Long Read

A Chinese Sputnik Moment for the West?

Sixty years ago, the Soviet Union launched Sputnik 1¹, the first satellite to orbit the earth, raising fears in the United States and the rest of the West that it would soon be surpassed technologically. The Sputnik launch triggered the Cold War’s space race and a concerted US effort to up its technology game. The Pentagon’s renown DARPA agency² which spearheaded the internet, SIRI and GPS (among others), was born then.

Today, technology is still acting as a leveller—not only among countries but also between state and non-state actors. From social media to 3D printing, biotech and artificial intelligence, the entry bar for mastering the new technologies is constantly being lowered. Even space launches, once the monopoly of states, have been privatised with SpaceX, a leader in reducing space transportation costs. The newer technologies increasingly allow emerging countries to leapfrog stages of developments while more advanced economies are disadvantaged by their legacy systems and more rigid regulatory frameworks.

The speed with which China is catching up and potentially surpassing the West is no longer hypothetical. Washington, Berlin and Paris are all increasingly worried. On the one hand, Western leaders accuse China of getting an undue advantage through buying up American or European high-tech industries. Indeed, it is common to hear high ranking in-the-know US officials attribute China’s advances to the theft of US companies’ intellectual property even while acknowledging the scale of China’s investments in scientific, technological, engineering and mathematics (STEM) research.

Artificial intelligence is a particular worry. On deep learning, for example, China is slightly ahead in overall publication numbers while the US is ahead in patents. In big data, China is reckoned to have a natural advantage because of the mountains of data they can gather without the legal or ethical constraints facing companies and governments in the US and Europe. The alleged lack of ethical inhibitions on manipulating DNA is also thought to give it a significant advantage. China is only too aware of the huge political and economic benefits the US and its companies like Google and Apple reaped from being the first mover on the internet and social media. Beijing thinks it should now be its turn.

If the Western narrative revolves around being cheated out of its rightful place championing scientific progress due to Chinese dirty tricks, the Chinese one harks back to an even earlier age when it led the world technologically with the creation of compass, paper, printing, gunpowder, porcelain and tea. Then came the centuries of humiliation by Western imperialists. It is only right they resume their leadership position. They also see nothing wrong with acquiring technological insights from abroad. Is this not what the West did in stealing Chinese secrets in centuries past?

Fundamentally a Human Capital Race

The US-Soviet competition erupted in an arms race. Today, the real competition is over skilled researchers and technicians. The US has had a huge advantage, but may lose it if the Trump Administration implements its plan to reduce temporary visas for highly skilled foreign workers. While the US primary and secondary educational system has been slipping in the world rankings every year and is no longer world-class, there are more top-rated universities in the US than any other country. US universities attract the world’s top talent and China has benefitted the most from the US’s open door, with over 300,000 students now studying in the US. Some STEM faculties in US universities are completely dependent on Asian students so much so that they cannot operate without them. American students tend to drop out after getting a BA or sometimes MA because they need to start paying off their student debt. PhD programs are mostly populated by Asian students at many US universities.

For China, sending their students to the US has been a quick and easy way to pull themselves up. Keeping them at home in universities that are improving but not top league would have retarded their scientific progress. Some Chinese students get government help, but in a Chinese version of the Horatio Alger story, the most students rely on their families. Family members typically band together to send their children to the US or other Western countries with the expectation that they will make their families proud and root the family firmly in the middle class. In the course of their studies, Chinese students develop many personal, long-lasting bonds with Western scientists. Most scientific papers increasingly have multiple authors, many times a Chinese one.

The Jewel in the Crown that May Be Dimming

Silicon Valley has made up for the US’s worsening educational achievements in the rest of the country. It is not just that Stanford University is located right in the middle of Silicon Valley, recruiting a steady stream of technology geniuses from all over the world. It is also that the students are expected to commercialise all the great technology they invent. Undergraduates routinely create one or two start-ups alongside their academic studies. It is a one-stop shopping mecca for venture capitalists. And increasingly Google, Facebook and Cisco have become leaders in their own right in different research fields. Silicon Valley is an ecosystem in which the whole is greater than the sum of the parts. There are other technology hubs in the US, but none can compare with Silicon Valley’s mix of scientific prowess alongside its keen commercial aptitude.

