For the record, Meng Wanzhou – the chief financial officer of the Chinese high-tech giant Huawei Technologies – was arrested in Canada last week for her involvement in violating American sanctions on Iran.
But it’s unlikely the United States would have ever taken such an extreme measure at such a particularly sensitive moment in its relations with China unless there was something bigger at stake.
There is. The United States is engaged in a new kind of cold war with China – one not fought for military or ideological supremacy, or access to natural resources. Instead, it is a war over who will be the world’s technology superpower.
Meng’s arrest sends a stark message to Beijing about how hard Washington will fight. She is not just a top executive; she’s the daughter of the founder of one of China’s biggest and most powerful companies – one of the few Chinese firms that can honestly claim to be a global brand. If Chinese technology is going to conquer the world, Huawei is going to lead the charge.
There’s no question that a lot is at stake in the U.S.-China rivalry. In the 21st century, technology is what drives economic growth. It gives the countries that excel at innovation a clear edge over those that don’t. Having vast reserves of oil or an old-economy industrial base doesn’t cut it like it once did.
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Israel is a key example of that. Our innovative abilities have enabled us to form close relations with powers, like China and India, that once gave us little attention. It draws foreign investment and multinational companies, and enhances our military power through cyberwarfare in ways unimaginable a decade or two ago.
Israel has emerged as such an important power in technology terms that the United States has grown concerned that our growing tech ties with China may hurt America.
The country that leads in up-and-coming technologies – particularly artificial intelligence, the one that promises (or threatens) to change the world we live in more than any other – will enjoy immense power and wealth.
America’s global technology titans – Google, Facebook, Amazon, Intel and the rest – not only generate huge profits and create millions of well-paid jobs, they also give America vast cultural influence. What Facebook does affects the lives of billions of people in Europe, Asia and Africa.
We should be cheering America on in this war. Despite resentment over the abuses of user privacy by the likes of Facebook and the antitrust concerns surrounding Amazon, American tech companies are still far more respectful of democratic and market norms than their Chinese counterparts. They are answerable to elected officials and public opinion.
Chinese companies are free to engage in practices that would never be allowed in the West, whether it be internet censorship, widespread use of facial recognition technology or an Orwellian social credit system. Chinese employers even use brain-scanning helmets to monitor their staff’s state of mind on the job.
Far from discouraging these practices, the Chinese government regards them as useful tools for maintaining social control.
For now, the writ of Chinese companies and the government are effectively limited to their home country. But imagine a decade or more from now in a world where Facebook & Co. have ceded control of global social media, search engines and e-commerce to Chinese companies: Chinese standards would effectively be the global standards, with America and Europe left to fight rearguard actions by banning the worst abuses in their home markets after they have been discovered.
China is still a distant No. 2 in the technology race, as a scorecard created by The Economist shows. Using data from 3,000 publicly traded companies and some 225 unicorns (startups valued at more than $1 billion), the magazine concluded that China’s tech industry is 42 percent as powerful as America’s. That’s a big gap – but as recently as 2012, China’s industry was just 15 percent as powerful as America’s, according to The Economist.
In the United States, there’s a pervasive sense of the inevitability that China will win the technology cold war. China’s emergence as the world’s No. 2 economy in such a short timeframe, and its government’s ability to set priorities and sail through economic crises, leaves the impression that its only way is up.
The Chinese should be given credit for their entrepreneurial spirit and effective government. But China’s rise has so far been largely due to the fact that it started from such a low baseline. The transition to a truly innovative economy will be much harder to finesse.
If I had to guess, China’s tech industry will look a lot like Japan’s and South Korea’s. They are manufacturing superpowers that make and sell some of the world’s most popular products, but lack the cutting-edge abilities that have made Silicon Valley what it is.
Unless China can break the iron law of innovation, its technology breakthroughs won’t be coming from giants like Huawei – or, for that matter, because of government targets and spending – but from the startup ecosystem.
That system can’t thrive simply by deploying vast human and capital resources. It requires free and independent thinking by engineers and entrepreneurs – and that’s just the thing the Chinese government loathes and seeks to contain.