Beyond reckoning in U.S.–China relations; U.S. pressure hardens Chinese IT efforts (2018.04.30)

Welcome to Issue 2 of Transpacifica. Back to the old U.S.–China Week convention of Monday publication this time. Experimentation with format will continue, so your thoughts both substantive and regarding style are very welcome. –Graham Webster

As always: Please encourage friends and colleagues to subscribe to the Transpacifica newsletter; here is the web version of this message, ideal for sharing on social media; and you can follow me on Twitter at @gwbstr. Please send your comments, quibbles, and suggestions to [email protected].

Understanding Changing U.S.–China Relations: Beyond Reckoning

In a recent issue of Foreign Affairs, Kurt Campbell and Ely Ratner helpfully summarized some of the emerging conventional wisdom that U.S. political thinkers must recognize changes in U.S.–China relations, including changes in the countries’ comparative power and leverage across economic and security domains. Campbell and Ratner described something that U.S. thinkers on Asia policy had increasingly grasped, but like so many others they faltered on what specifically to do about it.

Their realization wasn’t new. I have argued that the Obama administration’s “rebalance” (designed and implemented in part by both Campbell and Ratner) had essentially recognized the need for greater attention to change in the Asia-Pacific, and succeeded in devoting that attention, but never advanced beyond the defense of a partially-imagined status quo of U.S. leadership.

This week Evan Feigenbaum offers some new clear thinking on why, despite the fact that many have identified a mismatch between observed reality and dominant modes of thinking about U.S. policy toward Asia, it’s been hard for Washington insiders to chart a forward course. A crucial distinction is that Feigenbaum describes a world in motion, rather than a status quo under threat. That motion in the world is not due only to China’s increased relative power and its government’s initiatives, but also (especially since Trump took office) to the fact that theUnited States is itself a revisionist power.

China too is a revisionist power in this framework, but “not a revolutionary one,” he argues, describing Chinese efforts as intended to shape the evolution of the international scenebut not to overturn the structures that have underwritten increased prosperity and power for Chinese and their government. Specifically, he argues that Chinese initiatives internationally seek to diversify Chinese leverage, not to replace existing institutions in which China’s involvement and influence has grown.

Pointedly, Feigenbaum criticizes voices that reflexively seek to oppose China as a threat to a (partially imagined) preeminence many in the U.S. policy community reasonably want to maintain—arguing that “whining isn’t competing.” Instead of reflexively pushing back on any Chinese action, he calls for “bolstering America’s own power, presence, initiative, role, relationships, and arsenal of military, economic, and technological tools. And it can best do this in concert with other partners who have stepped into the vacuum created by U.S. absence, disinterest, protectionism, and worse.”

This is different from seeking simply to match and counter Chinese capabilities, to hold the line. This is a perspective that acknowledges that the international system is changing and will continue to change. And it’s a perspective that recognizes the need to push forward, not simply push back.

Signs Are That Trump Administration Pressure Is Reinforcing China’s Drive for Indigenous Innovation

Last issue, I discussed the most intractable elements of the U.S. demands against Chinese development, trade, and investment practices—specifically a “cross-sectoral Chinese government effort to decrease the Chinese economy’s dependence on foreign intellectual property, to move up the value-chain, and to ensure that foreign technology does not pose a security threat to the Chinese people or the Communist Party.” U.S. demands on this count have only sharpened, and Chinese reactions indicate that far from conceding, Chinese authorities are emboldened in efforts to develop an independent, “secure and controllable” information technology (IT) stack.

  • The U.S. government acted on Iran-related sanctions and banned U.S. companies from exporting key components to the Chinese IT company ZTE, jeopardizing broad swaths of its business that rely on U.S. firms for semiconductors. [NYT]
  • Chinese officials in a number of contexts responded by doubling down on national goals to develop a domestic semiconductor design and manufacture industry. [Reuters] And the government-backed National Integrated Circuit Investment Fund (IC Fund) was said to be inviting international investors to pile into the effort. [Bloomberg]
  • Xi Jinping gave a major speech on digital technology and cyberspace that raised the profile of the talking point to “move forward the construction of China as a cyber superpower through indigenous innovation.” [DigiChina translation]
  • State media have published a variety of reports advocating for domestic IT development, for instance “Commentary: Urgent need for China to start new round of self-innovation,” featuring Ni Guangnan, a longtime advocate for a domestically designed Chinese operating system.
  • Reporting suggests that U.S. officials traveling to Beijing this week for economic talks will encounter no significant compromise on efforts to strengthen a domestic tech industry (prominently through the Made in China 2025 program). “A senior Chinese government official said that Beijing is unwilling to negotiate with the United States on any curbs on Made in China 2025, which includes large-scale government assistance to favored industries in advanced-technology manufacturing,” NYT reported.

Chinese unwillingness to abandon domestic development strategies is absolutely understandable in the context of U.S. unilateral action to seriously undermine a major company such as ZTE. But the U.S. action was not out of the blue; rather, it came after ZTE allegedly failed to live up to a deal it reached with the U.S. government after it was found to be violating U.S. sanctions on Iran. Some Chinese voices have criticized ZTE as irresponsible, but the fact that the U.S. government took the action it did (and has indicated a potential investigation on similar grounds into the much larger company Huawei) does nothing to ease the pressure to help Chinese companies escape this kind of lurch in the future. If semiconductor suppliers were globally diversified, Chinese authorities might have less to worry about, but they’re not; some classes of chips are only available from U.S. suppliers. So if Chinese planners want to see a diversified global market, why not build it at home?

About Transpacifica

The Transpacifica newsletter is produced by me, Graham Webster, a senior fellow with Yale Law School’s Paul Tsai China Center and fellow with New America, where I am coordinating editor of the DigiChina project, working from a home base in Oakland, California. The opinions expressed here are my own, and I reserve the right to change my mind. For three years after its founding in February 2015, this newsletter was known as U.S.-China Week. It now appears biweekly, delivered by free e-mail subscription.

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