But Silicon Valley increasingly has its critics. There is a notable lack of women and minorities in senior positions in the high-tech companies and lots of first-hand stories about discrimination. Moreover, Silicon Valley’s push into the unknown on artificial intelligence and other emerging technologies has even Nobel prize-winning scientists questioning whether the industry may be opening a Pandora’s box that humanity is not ready for. Media headlines about Google and Apple allegedly trying to avoid paying tax has also tarnished their standing in the US and Europe. While the US policymaking elite worries about China getting ahead, many ordinary Americans are more fearful that high technology will take away their jobs.

China’s Different Route

China has pursued a different model. In keeping with how China has developed generally, it has adopted a top down approach for gaining technological superiority. The Chinese government increasingly pumps resources into STEM research, building up its universities and trying to lure world-class scientists to run laboratories and institutes on biotech, AI, and green energy. Westerners have been skeptical that China can make the leap and become a world-class center for science and technology but as with so many other flawed predictions about China not succeeding, there is an increasing recognition that it may have again prevailed, despite the odds.

US and Western governments are now in quandary. Stemming China’s aspirations to become a technology leader is not possible without hurting the West, too. Just as it is hard to imagine the global economy functioning without China, it is increasingly difficult to think about technology without reference to Alibaba, Tencent and Baidu.

Some US government officials comfort themselves with the thought that the US maintains a strong lead in the quality of its research. Linked to this argument is the belief that China is better at imitation than creative or imaginative breakthroughs. After all, how is innovation possible in the culture where political dissent is crushed and the government has put up a firewall, controlling the flow of information. But leaving aside the fact that much of the academic elite knows how to circumvent the firewall, if the crème de la crème of Chinese students is trained in the US and West, can they really not be as creative as American students? The West has had a hard time accepting China’s rise, particularly the speed of it. Is this just another aspect of a reluctance to face reality because it casts doubt on the distinctiveness of the West?

Faced with China’s increasing technological prowess, the West has limited choices to stop it, but how it accommodates – or not – China’s technological rise has big implications for China, the West and all our futures.

A New Cold War—Not Very Feasible

The prospect of a new Cold War is these days bandied about, but highly impractical, as the Trump Administration has found since coming into office. Trump vilified China during his campaign to gain the presidency, accusing it of “eating America’s lunch,” but, since his inauguration, the presidential rhetoric has mellowed, particularly after Trump figured out that he needed Beijing in dealing with North Korea. It has also helped that Chinese President Xi has gone out of his way to flatter Trump, most notably during the US President’s recent visit. The White House staff still worry about the potential for China to take a lead in newer technologies, but they have not come up with a convincing plan to avert it.

Still, there is pressure building outside the White House for more surveillance of Chinese acquisitions and investments in the US high technology sector³. The US has long had a CFIUS⁴ process that reviews foreign investments in the US for harmful national security impacts. Recently there have been moves in Congress to strengthen the CFIUS mandate, particularly the review of minority stakes by China and other foreign investors. An unpublished 2017 Pentagon study showed that Chinese investors were actively buying stakes in US technology startups, including companies involved in semiconductors, robotics, and artificial intelligence⁵. The leaked “Paradise Papers” also indicate that Russia has been funnelling money into US technology companies, in recent years⁶. Many of these stakes are minority stakes.

CFIUS has traditionally focused on military supply chains and sensitive defence technologies, rather than over-the-horizon national security risks, such as emerging technologies. Now Pentagon officials and other policymakers worry that investments by China, Russia, and others in artificial intelligence and robotics may erode America’s technological edge in the years ahead.

The explosion of joint ventures between U.S. firms and Chinese firms is another concern. Motivated many times by Chinese requirements that foreign investors establish joint ventures with Chinese partners to gain access to the Chinese market, many of these joint ventures involve high-value technologies, like chip design and advanced manufacturing techniques. Consequently, the Chinese have commercialised the technologies on their own—which then compete with Western companies both in China and globally. As White House trade official Peter Navarro wrote in an August op-ed, the risk is that “When an American company turns over its technology in exchange for access to the Chinese market of today, it has effectively created a Chinese competitor in the global markets of tomorrow.”⁷

In a similar vein, newly elected French President Macron has also voiced fears that Europe is not protecting enough its high technology industries against Chinese competition, including their acquisition by Chinese firms. German Chancellor Merkel has echoed Macron’s calls for the EU Commission to be tougher against the Chinese investments. In recent months, European Commission President Jean-Claude Juncker announced a plan to screen foreign investments. The idea is to allow (but not require) EU member states as well as the EU Commission to hold back or even effectively block business acquisitions or other investment plans financed by third country companies, in key sectors allegedly considered to be sensitive from a security perspective or being economically strategic. Juncker said it plainly: “If a foreign, state-owned, company wants to purchase a European harbour, part of our energy infrastructure or a defence technology firm, this should only happen with transparency, with scrutiny, and debate”⁸. Critics have charged that such a review would create one more layer of foreign investments checks and controls, on top of the rigorous screening schemes which 15 member states of the EU already operate.

