The Economist - USA (2022-02-26)

The Economist February 26th 2022 59

Business

ChinaIncandself-reliance

The techno-independence movement

A

strikingly harshappraisal  of  Chi­
na’s ongoing technological battle with
America appeared on the website of a pres­
tigious  Beijing­based  think­tank  on  Janu­
ary 30th. The paper, published by the Insti­
tute of International and Strategic Studies
(iiss) at Peking University, found that Chi­
na is likely to be the bigger loser from the
technological  and  economic  decoupling
under way between the two world powers.
China  lacks  control  over  core  computing
systems, the paper stated, and is far behind
America  in  a  number  of  important  areas
such  as  semiconductors,  operating  sys­
tems  and  aerospace.  Within  a  week  of  its
posting, the document vanished.
The  circumstances  around  its  removal
are unclear. Communist Party bosses may
have decided it signals weakness at a time
when  Xi  Jinping  wants  to  project
strength—his  country’s,  the  Communist
Party’s  and,  as  he  prepares  to  be  anointed
president  for  life  later  this  year,  his  own.
The report’s conclusions are indeed incon­
venient  for  Mr  Xi.  He  has  been  talking  up
“self­strengthening” against what his gov­
ernment  calls  “chokeholds”  that  the  West

exerts over access to critical technologies,

from seeds to semiconductors. The power

of  the  West  to  hobble  its  adversaries  with

sanctions  is  about  to  be  tested  in  Russia,

which  on  February  24th  attacked  Ukraine

(see Briefing). China’s rulers will be watch­

ing that military and economic confronta­

tion  closely  because  it  may  illuminate

their own vulnerabilities. China’s 14th five­

year  plan,  a  strategic  blueprint  published

in  2021  that  covers  the  years  until  2025,

makes  self­reliance  in  science  and  tech­

nology a cornerstone of economic policy. 

The plan’s deadlines for China to break

free from existing techno­dependence are

fast approaching. The government is pour­

ing  billions  into  the  effort,  and  cajoling

Chinese  companies  to  do  the  same.  Com­

bined public and private research­and­de­

velopment  spending  soared  to  a  record

2.8trn  yuan  ($440bn)  in  2021  in  a  bid  to

catch up with foreign rivals. That is equiv­

alent to 2.5% of gdp, still far from Ameri­

ca’s 3% or so but up from just over 2% five

years ago (see chart 1 on next page). On Feb­

ruary 11th smic, China’s biggest chipmaker,

said that it would invest some $5bn in 2022

in  new  semiconductor  factories.  Three

days later the Hong Kong unit of Standard

Chartered, a British bank, became the first

foreign  lender  outside  mainland  China  to

be directly linked to cips, the Chinese an­

swer  to  the  Belgium­based  swift inter­

bank payments system. 

To see how much all this adds up to, The

Economisthas surveyed six areas in which

China’s  reliance  on  the  West  has  been  of

particular concern to the party and Mr Xi.

We  looked  at  mrnavaccines,  agrochemi­

cals,  civilian  aerospace,  semiconductors,

computer  operating  systems  and  pay­

ments  networks.  Our  conclusions  mirror

those of the iisspaper: although there has

been  a  degree  of  self­strengthening,  self­

reliance is some way off.

Chinese  progress  has  been  most  pro­

nounced in fields that, though themselves

technologically sophisticated, require less

extended and complex supply chains. Start

with  the  vaccines.  Much  of  China’s  pro­

gress in mrnatechnology used in Western

jabs  such  as  Pfizer­BioNTech  or  Moderna

H ONG KONG
The Communist Party wants to sever China’s dependence on the West in strategic
industries. We assess its progress in six of them

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