The rise of China as a technology power: Some principles for a democratic response — Robert Hannigan

The West’s approach to Chinese advances in technology over the past twenty years has been almost entirely reactive, complacent, and belated. Worse, the democratic world has looked to its own technologists as proxies for a wider political strategy in handling the rise of China. There has been no coherent strategic political approach capable of reacting to Beijing’s newly aggressive stance — highlighted by its abuse of power in Hong Kong — and an apparent inability within or between western governments to decide whether China is an opportunity or a threat. This has suited the Chinese Communist Party’s strategy: its greatest strength has been disunity, apathy and disarray among democratic countries.

China’s rise has also exposed some deep inadequacies in unguided market-driven approaches to technology development in the West. For much of the last forty years it suited western economies to outsource IT manufacturing to China and to ignore the very obvious shift in the last decade as the Chinese academic and tech sector became innovators, backed by a well-funded, centrally-driven technology strategy from Beijing.

This shift was particularly obvious to anyone monitoring cyber space. Chinese state-backed attacks progressed from high volume, low-level raids on intellectual property, albeit on an industrial scale, to highly sophisticated and targeted intrusions into government and private sector. The ‘Cloudhopper’ attacks on household name giants in western IT services, with the clear intent of accessing their customers, showed the scale of ambition, patience and skill of Chinese state cyber actors. If the recently announced attacks in Australia turn out to be inspired by the Chinese state, as the scale, methodology and targeting suggest, that will not be surprising. Yet democratic governments have only recently begun to call out this behaviour and name the source of the attacks, whether from Russia, China, Iran or North Korea; we have paid a price for this collective timidity.

At a political level, western governments have been torn between tantalising opportunities for Chinese trade and inward investment as the Belt and Road Initiative rolls out across the world, and their domestic inability to construct an industrial strategy beyond a four year cycle. The failure to invest in 5G development and the subsequent row over Huawei is only one example. Without a change of direction and some organised thought, democratic governments look set to repeat these mistakes in a whole array of new technologies, notably in artificial intelligence and robotics, where President Xi has set out an ambitious plan for dominance over the next ten years.

At the heart of this is a dilemma which the West has not faced before: how to cope with a technology superpower whose values are fundamentally opposed to our own. The Soviet Union was technologically advanced in particular areas but hampered by, among other things, poor manufacturing and an inflexible central planning system. At no stage in the Cold War did western consumers or companies, or academic institutions, hanker after the latest Soviet product or research.

The parallel is important, because the debate on technology should start with values and politics, as it did in the Cold War, not technology. Companies and academic institutions should not be expected to supply an ad hoc strategy because their politicians cannot agree one.

If we start with values, certain key assumptions should inform our approach. First, the Communist Party sees no effective distinction between state and private economy. Xi has made this explicit by gradually writing the Communist Party into the articles of association of companies: under this new approach, every Chinese company will have a member of the Party on its board. Since there is no independent rule of law, we have to assume that all companies based in China are subject to the dictate of the party and its state agencies. The recent National Intelligence law is explicit about this, but the power is not new: did anyone imagine that before that law was enacted Chinese state agencies felt constrained?

This does not mean that all Chinese companies are simply tools of the state — that is an over-simplification — but it does mean that any company told to do something by the state would be obliged, by law and for self-preservation, to comply. Protestations by Huawei and any other company that they would never accede to these demands are worthless.

The second key assumption is about Chinese state intentions. This is not the place to catalogue Beijing’s domestic and foreign policy agendas, but Xi’s statements and actions have displayed new heights of surveillance and human rights abuse internally, and bullying, economic leverage and aggression externally — from the South China Sea outwards.

It follows that, for all our desire to avoid confrontation and find ways of co-existing, it is at least prudent to take technology and investment decisions on the understanding that Beijing has clear goals and explicit intent. It has been willing to pursue these single-mindedly and with force to date; given China’s actions in relation to Hong Kong and its rhetoric on Taiwan, we must assume that this will escalate.

These assumptions should lead us to some principles which apply broadly, but are particularly relevant to technology.

1. China’s strategic intent, combined with its power to coerce and co-opt its own companies in the state effort, mean that dependence on Chinese technology in any critical economic or security area would be rash. That dependence might be in the form of the technology itself, inward investment or ownership of the supply chain. In practice, these decisions about risk need to be taken early and, wherever possible, through international cooperation, for example through shared vetting of supply chains. Where we have already drifted into unenviable positions of over-dependence, we need to take practical steps, with like-minded countries, to reverse that (as I argued in the London Times in February). This demands political will and sustained investment.
2. Decisions about access to intellectual property and research should be driven by what is consistent with democratic values. This is not a simple equation: it means analysing what is to be shared and deciding whether that is in the interests of the West or a threat to it. In some cases it will mean new restrictions on academic cooperation and exchange, without falling into the trap of destroying exchange which promotes democratic values, western technology, and international understanding.
3. If we draw a distinction between China and the actions of the Chinese Communist Party, we should be clear about which technological cooperation and assistance actually promotes the grip of the CCCP internally and its power externally, and which does not. For example, it is not clear that isolating the Chinese population from western influence, for example by effectively creating two competing operating systems, is necessarily in our interests. It may be unavoidable, but it is a good example of the kind of debate we need before we drift into decisions.
4. If these principles are to be implemented, viable alternatives in new technologies need to be developed. This is not a trivial undertaking and one which western governments find it hard to stay focused on, let alone implement over the long term. It will mean cooperation between democratic governments on industrial strategy, and between governments and industry. It will also mean a more organised and open discussion of international standards, to avoid the gradual subversion of these.

We lack this informed debate in the West. Given the scale of the challenges presented by Chinese technology, a united approach with strong political leadership across the US, Europe and Asia is essential.

President Xi’s more overtly aggressive and expansionist version of Communism, set out so clearly in his ‘new era’ speech at the Communist Party Congress in 2017, may yet galvanise democratic governments. His actions in Hong Kong, threats against Australia and behaviour through the pandemic will have focused minds. But the challenge is for the West to construct a coherent and unified approach to confronting and containing Chinese aggression, while retaining the ability to cooperate and coexist in areas where that is essential, notably on climate change; in fact this cooperation will only be possible if we have worked out the principles on which we should engage. Technology is an important part of that, but it should not wag the political dog.