people's trade war, a numbers game
endurance, self-reliance, etc etc, back to the roots
Bullish Hong Kong, as window to team China domestic innovation IPOs
foreignaffairs.com
Why Blacklisting Huawei Could BackfireThe History of Chinese Indigenous Innovation
June 19, 2019
Last spring, when the U.S. Department of Commerce added the Chinese telecommunications company ZTE to a trade blacklist, effectively severing ZTE from its vital U.S. suppliers, Chinese President Xi Jinping told an audience at a tech company that the Chinese people must “cast aside the illusion and rely on ourselves.” “The illusion” was the idea that China can prosper even as it relies on foreign technology.
The Trump administration seems determined to prove Xi right. Last month, it blacklisted the telecommunications giant Huawei, the third major Chinese company to be added to the Commerce Department’s blandly named Entity List within the last year. Huawei is an indispensable Chinese company, central both to the rollout of China’s 5G mobile network at home and to the country’s efforts to expand its digital influence abroad. The Trump administration is also considering blacklisting several of China’s largest artificial intelligence companies.
The Trump administration is betting that banning Chinese tech companies will bring Beijing to the negotiating table with the aim of negotiating “structural changes” to the Chinese economy. And barring that, it is hoping to deal China a blow in the race to harness next-generation technologies, such as AI and 5G. But within China, the administration’s moves have created a powerful new consensus in support of “self-reliance” and “indigenous innovation,” two mantras of the Chinese Communist Party that the country’s tech industry has reluctantly taken up. Washington has underestimated China’s ability to “tighten its belt,” as Xi put it after the ZTE blacklisting, and to develop replacements for foreign technology. The Trump administration may well be paving the way toward a more technologically independent, and possibly more powerful, China.
THE HISTORY OF SELF RELIANCEIn China, the concept of “self-reliance,” or ziligengsheng, traces its roots back to the civil war, when Mao Zedong’s communist guerrillas found themselves isolated and facing annihilation at the hands of the U.S.-backed nationalist forces. According to Communist Party lore, the communists lived off the land and decentralized the production of economic and military goods as they rebuilt their forces and marshaled their strength. When, in 2014, Xi revived the concept as a call to reduce China’s dependence on foreign technology, the Mao-era slogan seemed an awkward fit for the age of global supply chains.
But China has a long tradition of defying international embargoes. During the Cold War, China succeeded in developing an atomic bomb even after the Soviet Union had cut off its technical support. Throughout the 1990s, China developed sophisticated satellites and rockets despite comprehensive U.S. sanctions on space-related technologies. In 2015, when the Obama administration prevented Intel from selling processors to China for its latest supercomputer, Chinese researchers quickly developed a local replacement. Less than a year and a half later, China unveiled TaihuLight, then the world’s fastest supercomputer, which ran entirely on Chinese-made processors.
These successes are partly the result of official policy. For decades, the Chinese government has urged scientists and researchers to go about their work with “the spirit of two bombs, one satellite”—a reference to China’s nuclear and missile programs during the height of the country’s isolation in the 1960s. To make the spirit a reality, China has developed a sprawling network of state and military research labs, including the Chinese Academy of Science, arguably the world’s largest research organization, with 115 research centers and 60,000 scientists.
This investment has translated into a formidable capacity for indigenous development, either through copying, and then building on, foreign technologies or through developing homegrown alternatives. China’s space sector, which has been almost entirely cut off from the United States for the past two decades, has built most of its satellites and rocket components from scratch. U.S. export controls on space-grade microchips have “actually benefitted China in unexpected ways over the years, because we’ve had to develop our own,” Zhao Yuanfu, a top state scientist, told the online magazine Sixth Tone in February. After nearly a decade of work, China produces all the microchips it needs for advanced satellites, including the BeiDou Navigation Satellite constellation, China’s answer to the U.S. military-run Global Positioning System.
But indigenous development takes hold only when foreign options run out, and few tech sectors in China are as cut off from the outside world as the space industry. For decades, Chinese researchers, at the behest of Chinese leaders seeking “secure and controllable” IT systems, have worked on a domestic alternative to Microsoft Windows. But the weak demand for a homegrown operating system due to the wide availability of foreign alternatives, not to mention the sheer complexity of building one from scratch, has stymied their efforts. China has also invested heavily in disrupting Intel and AMD’s near duopoly on cutting-edge central processing units. Yet Chinese developers continue to rely on more advanced foreign CP |