At most, such measures can slow but not stop China’s technology juggernaut. Furthermore, it cannot be denied that Chinese investments are often good for US and European economies. Should China not get some credit from rescuing numerous Greek, Spanish and Portuguese firms and pouring money in big infrastructure projects such as overhauling the Greek port of Piraeus when there were no any other buyers?

Cooperation Needed as Much as Competition

Trying to slow China’s progress may not be as effective as taking a leaf out of the Chinese playbook and the West increasing its investments in science and technology. Some individual European countries invest heavily in R & D, but the EU as a whole has fallen behind China. Many continental European universities desperately need more funding as they have not kept pace with their US and British counterparts in recent years and will soon see more competition from Asia. The US has done well by being the mecca for STEM students the world over, but as China’s and other Asian universities improve, global talent will no longer be constrained and have other options. The US should be developing its own talent pool at home, including more qualified women and minorities. And why put all one’s eggs in the Silicon Valley basket even if what has already hatched has been so successful? Funding for universities other than the Stanfords, Harvards and MITs—has been dropping as US states’ budgets are strapped. Nurturing a more diverse high-technology culture may be the best way to keep the US innovation fresh and cutting-edge.

Competition by itself is not enough. More than ever, China and the West need to cooperate on setting boundaries so we are not all harmed. CRISPR a tool that facilitates human gene editing, is an example of a new technology that could be misused. There have been only a few cases of bioterrorism but as it becomes easier to manipulate the human genome and to create viruses, it is no longer inconceivable that terrorists could develop biotech weaponry causing widespread harm.

The US National Academy of Sciences recently developed guidelines for CRISPR. To their mind, CRISPR should be used to prevent genetic disease, but not for human enhancement. The trouble is that view is not shared in China or probably not even by Western publics. Besides sorting out the ethics, there needs to be international agreement on who should be using CRISPR and ways to prevent it from falling into the wrong hands. Waiting until after we have had the first bio-terrorist incident is too late. Even if it does not result in terrorism, modifying human embryos is likely to have unintended consequences. Developing mechanisms early on for dealing with all possible harmful effects should be a priority.

Despite the long-term benefit for the US technological base, Sputnik helped fuel the Cold War and decades of Western confrontation with Soviet Union. China’s growing weight on the world stage is potentially even a greater tectonic shift than the Soviet Union was perceived to be. While competition with China is probably unavoidable, the US and the West have an opportunity to avoid the mistakes of the past by ensuring they retain the capacity for cooperation.

Footnotes

¹ The Soviet Union launched Sputnik 1 into an elliptical low Earth orbit on 4 October 1957.

² DARPA’s initial name was Advanced Research Projects Agency. It was renamed as DARPA in 1972. Sputnik 1 also led to the creation of NASA and a big increase in U.S. government spending on scientific research and education.

³ Peter Harrell, “CFIUS Reform Gaining Momentum,” CNAS Commentary, November 15, 2017, https://www.cnas.org/publications/commentary/cnas-commentary-cfius-reform-gaining-momentum.

⁴ CFUIS stands for Committee on Foreign Investment in the United States. CFUIS is an interagency view process chaired by the Treasury Department.

⁵ Ibid.

⁶ Ibid.

⁷ http://www.breitbart.com/big-government/2017/08/14/peter-navarro-time-to-end-the-devils-bargain-with-china/.

⁸ Dennis Kefalakov, “EU Commission Views to Screen Chinese investment,” September 20, 2017, https://europeansting.com/2017/09/20/the-eu-commission-vies-to-screen-chinese-investment-in-europe/; Paul, Weiss, Screening of Foreign Investment in the EU, https://www.paulweiss.com/media/3977402/27sep17-eu.pdf.