose technologies, such as AI, might have an indirect impact on national security. The national security risks that stem from dependence on Chinese mobile network equipment vendors are different from the national security risks to member states that rely heavily on drones, surveillance cameras or AI chips from Chinese vendors. Some of these risks can be mitigated at the technical level, while others come down to the trustworthiness of the technology provider.

Risks to normative aspirations: Strategic dependency or technology cooperation can also conflict with values. Like implementation of export restrictions to protect human rights, strategic dependency can also be scrutinized according to the human rights violations that such technology would enable. One example is the increased scrutiny of Hikvision surveillance cameras and the company’s involvement in human rights violations against Uyghurs in the prc. Similarly, sustainability is a growing concern, in which emerging and foundational technologies play an increasingly important role. While all sides emphasize its importance, the priority attributed and approaches to sustainability vary.

Risks to competitiveness: Countries around the globe might invest in strategic capacities or try to reduce strategic dependencies to be able to compete internationally in the long term if a certain technology or market is deemed highly important in the future. Current examples from Europe include investments in quantum computing and photonics. In light of the intensifying us-China technological rivalry, government incentives to support the technological competitiveness of a specific domestic industry or technology provider can also be motivated by maintaining “strategic indispensability”; that is, ensuring that a company continues to play an indispensable role in the global value chains in the long term. Technological competitiveness therefore creates geopolitical leverage. 

These sets of influence mechanisms and associated risks are not necessarily China-specific. Western companies and countries have long profited from their technological advance and exploited its dominance for political purposes. What is particular about the prc’s technical power is the close alignment of the party-state and Chinese companies, even those that are privately-owned. This blurs the distinction between commercial and strategic political interests of the party-state and enhance the prc’s power far beyond the narrow field of technology.

References

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Rühlig T, & Brink T (2021). The Externalization of China’s Technical Standardization Approach. Development and Change, 52(5), 1196-1221.Tong Q, & Xintong W (2023, junio 16). China tightens controls on cross-border data transfers. https://asia.nikkei. com/Spotlight/Caixin/China-tightens-controls-on-cross-border-data-transfers

Tim Rühlig

Tim Rühlig

Policy Officer de la Comisión Europea. Es autor de Las contradicciones de la política exterior de China (2022, Oxford University Press). (El autor escribe a título personal y sus opiniones no deben considerarse representativas de su empleador ni de ninguna institución de la UE.)

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