How to Win the Technology Race with China

The following is a summary of Anja Manuel’s TEDx Palo Alto Talk on May 24, 2019

It is time we acknowledge that China systematically extracts the most advanced technology from the West, using both legal and nefarious means.  Instead of closing our own system to guard our inventions – as we’re beginning to do -- we must compete, and then in some cases, we can even cooperate.

There is nothing wrong with China wanting to rise and innovate. Indeed, many Chinese are first-rate inventors. However, China often doesn’t play fair. This harms our economy, our military readiness, and makes it harder for the West to set the global values for technology to ensure it develops safely.

President Xi has been public about China’s goals: by 2025, to domestically produce key technologies such as semi-conductors, 5G equipment, robots, self-driving and electric cars, and others, and by 2049, to lead in "national strength and international influence" with an army that can "fight and win.

Our western innovation system is based on private enterprise, unguarded universities, and open source research. Not China’s. Over the past few years, the world has woken up to China’s effort to vacuum up the world’s best technologies in a systematic effort, coordinated by the Communist Party. Their tactics include:

• Stealing trade secrets through human spies and cyber-theft, which costs the US economy between 180 and 540 billion dollars a year;
• Buying some of our most sophisticated companies: in recent years, Chinese participated in 10-16% of all US venture deals.
• Forcing US companies to hand over their intellectual property as the price of doing business.

China also has an impressive, entirely legal, whole-of-government effort to educate scientists and financially support key technologies. Unlike the American system, the Communist Party ensures that anything learned in private labs goes back to benefit the Chinese government and military.

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Through all these means, China is rapidly catching up. For example, Huawei – a Chinese company that has long benefited from government support -- leads the global market for 5G infrastructure that will run everything from our phones to the internet of things.  We don’t want to give any one company – Chinese or not -- the ability to shut down our electric grid, or, even, if they choose, make all the self-driving cars swerve off the road.

Where does this leave the United States?

So far, the U.S. response to China’s technological rise has been entirely defensive.  The U.S. government tightened up CFIUS laws last year to make it tougher for China to invest in our most advanced technologies, and is creating new broad export controls so our companies can’t sell cutting edge technology to China.  Some of this was long overdue and positive – but defensive measures alone won’t fix the problem and will hobble our most advanced companies.

Walls won’t work. We’re part of a global web of innovation. For example, semiconductors are often designed in the U.S. and manufactured in Korea, Japan and Taiwan. They are then shipped to China, assembled into phones and computers, and sold all over the world. Tech companies innovate everywhere: Alibaba has AI research labs in China, but also Russia, Singapore, Israel and in the US. Google does its advanced research in the U.S., but also China, Germany, India and elsewhere. Breaking up this web would be nearly impossible, and it would punish us as much as China.

To compete with China, we do NOT need to define the Chinese people as the "enemy" or close ourselves off from the world.  An offensive, positive strategy might look like this:

At the global level, we need to stop going it alone.  Pushing back jointly with our allies on China’s unfair trade practices would be far more effective than our current path of arguing with everyone about trade at once.

We need a "Tech 10" group of key countries who are willing to create and the norms to shape new technologies. Without democratic values and leadership, we will struggle to push back against the spread of China’s AI-enabled social control and surveillance systems, which it is already exporting to dictators around the world. We could see more dangerous gene editing experiments on humans, as previewed by the Chinese HIV immune baby in late 2018.  And we must create international norms to govern cyberwar and the use of robots in war while we still have the edge in these areas. China wouldn’t be excluded, but must accept the high standards set by the world.

The U.S. federal R&D budget should rise by billions of dollars. China is spending around 8.7% of its government budget on R&D, while the U.S. government spends less than three percent. Our science education must improve:  recently, the OECD ranked China 10th in the world in student math, science and reading scores, while the US ranked a measly 31st. We can’t lead the world if our kids can’t do math. On immigration, rather than banning China’s best minds from studying here, the U.S. should carefully vet Chinese students, and crack down hard on anyone actually caught spying, while welcoming those who don’t. Xenophobia is not the answer.

The private sector also has a role to play. Silicon Valley should cooperate with the U.S. government in reasonable ways rather than fighting it at every turn. The legendary early Silicon Valley companies – Fairchild Semiconductor, Varian, and others, all did this.  Within reason, we need our companies to be patriots again, instead of fixating on becoming unicorns.

China isn’t ten feet tall, and we can compete effectively if we start now.  If we shore up our own innovation system and steer the global values of tech in the right direction, we will have made all humans better off, and created a fair playing field. We can then even cooperate with China on clean tech, non-military uses of AI, and even some semiconductors, in very positive ways.