Beijing Seeks to Evade U.S. Restrictions on Technology Imports

Chinese President Xi Jinping delivered a major speech earlier this month acknowledging how U.S. efforts to restrict Chinese access to critical technology have laid bare systemic weaknesses in Chinese supply chains. To meet this challenge, Xi foreshadowed plans to accelerate and deepen scientific and technological (S&T) innovation in China’s “strategic emerging industries,” thus marshalling domestic development to neutralize Washington’s policies.

Delivered before a scientists’ forum, Xi’s speech emphasized the strategic importance of fast-tracking China’s S&T innovation to promote technological innovation and ensure “high-quality” lives for the Chinese people. Xi further acknowledged that China faces a “domestic and international environment of profound and complex change,” likely a reference both to the economic impact of COVID-19 and to current bilateral tensions with the United States. While Xi emphasized the importance of international S&T collaboration on some niche issues, such as climate change and public health, his prescribed plan of action focused primarily on resolving critical internal barriers constraining Chinese S&T innovation and development.

Consistent with his broader efforts to rally domestic support for his policies, Xi also appealed to the nationalist sentiments of China’s S&T workforce, drawing on historical references, such as Beijing’s “Two Bombs, One Satellite” nuclear weapons program, to argue that science must be harnessed in service of the state. Xi also reiterated his view that “science has no borders, but scientists have motherlands,” an implied justification for China’s theft of intellectual property and academic research around the world.

In setting the stage for domestic reforms during China’s upcoming 14th Five-Year Plan (2021–2025), Xi’s address conceded that many critical technologies and components necessary for China’s economic “rejuvenation” are presently controlled by other countries. On this point, though, Xi struck a delicate balance between the need to address current, practical problems facing China and the importance of building a comprehensive framework to guide future technological investments.

Xi specifically identified China’s heavy reliance on agricultural and energy imports as key areas of concern, explaining that China’s dependence on foreign oil had reached over 70 percent of demand. Xi further elevated the importance of addressing the practical considerations associated with the country’s aging population and environmental degradation.

As the centerpiece of Xi’s speech and a subsequently released joint circular, Xi foreshadowed increased investment in a series of national laboratories and research institutes to meet China’s emerging technological needs. In all, Xi’s plan identified eight areas for investment promotion, including 5G network applications, biotechnology and vaccine development, high-end manufacturing, chipmaking, and smart vehicles. Recognizing that solutions to these and other problems can only be “achieved by thousands and thousands of S&T workers and market actors battling in line,” Xi indicated that his plan relies heavily on state planning and hiring to promote the establishment of a favorable scientific ecosystem. Left unsaid was the role, if any, of private enterprises in the central government’s push for S&T dominance.

Increased U.S. regulatory attention to Chinese technology platforms and telecommunications companies, as well as U.S. export bans involving semiconductors and other critical inputs, have clearly struck a chord in Beijing. Nevertheless, while U.S. actions appear to have achieved their intended result in the short term, Xi’s speech suggests Beijing is determined to speed up efforts to substitute home-grown innovation for imported technology, regardless of the U.S. election’s outcome.

Xi’s strategy to reduce and in some cases eliminate China’s supply chain dependencies therefore raises serious questions about the long-term viability of a U.S. strategy largely built around the use of regulatory tools and enforcement mechanisms. Xi’s strategy also puts into sharp focus Washington’s failure to produce a competing industrial policy of its own, as well as its misguided attempts to secure double-digit budget cuts to R&D spending at major U.S. scientific agencies.

Craig Singleton, a national security expert and former U.S. diplomat, is an adjunct fellow at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Cyber and Technology Innovation (CCTI) and Center on Economic and Financial Power (CEFP). For more analysis from Craig, CCTI, and CEFP, please subscribe HERE. Follow FDD on Twitter @FDD and @FDD_CCTI and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.