America vs. China: the State of Play

Most people are not very concerned about the state of play in the clash of Western and Chinese civilizations. After all, we have more diversity, more social justice warriors, more bureaucrats and more lawyers. How could we not win?

Besides, the Chinese are evil. Don’t you know it? I’m sure you do. And in the final battle between good and evil, good will always win.

And then we have our ace of trumps: we have higher self-esteem. When it comes to filling ourselves with unearned praise, we are world champions. We might not be willing to spend what it takes to compete in the world of high tech, but we feel good about ourselves.

Anyway, David Goldman sheds the light of reason on the current competition. He has far better information than I do about many of the high tech developments, so his is a voice worth heeding.

As opposed to our government, which is trying to manufacture diversity, the big, bad Chinese government is investing in technology, roughly as we used to do. In truth, Goldman says, the Chinese got the idea from us:

We face a strategic rival that wants to play America’s winning hand in the Cold War, through massive support for dual-use technologies, guided by a Communist legislature that includes more than 100 billionaires. And this strategy is hardly a secret; Huawei’s plan to seize the control points of the Fourth Industrial Revolution is promulgated in streaming video on the company’s website.

The state of play-- China leads in 5G broadband:

China already leads in 5G broadband, building three times as many network towers as America on a per capita basis. Americans tend to think of broadband as a consumer technology and 5G as a faster way to download videos. China views 5G as the enabler of a Fourth Industrial Revolution, just as railroads launched the First Industrial Revolution. (The second and third were powered by electricity and computing, respectively.) Made possible by 5G are game-changing technologies like self-programming industrial robots, remote robotic surgery, autonomous vehicles, and smartphones that do medical diagnostics and upload data to the cloud in real time—not to mention deadly drone swarms and other military applications.

China leads in artificial intelligence:

China has become the world leader in artificial intelligence, not because its computer scientists are smarter than Microsoft’s , but because China has a huge advantage in data—the fuel that powers the AI engine. In medical technology, which may become the biggest growth industry of the 21st century, it commands a vast database of digitized patient medical histories and DNA. Soon it will have real-time readings on the vital signs of hundreds of millions of its own people, and, if Huawei’s plans mature, hundreds of millions of people outside China as well.

America’s tech companies have given up on hardware: 

Washington is falling behind because it abandoned the defense driver for innovation that won the Cold War. The digital age would still be struggling to be born were it not for America’s tech companies, but for the past 20 years they’ve shifted to capital-light software, letting Asia make the hardware. China subsidizes capital-intensive industry the way the U.S. subsidizes stadiums. This shortsightedness now threatens America’s standing as the world’s leading military power and largest economy.

But, we are puffed up with self-esteem, so we feel better even though we are losing:

There’s a world of difference between winning and making yourself feel better while losing. It’s time for the U.S. to face up to the magnitude of the Chinese challenge and abandon some self-consoling myths—such as the tired notion that China steals technology because it can’t innovate. China can innovate, and already it is ahead in 5G broadband, quantum cryptography and key applications of AI. Homegrown innovation, not intellectual property theft, should be America’s biggest tech worry.

Will the Chinese banking system collapse? Goldman says No:

Further, China’s banks won’t collapse anytime soon. Growing countries with a high national savings rate and a current-account surplus don’t have unmanageable financial crises. China’s economy will show positive growth this year while U.S. and European economies shrink.

But then there is the matter of semiconductors. As of now the leading manufacturers of chips are South Korea and Taiwan. The leading American producer, Intel, has recently suggested that it might offshore its chip manufacturing facilities.

So, we can inhibit Huawei’s access to chips, but not for very long:

Restricting China’s access to technology—for example, computer chips built by foreign foundries using American equipment—will slow China only temporarily. Huawei may not be able to fabricate chips in Taiwan, but it can hire anyone who’ll work for it, and about 10% of Taiwan’s chip engineers are now working in mainland China to build up Beijing’s domestic semiconductor industry. The U.S. still leads in chip-making equipment, but American machines are neither indispensable nor the most advanced in the key area of lithography.

But, we are fight back with tariffs. Nothing wrong with tariffs, especially when used in order to right a lopsided trade relationships. But, are the tariffs hurting China? Apparently, not:

Placing tariffs on Chinese exports to the U.S. hasn’t hurt China much, either. Total Chinese exports to the U.S. now amount to less than 3% of Chinese GDP. Exports have fallen to 18% of China’s GDP, from a 2006 high of 36%, as domestic consumption has risen. In fact, per capita domestic consumption has risen ninefold in the past 30 years.

Financial sanctions against China have backfired. The Trump administration’s threat to kick Chinese companies off U.S. exchanges only threw them into Xi Jinping’s briar patch—that is, Hong Kong, where secondary listings have drawn tens of billions of dollars into the local market.

Anyway, we are up in arms about the treatment of the Uighur minority within China, We have called the Chinese Nazis over and over again. We are going to crack down to defend the Uighurs. The world's Muslim leaders have nothing to say about it, but we want to occupy the moral high ground on this one. Apparently, it’s a lot of smoke blowing:

Denouncing human-rights abuses, like the brutal treatment of the Uighur minority in Xinjiang province, doesn’t impress Beijing. The Chinese empire has been exterminating what it sees as “unruly barbarians” on its borders for thousands of years, and it won’t change its methods now.

Surely, China has a responsibility for the current coronavirus pandemic, but the more salient issue is: what can we do about it. Should we wag our moral fingers at them or should we set out to become more competitive in science an technology:

Whatever opprobrium China deserves for the Covid-19 pandemic, wagging fingers won’t get anyone anywhere. The U.S. needs to play offense, not defense. That means a return to the policies that won the Cold War and made American innovation the envy of the world: Reagan-era funding levels for basic research, Manhattan Project priority for critical technologies like quantum computing and missile defense, a national program for 5G build-out, and a science education program on the model of the post-Sputnik National Defense Education Act of 1958.

In truth, America is not worrying about science and engineering and technology. It is consuming itself over diversity. And it is hard at work defunding the police. Do you really imagine that engineering diversity is more important than engineering semiconductor chips? But, if all else fails, we will sue.

I bet that that is keeping them up at night in Beijing.