Does Sino-US Tech War Underlie Escalating Trade Tensions?


Observers say that technological rivalry between China and the US lies at the root of escalating trade tensions between the two economies.

In an article for the South China Morning Post, CCTV host Robert Lawrence Kuhn writes of the potential for a “looming tech war” in the wake of worsening trade friction between China and the US.

The US Department of Commerce has just banned the sale of hi-tech goods and services to Chinese telecommunications giant ZTE over its breach of sanctions against Iran, while the FBI has also launched a probe into sector peer Huawei for similar infractions.

These developments arrive following a round of escalating tariff unveilings by both China and the US, and the filing of a dispute proceeding with the World Trade Organization by Beijing over the 25% levy proposed by the Trump administration on as much as USD$150 billion in Chinese imports.

Kuhn points out that access to technology remains the key imperative for China when it comes to SIno-US trade relations.

China Daily recently opined that “targeting technology is like throttling the neck of the Chinese enterprises,” while commerce minister Zhong Shan has said that “Sino-US trade imbalances are related to US controls on hi-tech exports to China.”

The possibility of stymied access to US technology due to trade tensions have given impetus to long-standing calls for China to achieve greater technological independence.

Xi Jinping has said that “heavy dependence on imported core technology is like building our house on top of someone else’s walls,” while Jack Ma more recently opined that China needs to avoid “over-dependence” on US tech imports.

This rise of China’s technological independence and prowess is the very development raising the hackles of American lawmakers, however, with the US trade representative making specific reference to China’s semiconductor ambitions in a report that greenlighted the levying of up to $100 billion in tariffs on Chinese imports.

Ann Tang, deputy secretary general of Beijing-based think tank the Center for China and Globalization, points out in Financial Times that China’s state-led “indigenous innovation” model has achieved remarkable accomplishments in the tech sector.

It has produced national champions such as Alibaba and Tencent, both of which rank amongst the world’s top 10 companies with valuations of $480 billion and $570 billion respectively, as well as created a digital economy worth $22.6 trillion, accounting for around a third of China’s gross domestic product.

According to Tang the very success of China’s model could be putting it on a collision course with US in the tech sector.

“China’s state-dominant model of technology innovation, known as ‘indigenous innovation,’ is inherently incompatible with the West’s open, collaborative, market-driven approach to innovation,” writes Tang. “The west is increasingly anxious about China’s rising technological profile.

“In the context of growing great power competition, trade and investment might well be amalgamated into a more explicit battlefield over tech supremacy.”