The tech flashpoints fueling US-China tensions
There is perhaps no more pressing foreign policy question in Washington than how to responsibly approach China’s growing influence in the world and prevent a shooting war in doing so. Both countries are vying for supremacy, so when President Joe Biden and Xi Jinping convened for a virtual summit this week, it was billed as an effort to get the two sides talking again—and to turn down the temperature on a relationship that’s gotten heated in recent years.
One of the key flashpoints fueling that tension is access to technology and the security of global supply chains. The virtual summit and related events this week have only illustrated how volatile these issues remain along a number of dimensions.
Taiwan and semiconductors. Both sides showed up with a familiar set of grievances—principally, human rights and trade practices from the U.S. side, support for Taiwan on the Chinese side. But amid a global shortage of semiconductors, the stand-off between China and the United States over Taiwan, which provides the world with a huge portion of its advanced semiconductors, has gained outsized importance. As the chief supplier of chips, Taiwan now represents the linchpin in the global supply chain for electronics. And as electronics have become integrated into just about every product imaginable, Taiwan’s role in the global economy has only increased.
As Taiwan’s economic importance has grown and as China has shown itself increasingly willing to renege on its international commitments to Hong Kong’s sovereignty, the stakes of the conflict over this breakaway island have only grown. Taiwan represents the most likely flashpoint of a possible war between China and the United States—and also provides the manufacturing base for an industry that makes up a key portion of the broader strategic conflict between the United States and China. Given that factories in Taiwan provide many of the chips that are powering breakthroughs in everything from AI to biotechnology, Taiwan’s de facto independence is from the U.S. perspective not just a matter of principle and commitment, but a key piece in the tech conflict with China. By contrast, seen from Beijing’s perspective, Taiwan’s continued refusal to accept China’s demands for reunification is not only an affront but a missed opportunity to control a key piece of industrial infrastructure.
A new kind of cold war. As tensions over Taiwan on both sides have escalated recently, they have contributed to a renewed perception that the United States and China are headed for a new cold war. The Biden-Xi summit illustrated that there are no straightforward solutions to the basic disagreements that give rise to that perception. While Biden reaffirmed his commitment to the “One China” policy—the diplomatic recognition of the People’s Republic of China as the only legal government of China (and not the one that resides in Taipei—he also said that the United States opposes efforts to “change the status quo or undermine peace and stability across the Taiwan Strait,” a statement aimed at discouraging any plans of retaking Taiwan by force and potentially sparking a broader war. “It seems to me we need to establish some common-sense guardrails,” Biden told Xi. “We have a responsibility to the world, as well as to our people.” But in Taiwan, Beijing sees an issue with little room for compromise. In its support for Taiwan, the United States is “playing with fire,” Xi said. And by arraying its allies against China, it risks a new cold war.
Although the perception of a new cold war has become something of an internecine debate within U.S. policy circles, it’s one that sheds light on the technological relationship between the two countries. During the last Cold War, the economies of the Soviet Union and the United States were far less intertwined, even if some trade and scientific cooperation continued. Today, the United States and China are key trading partners with one another, and China has embarked on a campaign of high-tech transfer that has frequently involved the theft of intellectual property from firms in the United States and elsewhere. Current shortages of goods made in Chinese factories only reinforce this reality: The West remains dependent on Chinese manufacturing capabilities. How to best wage a cold war on a trading partner is unknown at best.
Trade and tech transfer. This economic dynamic presents the Biden administration with a difficult balancing act—to maintain an economic relationship that powers the global economy while preventing the type of tech transfer that might give China a strategic edge and could worsen its human-rights abuses. A report released Wednesday by the U.S.-China Economic and Security Review Commission urges the Biden administration to further restrict the U.S. commercial relationship with China by placing greater restrictions on U.S. investments in China and the ability of U.S. investors to buy the shares of Chinese companies listed on American exchanges. The report finds—perhaps surprisingly amid tense relations between Washington and Beijing—that bilateral trade is approaching levels seen just prior to when trade tariffs were imposed on China by the Trump administration. The report also finds that while “bilateral foreign direct investment flows are down,” other investments like venture capital and private equity deals are increasing. This development brings with it the threat of sensitive technology transfer that the Biden administration needs to do a better job of preventing, the report argues.
The commission’s findings illustrate that efforts in Washington to better control the technological relationship with China are likely only beginning. Congress has already passed a variety of measures aimed at improving investment reviews and shutting Chinese telecommunications firms out of U.S. networks, and concerns about China’s growing technological are only likely to intensify these efforts.
In the meantime, countries like Taiwan are caught in the middle of a great-power struggle for international supremacy.
– Elias Groll (@EliasGroll)