The Digital Frontier of U.S.-China Relations: Challenges and Opportunities

POST-EVENT SUMMARY

On September 13, 2021, the Institute for China-America Studies (ICAS) and the Carter Center China Program hosted a virtual public event to discuss the deepening patterns of U.S.-China competition in the area of digital and core technologies. The event was titled “The Digital Frontier of U.S.-China Relations: Challenges and Opportunities.” Dr. Hong Nong, Executive Director and Senior Fellow at ICAS, delivered the opening remarks, speaking to the scope for both competition and cooperation in the high-technology sector as well as re-publicizing the launch of ICAS’ newest program – the ICAS Trade ’n Technology (TnT) Program. The discussion was moderated by Dr. Liu Yawei, Director of the China Program at the Carter Center, and featured four speakers: Mr. Paul Triolo, Practice Head, Geo-Technology at Eurasia Group; Ms. Amy Karam, an instructor at Stanford and Duke University and a global competitive strategy consultant; Dr. Yang Nan, Assistant Research Fellow at the Chinese Academy of Social Science’s Institute of American Studies; and Dr. Denis Simon, Senior Advisor to the President for China Affairs at Duke University and a Senior Advisor to ICAS’ TnT Program.

The panelists expressed various perspectives on the escalating U.S-China race to seize the commanding heights in the area of digital and core technologies. Panelists concurred that the digital frontier is an arena of immense opportunity, as major economies race to build out a smart and better regulated digital economy fueled by a range of innovations such as 5G, artificial intelligence (AI), cloud computing, quantum computing, and the internet of things (IoT). On the other hand, the unfolding and increasingly bitter U.S.-China geopolitical rivalry has cast a looming shadow over two-way technology exchanges, as both countries adopt a variety of unilateral approaches to protect national as well as proprietary data and technologies. The competitive dynamics on the digital frontier have been accentuated by an action-reaction sequence, as each government feels the need to respond to heavy-handed measures by the other. Challenges that are endemic to this sector – regardless of national affiliation, such as the loss of control over data, the potential theft of intellectual property (IP), and the ability to shape and enforce legislation in the digital environment have compounded the difficulty of managing U.S.-China relations at the digital frontier.

Looking ahead, U.S.-China competition and tensions in the digital, advanced manufacturing and high-technology sectors are expected to persist for the next decade and perhaps even longer. At their end, the Chinese leadership is aware that the two countries stand at an important inflection point in their technology exchange relationship but unsure as to the scope and extent to which decoupling will become a permanent reality in U.S.-China economic relations. And so, while aiming to stay ahead of the technology curve from a domestic regulatory standpoint, they have kept cross-border policy options open – including the option to implement reprisals. At the U.S. end, the incentive structure of policy is somewhat different. The objectives here are to renew U.S. domestic competitiveness, including grappling with the need perhaps for a coherent ‘industrial policy’; level the bad equilibrium stemming from a lack of cross-border trade and investment reciprocity in key Chinese digital, advanced manufacturing and IT-enabled sectors; and, finally, improve or redesign a new set of technology controls-related tools that are a legacy of the Cold War era.