FS Insider recently spoke with Gordon Chang on the emerging tech war between the U.S. and China. Gordon explained what key areas the U.S. is falling behind in and shared his take on the coronavirus and what role he believes China may have played. Read below for excerpts from his interview on FS Insider. If you’re not already a subscriber, click here.
For audio, see Gordon Chang on the Great US-China Tech War.
You’ve written that the U.S. and China are locked in a cold tech war, and the winner will end up dominating the 21st century. In which areas do you see America falling behind?
We're behind in two areas in particular. One of them is 5G, the fifth generation of wireless communications. China's Huawei Technologies is wiring much of the world— we don't have an American company that provides a comprehensive solution. That’s not to say that we're not in 5G because there is Qualcomm which makes chips and Cisco is getting in there as well. But by and large, we are being left in the dust.
We’ve got to remember why this is important. This is the internet of things, almost every device is going to be connected to them, which means that China will be able to filter a lot of data which will feed into its artificial intelligence systems. It also gives them the capability of remotely manipulating the devices of tomorrow.
The second area where we're far behind is quantum communications. Beijing has figured out how to use this ‘spooky phenomena,’ as Albert Einstein called it, of particles at great distances moving in tandem. They've already got communication satellites. They've got quantum communications on the ground between Beijing and Shanghai. They're at least five years ahead of us. So this provides them with unhackable communications. And that means they've got a big leg up on us.
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How is it that China is gaining a lead in a number of these technologies? Is it just by funneling a ton of money into each of them? What are some of the methods that they're using?
Well, yeah, it certainly is. I mean, China's leaders, and this goes back before Xi Jinping, they’ve identified technology as an area of focus. And so, Xi Jinping, in addition to the 13th and now the 14th five-year plan, he has the Made in China 2025 initiative. Initially, it identified 10 areas where Beijing should be dominant at the end of that 2025 period. They've now expanded the number of areas. They just think of technology all the time.
So, for instance think of Xi Jinping’s Belt and Road initiative announced in 2013. The goal was to connect China with the rest of the world just by infrastructure. Well, this is more than just ports or airports. In 2017, Xi Jinping announced his digital Silk Road initiative, which complements the Belt and Road initiative. So, they're always thinking about technology. They're always thinking about how they can steal it. They can think about how they can develop it, but we've got to remember one thing in terms of how government can influence progress in a country.
Remember, the U.S. was way behind the Soviets in space. The Soviets put the first Satellite Sputnik in orbit. They had the first human in space. They had the first spacewalk. But there was a guy named John F. Kennedy who said, no, the U.S. is going to get to the moon first. He went to Rice University and said, we're going to the moon. We're going to the moon because it's important. And he was able to marshal the resources of the federal government and of the private sector. We got to the moon and we got to remember that no other country has left the Earth’s orbit.
But the Chinese have learned that lesson and they are doing their best to get to the moon to get to Mars to do all these things. And you know, we saw a demonstration of this a few days ago with its successful test of its Long March 5. This will get them to Mars and to the moon. This will get their space station up in orbit around the Earth. China's making fast progress.
What are some of the steps that you believe Trump, or the U.S., should be taking in order to combat this threat?
So, no one really wants to do this, but I think we have to cut our ties with China. Chinese communism is not reformable, which means that we are going to remain vulnerable as long as we have contacts with it. That means we've got to cut commerce, because with commerce, even in items which are not considered to be especially sensitive, China is using the proceeds of trade to engage in all sorts of activities which are anathema to us. Of course, they're using proceeds of trade to develop their military, which is configured to kill Americans.
So unfortunately, I think we've got to cut trade. We certainly have to stop investment to China's financial markets; we have to force disinvestment. We have to prohibit new licenses, and we have to cut technology sharing agreements. This is going to hurt us. But I don't see how we have a choice...
To listen to our full-length interview with Gordon Chang, and to find out his take on the coronavirus and what role he believes China may have played, click here. Read his recent booklet, The Great US-China Tech War. If you're not already a subscriber to our FS Insider podcast where we interview book authors, strategists and industry experts from across the globe on all things economics, finance and markets...
