Beyond the US-China Race for Geotechnological Supremacy

Photo courtesy of Tech United Eindhoven.

We are living in an age of technological revolution unlike anything humankind has experienced before. The confluence of the internet, big data, artificial intelligence (AI), advanced manufacturing, and blockchain is fundamentally altering the way we live and work. More importantly, nations that master these technologies will hold the key for architecting the rules of the next global order.

In 2013, global strategists Marc Goodman and Parag Khanna coined the term “geotechnology.” It offers an understanding of how technology can tilt geoeconomic advantage and alter geopolitical balance. Today, the consensus view is that the US, as the superpower, and China, as the emerging challenger, have begun a winner-take-all race for technological dominance.

Once a Latecomer to Modernity, Now a Leader in Geotechnology

As a latecomer to modernity, China has long emphasized the importance of technology in becoming a strong nation. The Self-Strengthening Movement of the late Qing dynasty embodied a desperate desire to resurrect national glory through industrialization in the face of Western imperialism. Today, China’s Communist Party understands full well the power of technology. In his 19th Party Congress speech in October 2017, President Xi Jinping mentioned the further promotion of AI, big data, the internet, and advanced manufacturing. At the same time, he said that the party must adeptly utilize information technology to stay politically strong.

Nations that master these technologies will hold the key for architecting the rules of the next global order.

Let’s look at the geopolitical implications of these key technologies one by one.

In the realm of advanced manufacturing, China’s political push for industrial modernization is clear. Its industrial master plan “Made in China 2025” aims to turn China into a manufacturing superpower. The strategy targets virtually all high-tech industries, such as aerospace, machinery, and robotics. With a focus on the higher end of the global value chain, Made in China 2025 is China’s direct challenge to advanced industrial nations like Germany and the US. At the lower end, China is seeking to export higher-end industrial goods and Chinese standards to emerging markets through strategic imperatives like the Belt and Road Initiative (BRI).

In information technology, the strides made by BAT (Baidu, Alibaba, and Tencent) are well known. As they adapt their products and services to new markets and build global positions, they will challenge established companies like Google and Facebook, exporting the Chinese model of internet governance in the process. Domestically, the vast data troves these companies collect will integrate into China’s social credit system, which aims to monitor, rate, and steer the behavior of citizens. If implemented successfully, it will strengthen China’s capacity to enforce and fine-tune market regulations and industrial policies at a level of sophistication never seen before.

In AI, China has emerged as a major global contender, locked in a two-way race with the US. In July 2017, China’s State Council promulgated the “Next Generation Artificial Intelligence Development Plan,” calling for the building of an “intelligent economy” by 2030. In hardware, talents, and business applications, China is rapidly closing its AI capability gaps with the US. As AI transforms labor markets and global economic hierarchies, it will become a key source of trade friction and political tension.

Similarly, the blockchain and cryptocurrency sector can be viewed in the context of China’s broader geopolitical intentions. The People’s Bank of China is on its way to becoming one of the first central banks to issue a digital currency. Home-grown smart contract platform NEO, known as the “Ethereum of China,” is widely viewed as the foundational platform for the intelligent economy of the East.

As cryptocurrency expert Michael Casey has pointed out, China sees blockchain as a geopolitical tool for advancing its regional interests. By incorporating blockchain technology into supply chain logistics and trade settlements, China could end the US dollar’s role as the global intermediating currency and cut out Wall Street middleman correspondent banks.

China could end the US dollar’s role as the global intermediating currency and cut out Wall Street middleman correspondent banks.

At present, the US remains the dominant force in each of the aforementioned key technologies, but China is gradually moving towards parity. Importantly, however, it has to be caveated that China’s progression will not be a smooth one. Massive data collection by the social credit system, for instance, will be prone to security risks, data manipulation, and misuses. As business decisions and social behaviors are increasingly determined by data and algorithms, serious ethical questions are raised about the protection of personal information, autonomy, and dignity.

Avoiding a Zero-Sum Game in Geotechnology

Exponential change is upending the world’s balance of power, and the initial reactions of established powers have understandably been driven by fear and self-defense. Western companies identify their Chinese counterparts as a main source of threat. Their governments accuse China of enacting protectionist measures and trade barriers, and appropriating intellectual property.

Many of these criticisms are valid. However, if we are to engage in a frank conversation on new, balanced development policy norms, we must first take into consideration the fact that every successfully industrialized nation since the Industrial Revolution has enacted state-centric industrial policies. Even today, the US is a “hidden developmental state” in key sectors like biotechnology and information technology.

Compromises will open space for collaboration, and avoid zero-sum geotechnological competition, with the recognition that knowledge and learning can flow both ways.

Perhaps it is time for the West to consider geotechnological competition from China in a more pragmatic, less ideological way. For China’s part, it needs to recognize the limits of old-fashioned industrial policies, especially as it moves toward the technological bleeding edge where spontaneous innovation cannot be planned, and partnerships with a diverse set of players are important.

Such compromises will open space for collaboration, and avoid zero-sum geotechnological competition, with the recognition that knowledge and learning can flow both ways. In the short term, China’s technological upgrading will provide tremendous opportunities for foreign enterprises in areas where China is still lagging. In the medium term, “reverse innovation,” or the flow of knowledge and capabilities from China to the US, will stimulate the latter’s technology and skill base.

In the ideal scenario, greater collaboration among governments, enterprises, and universities will accelerate innovation, foster inclusive global standards, and advance the application of these technologies to global challenges. For example, collaboration with other important geopolitical actors, such as the European Union, in setting international standards to guarantee technological interoperability and scalability could be a way to break out of the duopoly towards a more sustainable future.

In this age of rapid geotechnological change, the US-China duopoly has already arrived. However, we can shift the nature of this duopoly towards cooperative competition through smart policies and compromises. As long as we turn away from a zero-sum mindset, the world has good reasons to welcome China’s rise as an innovation power.