When Donald Trump re-enters the White House, he’ll get accompanied by a group of China hawks who will use tariffs and trade restrictions to prevent Beijing from challenging the country’s technological superiority.
China has been subject to such industry force since Trump took office in 2017 and it has continued through the Biden administration. This isn’t completely new.
However, some commentators are suggesting that the magnitude of what Trump is now proposing, including taxes of up to 60 % on goods from China, had “keep Beijing on the defense and completely transform the rivalry in America’s favor,” according to one analyst.
For a watch is premised on the belief that China’s obsolete, state-subsidized, manufacturing-for-export type is mature for disturbance by US taxes.
However, as someone who has written and edited two books on China and creativity and studied China’s systems since the early 2000s, I believe this description of its economy is at least two years out of date.
China’s industrial sectors have grown fast since 2016 as a result of the removal of American tariffs. However, since the” business war” launched by Trump in 2017, Chinese systems has really emerged as a world leader.
China’s technology climb
Thirty years ago, China’s best technology company had yet to create a competitive personal computer internally, and the country scarcely had internet access. The nation was the nation’s manufacturer fifteen years ago, where iPhones and other technology products were assembled without the ability to produce any high-tech components on their own. They were stuck at the bottom of the value chain.
No Chinese planners could have predicted the future directions that China’s technology would take it even with the best glass game in the middle of the 2000s.
Fast-forward to now: China is today ahead of rival economies across large industrial areas. The think tank Information Technology and Innovation Foundation found in a 2024 statement that China is leading or internationally competitive in five out of nine high-tech businesses – automation, nuclear energy, electric vehicles, artificial intelligence and quantum computing – and quickly catching up in four others: chemicals, system tools, biopharmaceuticals and semiconductors.
A Bloomberg research also identified China as leading or internationally competitive in 12 out of 13 technology-intensive business. And China was identified as the leader of 37 of the 44 crucial systems tracked by the Australian Strategic Policy Institute.
Why has the Chinese technology sector grown so fast? Some in Washington think that the decades of meticulous state planning have given rise to the world’s high-tech sectors.
But this, I believe, greatly overestimates Beijing’s vision and power. Although the Chinese government has certainly pursued the lofty objective of catching up with the West since the 1980s, having goals is not the same as having the ability to carry them out.
Many in the West level to the Chinese government subsidies that support local tech companies. While grants have contributed to some technical achievement, the Chinese government has also provided many problems.
Take electronics, for example: Despite massive Chinese state assets since the 1990s, China still lags in producing cutting-edge cards and is reliant on goods.
Dare to DREAM
In my view, China’s technological dynamism didn’t come from the magic of central planning, but through five key elements I call DREAM.
D stands for the exchange between the state and the market.
While China’s government wields significant power, the country’s private sector is neither submissive nor powerless. In 2022, businesses that are not owned by the government ( mostly private ones ) but also offshore ones in which Beijing does not hold a controlling stake accounted for 95 % of enterprise R&, D spending and 88 % of urban employment.
Beijing has stepped up its sanctions against tech giants, including a ban on Alibaba’s Ant Group from listing on the New York Stock Exchange in 2020 and a Covid-19 lockdown that hurt the private sector, but the government is not bound by strict ideology, as many in the West believe it to be. It has recently begun to support the private sector, and it has even begun to draft laws to protect them.
Indeed, it’s more accurate to describe state-market relations in China as dynamic, adaptive interaction– more dialogue than dictatorship.
R refers to domestic R& and D ( R&, D).
Over the past 20 years, China has heavily invested in domestic research capacity, once dependent on imported technology. Chinese scientists and engineers continue to be deeply involved in global networks despite the fact that political tensions have accelerated the development of self-reliance.
Further, China has a higher number of highly skilled workers thanks to a supposedly anti-espionage initiative launched under Trump’s first administration.
The” China initiative” that the US Justice Department introduced in 2018 promoted the idea that Chinese and Chinese American scientists might be spying for Beijing, leading to a flood of top scientists returning to China.
They continued to conduct cutting-edge research and train a fresh batch of Chinese scientists there.
E is for China’s industrial ecosystem, which it can exploit.
China’s vast manufacturing base enables rapid creation and scaling of new technologies. China was the only nation to cover every major industrial sector and contributed 35 % of the global gross manufacturing output in 2023.
Silicon Valley’s innovative ecosystem, which can rely on extensive venture capital and a booming stock market, may not exist in China. However, it has over the years developed comprehensive supply chains, and it excels at repurposing them to quickly introduce new products to the market.
Take the example of robotics. Only when labor costs increased sharply, did China take the robotics industry seriously. In 2010, China’s manufacturing labor costs were about US$ 2 per hour, similar to those of the Philippines or Vietnam, by 2022, that figure rose to about$ 8 per hour – more than double the average for Southeast Asian countries.
China installs more industrial robots each year than the rest of the world combined, and its robot quality has increased exponentially.
A stands for accumulative changes.
Chinese companies excel at incremental improvements, which add up to an accumulative transforming effect rather than new discoveries. Instead of a few brilliant ideas from any leader’s creative mind, the vast manufacturing networks offer opportunities to improve already-existing products based on market feedback.
Analysts in the US have long predicted that China’s rampant intellectual property violations would end its innovation drive, believing that it would stifle people’s desire to innovate if they believed they would be robbed of their ideas.
Instead, as Taiwanese tech expert and writer Kai-Fu Lee has explained, Chinese enterprises can be dynamic and innovative in an environment with less IP protection. They frequently grow their market share quickly and establish business ecosystems to stop rivals from catching up.
M means the middle market.
Chinese firms tend to target middle-income consumers, both domestically and globally. By prioritizing affordability and functionality over cutting-edge innovation, they avoid head-to-head competition with Western giants such as Apple.
Xiaomi and Oppo, two Chinese smartphone manufacturers, cost a third to a third as much as an iPhone but have comparable features. Tesla and other Chinese electric vehicles have comparable prices, but they still have some excellent features.
Chinese firms tolerate lower profit margins, as they can rely on the expanded sales in the middle market, both domestically and, increasingly, overseas.
Tariffs as a counterproductive measure
The incoming Trump administration’s issue is that, while tariffs may change how China’s manufacturing and exports are perceived globally, they won’t eliminate any of the DREAM components. They might actually have the opposite effect: boosting China’s capacity for self-reliance and bolstering its standing in the world’s middle-class.
The issue is primarily due to the fact that American policymakers frequently view technological competition with China as a zero-sum game. However, technological competition is not comparable to a race with separate lanes and a finish line. Rather, tech transformation is a complex process in which countries and companies compete, collaborate and build on each other’s work.
Ultimately, America’s technological prowess won’t be measured by the extent to which it manages to stop China, but by how successfully American companies can address humanity’s greatest challenges. There will be little progress made in the direction of tariffs and trade wars.
Vassar College’s professor of economic geography is Yu Zhou.
This article was republished from The Conversation under a Creative Commons license. Read the original article.