The US and China's tech cold war is far from over, even with Trump's trade deal. Here's why tech companies will remain on the front lines of the trans-Pacific rivalry.

Trump Xi

  • The US and China took the first steps toward halting a
    near-two-year-long trade war raging between the two countries, as
    President Trump
    signed an interim trade deal
    with China on Wednesday
  • But although the first phase of the deal addressed intellectual
    property issues that American tech companies have complained about
    for years, the broader issues surrounding tech supremacy – which
    have fueled tensions between the two countries – remain largely
    unaddressed, according to some experts. 
  • Issues like China’s emerging dominance in AI and concerns over
    its human rights record –
    that was used as justification for some sanctions
    – were left
    unaddressed, one expert said. 
  • We should also expect to see the US push for stricter controls
    on tech trade with Huawei and China in the future, another expert
    said. 
  • In the meantime, expect to see the two nation’s tech industries
    to continue decoupling, they said. 
  • Visit Business
    Insider’s homepage for more stories.

President Trump’s
interim trade deal
with China — announced on Wednesday with
great fanfare — raised the prospect of a return to normalcy for
technology companies
rattled by an 18-month trade war.

But while the pact eases some immediate hostilities,
particularly in industries like agriculture and financials, it does
little to resolve the underlying tensions around technology that
have pitted the two countries against each other, according to some
experts Business Insider spoke to.

American tech companies have long complained over the lack of
intellectual property rights protections in China. But as
technologies like AI and wireless communications have become
increasingly vital to everything from national security to economic
growth, the rivalry between the US and China has erupted into a
full-fledged tech cold war.

Graham Webster, who leads a joint initiative between Stanford
university and the think tank New America, focused on China’s
digital policy, said that Wednesday’s deal brought good news
regarding intellectual property protection. The pact commits China
to crack down on the theft of American technology and corporate
secrets by Chinese firms and state-owned organizations.

But this was a small concession for China, and in its own
self-interest, Webster said. “The Chinese government was already on
a trajectory of becoming more rule-based, and [implementing
intellectual property rights] has become a matter of self-interest
for the Chinese economy as its companies have become more
advanced,” he said. 

All the missing pieces

More importantly, the deal did not touch on the biggest issues
fueling the tech cold war. “Phase 1 just didn’t get to most of the
tech issues on the future of supply chain security and the ethical
use of advanced security,” Webster said. 

Adam Segal, a cybersecurity expert in the Council of Foreign
relations, said that little change was coming to the tensions that
have fueled the tech cold war.

“The trade deal doesn’t have much of an impact on tensions over
AI or Huawei and the race to 5G,” Segal said. “There are still part
of the White House that want to slow China’s tech development down
and hobble Huawei, and we will continue to see US push for stricter
controls on tech trade with Huawei and China more generally.” 

Webster agreed with this assessment, and said that the Chinese
government’s need to develop independent technology is only going
to increase. “None of this is going away,” he said. 

Here’s a look at the major battle lines in the China-US
tech cold war that are still unresolved: 

Huawei and the 5G battle

Last May, the US
added
China’s Huawei to a so-called entity list, in an effort
to block American companies from selling components to it. Huawei
is the second-biggest smartphone maker in the world and is dominant
in mobile network equipment, so the implications of the blacklist
were huge. 

Huawei was accused of theft, wire fraud, and threatening to
American national security, due to its close links with the Chinese
government. 

And as American companies like Google
cut ties
with the world’s second-largest phone maker —
blocking its access to Android, for instance — some wondered
whether the US had dealt Huawei a fatal blow. 

More recently, the US has been pressuring its allies,
like the UK
, to toe the same line and freeze Huawei out of its
5G infrastructure projects. 

 

The race to dominate artificial intelligence

The US continued to hit Chinese tech companies later into 2019,

adding
28 more Chinese companies to its ‘entity list’ in
October. Among these 28 were eight major tech companies, including
three AI startups valued at over $1 billion (One of the companies,
SenseTime was at one time the world’s most valuable AI startup at
over $4.5 billion,
per TechCrunch
). 

The Department of Commerce said the companies named were
implicated in human rights violations, as their surveillance
operations had aided in the oppression of Uighur Muslims and other
minorities in China. 

But the ban was also linked to a race to dominate the field of
artificial intelligence. China accounted for 17 out of the top 20
academic institutions involved in patenting AI,
Reuters reported last January
. The next month, President Trump
had issued an executive order to call on the US to prioritize
advancements in artificial intelligence,
Axios reported

 

 

China refused to pledge that it would not hack American companies,
arguing that the issue was not trade related.

Chinese officials declined to pledge to refrain from hacking US
companies and stealing intellectual property, arguing that it
wasn’t a trade issue,
the New York Times reported

The issue of hacking and corporate cyber espionage has been a
long-running point of friction between the two countries. In 2018,
the Trump administration
accused the Chinese government of breaking a promise
struck
with the Obama administration to stop hacking US businesses.

And China’s push to be less dependent on the US technology,
potentially disrupting supply chains, seems more likely than ever.

China’s central government told its departments and public
institutions to replace existing computers and software with
domestic versions, the
Financial Times reported December.

Webster says that this is a natural outcome of China’s push to
become more independent. 

“This is national strategic logic to avoid more dependence on
sometimes unfriendly countries,” Webster explained. “What happened
with the trade war, especially with the tariffs that threatened to
disrupt trade, has only strengthened the Chinese government’s
instinct to become more independent.” 

A director at the China Computer Federation had similar
reasoning, telling
the Financial Times
that “three years ago, there may have been
more people thinking that we could rely on some US technologies …
Now if someone is still saying that, I suppose they have just been
sleeping for the past three years.” 

Source: FS – All – Economy – News
The US and China's tech cold war is far from over, even with Trump's trade deal. Here's why tech companies will remain on the front lines of the trans-Pacific rivalry.