The Chinese Side

The People’s Republic of China (PRC) is competing. The first goal of the Communist Party is, of course, to preserve its own rule. A serious risk to that rule is foreign, particularly American, coercion. There are a variety of ways the PRC might be coerced, but foreign technological capability is usually at the heart of the threat. A blockade of the commodities imports that the economy requires, for instance, is far more feasible if foreign militaries are technologically superior. The extraordinary income Chinese firms earn overseas does not rely on technological superiority, but it is vulnerable to foreign breakthroughs. Possibly most worrisome to General Secretary Xi Jinping is foreign technology that can expose internal Party records and communication or undermine authority in a crisis.   

That the PRC has been attempting to climb the technological ladder is old news. Its capacity to compete in advanced technology with the United States (and others) has emerged more recently. The basic Chinese model remains the same: the state belatedly identifies important technology, usually prompted by the private sector, then commands development of that technology while providing various kinds of support. The identification stage has become more difficult as the PRC gets closer to the technology frontier, but the resources available for state support have expanded tremendously. It’s worth noting that the Party is unlikely to voluntarily permit deployment of technology at the frontier, due to potential threats to its authority. China is competing for political stability and commercial advantage, not to induce risk.

Among specific industries, computing deservedly gets the most current attention, led by but not limited to artificial intelligence (AI). Backing this is a frenzied effort to catch up in semiconductors. Computing has to make some room for biotechnology, as the PRC ropes in foreign biotech companies just as it did with telecom, chips, and others. Less than a decade ago, aerospace played the leading role—satellites, then large commercial aircraft, and now space flight. In energy, as well, China has seen attempts to reach parity, then gain commercial technological superiority, and now, in some areas, is trying to attain leadership.  

The Chinese model of technological competition sees the state unavoidably misidentify priorities and waste a great deal of money. More broadly, the country has fundamental disadvantages in prosperity and demography, the latter of which will become crippling in less than a generation. But both the government and Chinese enterprises are competing intensely, which at least gives them a chance to prevail.

The American Side 

Unfortunately, that is not true for the United States. For decades, it made no sense for America to engage in technology competition with China because the gap was so large. The tools available to Beijing for those decades consisted of buying and stealing technology, tools that the United States cannot readily adopt. The PRC has had to and must continue to adjust its strategy as its position changes, but the United States has no technology strategy at all. The American failure to compete is striking. 

This claim may seem obviously wrong at the level of individuals and companies. Of course, Americans and the firms they work for are competing. They are just competing for profits, not for national interests. The painful twist is how many see their profit and share price performance tied to helping China. Trading technology for supposed market access to China dates back to the 1990s, when Motorola (now owned by a Chinese enterprise) helped advance Semiconductor Manufacturing International Corp. (SMIC) and others. Boeing carried the engagement water for years, simultaneously boosting the PRC’s progress in aerospace, and then Apple did the same in consumer electronics and supply chain management. Now NVIDIA’s desperation to sell more advanced chips to the PRC looks similar to the behavior of American biotechs. Firms compete over who can help China more than who can beat China. 

The federal government may be just as bad, and if not, it is heading that way in the second Trump administration. Despite decades of complaining about infringement and theft of intellectual property by the PRC, the United States has not seriously punished a single Chinese firm. For this reason alone, it’s impossible to take American policy seriously. While Beijing will always make foreign technology acquisition a cornerstone of its competition strategy, we have made its job easy.

A secondary issue is US finance supporting Chinese technology development. American holdings of PRC securities soared from $368 billion at the end of 2016 to $1.15 trillion at the end of 2020. The Biden administration responded by undermining the Congressional response and taking its full four years to issue an executive order that did almost nothing. There has never been a breakdown of how much money goes specifically to Chinese technology because, apparently, America’s national politicians do not want that to be known. The inaction of a Republican-controlled Congress on outbound investment and the silence of the second Trump administration indicate that nothing will be done for at least several more years. 

The second Trump administration has been anything but silent on export controls. Initially, they were to be tightened. But that, most emphatically, has turned out to be only a bargaining chip. Perhaps the most high-profile step is the proposal to allow NVIDIA and AMD to sell semiconductors—useful for powering artificial intelligence—to China if they hand over 15 percent of the revenue generated to the federal government as a “fee.” This could be found unlawful, yet NVIDIA is already looking to sell a second, superior chip to the PRC, with President Donald Trump’s knowledge. The US government has seen American companies make money selling to China while working against the national interest, and apparently wants to get in on the action.

Short- and Long-Term Failure-

For 2025, it has increasingly looked to many observers that Trump is chasing a meeting with Xi. The discussion of more advanced chips possibly being available looks like a carrot in that context. Trump’s broader record to date has emphasized the trade balance and (failed) deal-making, certainly not any sort of technology competition with the PRC. 

Beyond this year, China has been much poorer than the United States for the past decade and will be much poorer than the United States for the next decade. Its technology development model certainly has important strengths but also serious weaknesses, both stemming from the state’s overwhelming presence. Thanks in part to better protection of intellectual property, the United States has a much broader and more vibrant base of private-sector innovation. But to win a race, even the fastest runner has to try at some point. And we aren’t.