China and America’s Tech War from AI to 5G: The Struggle to Shape the Future of World Order
AB Abrams, Lexington Books, £96

CHINA has major advantages in five key broad areas of technological competition with high strategic and economic significance — artificial intelligence, quantum computing, green and nuclear technologies, telecommunications and semiconductor chips — due to its greater home market scale, flexible regulatory environment and faster product integration loop.

China is the world’s largest overall (public and private) R&D investor. And China is not producing copies, as is commonly alleged: China files nearly half all the patent applications submitted worldwide. 

The unaffordability of higher education in the United States means that fewer US citizens are going to university, but in China the numbers receiving higher education are rising fast. In 2013, 40 per cent of Chinese students graduated in STEM subjects, under 20 per cent in the US. 

In the period 2016-2018, China overtook the US in the number of peer-reviewed papers published in scientific journals. The 2019 PISA (the OECD Programme for International Student Assessments) found that Chinese students were the best educated in the world.

The US responded not by upping its investments in high tech but by stepping up its attacks on China’s Huawei.

By 2019, 40 per cent of the world’s population used telecoms that passed through Huawei equipment. The US government alleged that Huawei was using its equipment to spy on other countries. 

Nevertheless, the US House of Representatives intelligence committee had concluded in 2012 that there was no evidence that the firm was installing back doors in its equipment for espionage purposes.

Germany’s Federal Office for Information Security found no evidence of any security threat or malpractice from Huawei. And, as Abrams points out, “It was the NSA, not a Chinese government agency, which sought to install back doors into Huawei equipment for espionage purposes.” 

The NSA made US tech companies like Microsoft, Google, Yahoo, Facebook and Apple assist its surveillance efforts.

While the US government pushed for a global ban on Huawei based on unevidenced allegations, all these US firms were doing precisely what Huawei was accused of.

The US’s tech war against Huawei spurred huge Chinese state and private investments in semi-conductor development.

Abrams observes: “By initiating hostilities the US may only have accelerated its own decline by pressing China and its suppliers to phase out reliance on both American inputs such as software as well as on US chips.”

When the US and many of its allies moved to ban Huawei, they ensured that 5G would reach them far more slowly and at poorer quality. 

For example, in July 2020, the Johnson government announced that it aimed to expel all Chinese equipment from British 5G networks within seven years. This would cost Britain over £7 billion and delay its 5G rollout by at least three years, breaking Johnson’s election manifesto pledge to “give all homes superfast broadband by 2025.” 

Classic reactionary folly — lifting a rock, only to drop it on your own feet. 

Likewise, the US economy is in growing trouble. As Abrams notes, “The more the Pentagon outsourced abroad the more domestic industry declined, and the more it declined and became less competitive, the greater the incentive to outsource was… A growing consensus emerged that a laissez-faire approach had effectively ended the era of American primacy.”

Foreign Affairs noted: “The curse of monopoly capitalism that already affects the country’s overconsolidated defense sector — causing higher costs, lower quality, reduced innovation, and even corruption and fraud.” 

The US has an unprecedented rate of debt accumulation, with a debt to GDP ratio surpassing 1:1 in 2020, as deficits that year reached $3.13 trillion or 15.2 per cent of GDP.

US government expenditures went well beyond its tax revenues and were financed through unsustainable debt accumulation.

Government funding for the tech war, whether directly or through provision of infrastructure, education and other services relied on by private tech firms, could not be sustained.

As the editors at the MIT Technology Review observed: “Governments are more likely to fund long-term, risky bets like clean energy, sustainable materials, or smart manufacturing — the kinds of technologies the world really needs right now.

“It’s becoming increasingly clear in the West that while the venture capital model is good at building things people want, it’s less good at producing things society needs in order to solve hard, long-term problems like pandemics and climate change. Letting Silicon Valley set the agenda has… limited innovation to the types of inventions that can make quick profits.” 

This has left the US in a much weaker position to compete in strategically vital technologies.

As Abrams sums up, “China today is unrivalled in the prevalence of technical skills in its workforce, in the concentration of manufacturing supply chains on its territory, and in the speed of its economic growth… China has the important advantages of a larger, faster growing and significantly healthier economy and industrial base.” 

This is another amazing book from Abrams.