China, Too, Is Gearing Up for Tech Competition

Xi Jinping takes his oath of office to begin his third term as president of the People’s Republic of China (PRC). Source: Reuters

It is no secret that the United States views the People’s Republic of China (PRC) as a near-peer competitor. As the Biden administration describes, China has both the intent and the capability to reshape the existing international world order. Over the last three years, Washington has rallied behind a future vision for America that places technological competition with the PRC front and center — from passing the CHIPS and Science Act, to restricting the export of advanced semiconductors and manufacturing equipment to China, to creating a new House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party. 

But Beijing is responding, too.

In March, the Chinese Communist Party (CCP) concluded its annual “two sessions,” where the Party not only affirmed Xi Jinping’s third term as president, but also announced a series of new policies and government appointments. Called the “two sessions” due to its convening of China’s two main political bodies, the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the meetings sent a clear signal among the PRC’s top leadership that China is organizing for tech competition against the United States.

Most prominently, the Party’s Central Committee and the State Council revealed a plan to reorganize the Ministry of Science and Technology (MOST) by creating the Central Commission for Science and Technology (CCST). Led by the Party rather than the state, the commission will coordinate a new “national innovation system,” determine national strategic science and technology (S&T) tasks, and decide on major national S&T research projects. The CCST is also charged with advancing the development of dual-use, military-civilian technology — no doubt an expansion of its Military-Civil Fusion strategy, which has been heavily scrutinized by the United States. With this restructuring, the PRC has centralized S&T leadership across the Party and state.

At the close of the “two sessions,” Xi Jinping made his first speech as a third-term president, where he emphasized the need for “self-reliance and strength in science and technology” to compete with the West. Such a pathway includes a two-percent increase in nationally directed S&T research and development spending. The PRC’s S&T strategy has prioritized “indigenous innovation” for the last two decades, but Xi’s explicit reference to competition with the West in this year’s remarks simultaneously escalated already rising tensions between the United States and China.

Beyond national reshuffling to meet the challenges of tech competition, local governments are taking action, too. In order to address STEM talent shortages, Zhejiang Province is requiring students in elementary and middle school to study artificial intelligence (AI). The municipal government of tech hub Chengdu is offering up to $72 million in subsidies to local semiconductor projects in response to national calls for self-sufficiency. Last October, Shanghai launched its third semiconductor personnel training campus in partnership with Shanghai University and the Lingang Special Area, a designated free trade zone.

China’s technology companies are likewise joining the competitive fray. E-commerce giant Alibaba announced on March 28 that it would be restructuring into a holding company, overseeing six subsidiaries: Chinese e-commerce, global e-commerce, cloud computing, digital mapping and food delivery, media and entertainment, and logistics. In response to further restrictions on semiconductor imports to China by the United States, Japan, and the Netherlands, Huawei’s rotating chairman Eric Xu confirmed that the telecommunications company is working with other domestic firms to achieve breakthroughs on chip designs, saying the Chinese chip industry will be “reborn” despite international export controls. So far, Chinese companies have lagged (albeit closely) behind Western companies in their ability to produce smaller nanometer-sized chips. Of course, whether or not China’s indigenous innovations will achieve or exceed parity with American designs will be the litmus test for how well the PRC can play defense. U.S. firms operating in China might also face further scrutiny moving forward; the Cyberspace Administration of China (CAC) recently opened a cybersecurity review into products sold by U.S. chip manufacturer Micron Technologies. 

For those sitting in Washington, the PRC’s mobilization behind tech competition should come as no surprise. After all, the United States has doubled down on its efforts to increase its own technological resilience; a response from Beijing should be expected. Only time will tell just how effective the Biden administration’s parallel “run faster, slow them down” approach might be.

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