US-China Cold War — Shifting Frontiers of a Deepening Rift

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Britain’s decision to ban Huawei from the country’s nextgen high-speed wireless networks opens a new front in the US-China trade-cum-tech war. Tit follows Tat. The US shutters the Chinese Consulate in Houston over charges of industrial espionage, China shuts down their Consulate in Chengdu.

The US-China tech cum trade war — while not initiated by Trump — gets coloured by his re-election bid. Trump faces flak over his COVID-19 handling even as #BlackLivesMatter spawns a groundswell of social unrest.

The rift with China runs deep. Restraints on China’s aggressive acquisitions in the US had been on the rise before Trump. But political techno-nationalism finds few takers in a polarised political landscape.

The battle for tech dominance is an old one — the 1980s saw the US fight Japan’s semi-conductor industry with trade tariffs. The humble chip yet again is the bargaining chip in the war for tech-dominance as modes of production shift gears for the Fourth Industrial Revolution.

The semiconductor industry’s value chain today knits the world together linking materials, design, manufacturing, software, assembly and testing — breaking it is not easy. The US dominates the highest value components at the top of the chain. China figures both as its biggest market and in the areas of assembly and testing. The brick work for this edifice is done primarily in Taiwan where new US restrictions demand that supplies to Chinese companies require license.

Huawei is seething — it has been building inventories, but to what avail? While the globalised world unravels in the face of a deepening US-China technology divide, the biggest clash could in fact be in the emerging markets.

While India decides to cold-shoulder China, it is yet to be seen how ASEAN neighbours — Vietnam, Malaysia, others — respond to Huawei. Time will tell where things are moving.

Beneath the rhetoric of national security, however, is a deeper ideological concern: can China’s economic model have the potential to rival the productive power of liberal capitalism? The deeper debate is around the power of open, democratic societies to remain that way. Beyond the tussle of technology lobbyists, the unending arguments of security hawks lies the more fundamental question — how to defeat the Chinese model without embracing the Chinese way?

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