China-US tech war is around the corner

Global analysts agree 'China’s ambition is unstoppable to become a global leader in tech' with or without trade war

While the Finance Committee of the Chinese State Council was deliberating on the importance to accelerate opening the domestic financial industry to overseas financial institutions, and enhance the viability and competitiveness of the Chinese financial system — Trump’s administration was mulling over the option to block small Chinese firms from entering US capital markets.

Although US Treasury official Monica Crowley refuted reports of Washington considering preventing the initial public offerings of Chinese start-ups, the part of her statement “at this time”, explicated a cloaked US intent to use the move as leverage. This implied a pre-emptive attempt to exert pressure on China ahead of the looming trade talks.

But the shocks were strong as major US stocks stumbled after news of delisting small Chinese companies shook the markets, with the technology-driven Nasdaq plunging by 1.18%. Since shares of Chinese digital conglomerates — Alibaba, JD.com, and Baidu —also dove by 5.15%, 5.95%, and 3.67% respectively, the US apparently leaked its intent to anticipate potential repercussions on the market if it pursues the path of stopping the growth of Chinese giants in the area of artificial intelligence (AI).

In July 2017, the State Council released a three-step roadmap to make China the world leader in AI by 2030. Aiming to expand the AI industry to one trillion yuan, Beijing planned to set up an initial funding of 100 billion yuan alongside 10 public platforms for AI innovation, six demonstration zones, and 60 AI applications.

Last month, China hosted the 2019 World Artificial Intelligence Conference, with 500 global guests and more than 300 companies showcasing their AI applications. In the exhibition area, the “chip wall” demonstrated the most advanced and indigenously-built chips from Huawei and other Chinese unicorn start-ups, like YITU Technology, Cambricon, and Horizon Robotics.

Since Beijing is largely reliant on US Qualcomm and Intel to meet its massive semiconductor demand, the Chinese pursuit of self-sufficiency in chips is hard for the US to swallow. The Trump administration would, therefore, try to root out any Chinese company that could challenge US dominance. Its concerns levitated last week after Alibaba followed Huawei and unveiled its chip, Hanguang 800 for AI, and plans on using AI for shopping and healthcare while Baidu runs a research lab in Silicon Valley to explore driverless cars.

Alibaba, Baidu, Huawei, and Tencent are investing heavily in AI, worrying American technology companies and the Trump administration. The panic was obvious when earlier this month US Technology Chief Michael Kratsios warned Trump that China is speeding up its AI race to catch up with the US and could threaten its dominance in global AI.

Trump’s tech head’s remarks coincided with another report by the Council of Foreign Relations (CFR) which stressed that China is a major threat in emerging technologies, including AI, and China is closing the technology gap with the US and will soon lead in AI, robotics, energy storage, fifth-generation cellular networks (5G), quantum information systems, and possibly biotechnology. The paper feared that Chinese rapid growth could quickly concede Washington’s leadership position to China.

While the US Department of Defense asserted in its AI strategy that China is making significant investments for military purposes, there seems to be a broad consensus among all US state departments to halt the Chinese AI boom.

Although global analysts agree that “China’s ambition is unstoppable to become a global leader in tech” with or without trade war, Beijing still needs to be vigilant. Rather it should be well-prepared for a US-waged technology war.

Published in The Express Tribune, October 9^th, 2019.

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