Damage unlimited

US crackdown on Chinese companies is playing havoc with the global technology ecosystem

Decoupling has become a term du jour of China-US relations. Among that, technological decoupling is widely used by US think tanks and media outlets, to summarize the US government's many policies aimed at cracking down on China's technology sector.

According to incomplete statistics, the US has thus far put over 600 Chinese companies and institutions of various types on its sanction list. The US Commerce Department's interim final rule on "Securing the Information and Communications Technology and Services Supply Chain" became effective in March 2021. And US President Joe Biden signed the Secure Equipment Act of 2021 into law in November 2021. Both moves are aimed at curbing technological interdependence with China and establishing a supply chain system without China.

The US government is blocking China-US technological cooperation in the name of preventing China from obtaining US core technologies. It is even blocking cooperation between Chinese and US scientists to prevent the so-called technology transfer. It attempts to cut off the Chinese companies' connections with their key supply chains to suppress their development. It has also orchestrated a smear campaign, hyping up issues such as violations of human rights, and national security, to hinder China's top digital companies' development in the international market.

However, can the US government's measures achieve the desired effects? Jon Bateman, a senior fellow at the Carnegie Endowment for International Peace, said in a report titled "US-China Technological Decoupling: A Strategy and Policy Framework" that "without a clear strategy, the US government risks doing too little or－more likely－too much to curb technological interdependence with China. In particular, Washington may accidentally set in motion a chaotic, runaway decoupling that it cannot predict or control."

Judging from existing US policies and their effects, the US has achieved little in advancing technological decoupling from China. Instead, a lack of clear strategy has resulted in lots of unintended spillover effects, such as the disruption of global supply chains, polarization of technology ecosystems, and the abuse of the concept of national security. Furthermore, while some people in the US are urging the US Congress and government to take more radical actions against China, lots of US tech companies may have lost their Chinese market and are suffering heavy losses.

The technological decoupling has achieved poor effects for the following three reasons.

The US government has underestimated the complex interdependence in the global technology ecosystem. Cutting off US connections with a certain company or companies from a certain country is not as simple as imagined. Daniel Gerstein, a former export control official at the Department of Homeland Security, said at a June 16 Emerging Technology Technical Advisory Committee meeting that export controls on their own haven't historically proven to be very effective in stopping "US adversaries" from acquiring technologies and components. He said the US and other countries have "ample information telling us that they have not been particularly effective, even for sanctions regimes".

Apart from some effects on specific Chinese enterprises such as Huawei, ZTE and DJI, the technological decoupling from China has produced less-than-expected effects for the US. Statistics show that China-US trade and investment ties are deepening, despite the impacts of tariffs and technological decoupling. In 2021, China-US trade relations registered rapid development and the two-way trade grew by nearly 30 percent, reaching a record high of $755.6 billion.

Within the US, the opposing voices are growing louder. After all, because of the sanctions, US companies' market share has been taken over by companies from other countries or Chinese domestic firms. Despite the crackdown by the US, the total sales from Chinese-based chipmakers and designers jumped 18 percent in 2021, according to the China Semiconductor Industry Association. According to data compiled by Bloomberg, 19 of the world's 20 fastest-growing companies in the chip industry over the past four quarters, on average, hail from China.

Technological decoupling from China is neither conducive to the maintenance of US technological dominance, nor helpful for its national security and economic prosperity. The US should invest more capital and resources in increasing its own innovation capacity and competitiveness, rather than starting a vicious competition to exclude China. Therefore, China and the US should strengthen dialogue in emerging technologies and manage disputes to avoid irreparable losses on both sides caused by policy misjudgment. Furthermore, the two sides should draw a bottom line for competition in emerging technologies, so as to avoid severe "secondary damages".

To start with, the scope of national security should be strictly limited. Excessive national security thinking only benefits interest groups while harming national interests. The two sides should carry out practical dialogue over national security issues and reverse the trend of unlimited expansion of the scope of national security, which could lead to irrational decisions or even unmanageable crises.

Second, technological competition should not be at the expense of damaging the global technology ecosystem. Technological progress is the key to solving many problems in such areas as environment, energy, hunger, and diseases. The US crackdown on China's tech companies damages the global technology ecosystem.

The author is a professor and director of the Research Center for International Cyberspace Governance at the Shanghai Institutes for International Studies. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn