US-China tech war: Beijing gives muted response to newest US initiative to redefine the country's approach to global competition

China has given new US Senate legislation designed to contain its tech rise a relatively muted response, despite a warning from some analysts that the move represents a paradigm shift in relations.

The US Strategic Competition Act of 2021, presented to Congress last Thursday, defines areas of long-term competition with China, including technology, geopolitical issues, the economy and the military.

Although China's Ministry of Foreign Affairs spokesman Zhao Lijian said last Friday that the country is opposed to the bill, Chinese officials have otherwise been largely silent on the matter.

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"I reiterate that China is committed to developing a relationship with the US featuring non-conflict, non-confrontation, mutual respect and win-win cooperation," the spokesman said at a regular press conference.

Beijing's measured response to the legislation comes amid China's recent war of words with the West on several other issues, such as democracy in Hong Kong and the treatment of Uygurs in Xinjiang. Chinese state media have been relatively restrained, with China Daily running an editorial and tabloid Global Times publishing an analysis. 

Summaries of the proposed US legislation have, however, circulated on Chinese social media platforms such as WeChat and Weibo, where some netizens have dubbed it Washington's strategic plan to "confront China".

Liang Yabin, a professor from the Central Party School, the training institution for senior Communist Party cadres, wrote in an opinion piece that it was likely the proposed rules would be passed into American law.

"There's bipartisan consensus now about strategic competition between China and the US. Washington's policy will get tougher and it will last," Liang wrote.

Alex Capri, a research fellow at the Hinrich Foundation, said the response from Beijing had been "measured". "There seems to be a realisation in some quarters that strident responses to US and European policy announcements have produced even more of an anti-China backlash," he said.

The proposal, set to receive a hearing on April 14, "sets the tech sector as, more than ever, a strategic domain for the two superpowers amid ongoing tensions", according to Kenn Yee, a policy analyst at Access Partnership.

"In this skirmish against China, the tech sector is the pawn," said Yee. "The impact of the Act on US tech companies is clear - there'd be greater pressure to alienate China tech and perhaps the market altogether."

Analysts said the legislation could dampen the enthusiasm of a broad range of US companies to deepen cooperation with Chinese firms in high tech fields, as well as increase financial risks for Chinese companies that have listings on US and other overseas stock exchanges.

The potential impact of the 283-page bill is spread much more widely than China's trade policies, its intellectual property practices, alleged forced technology transfers and subsidies deemed unfair by the US.

"The Act guarantees that the strategic decoupling of supply chains around things like semiconductors, pharma, rare earths, batteries and other 'sensitive' technologies will accelerate," said Capri. 

The legislation includes help for American companies to diversify their global supply chains, to strengthen US leadership in technical standards for next-gen technologies, and plans for total, or partial, acquisition of infrastructure like 5G mobile networks and undersea cables.

The legislation is also aimed at countering what it describes as "digital authoritarianism", signalling more attention on exports of surveillance technology and information warfare. This could mean a stepping up of efforts by the US and its allies to block the sale of hard technologies or IP that may be seen as enabling techno-authoritarian regimes, said Capri.

Huawei Technologies Co., which was put on Washington's trade blacklist in 2019, has been one of the most high-profile names to struggle under US sanctions. Over the past two years, more Chinese tech firms have ended up on US blacklists having been deemed a national security threat or for their alleged role in helping Beijing's crackdown on the Uygur ethnic minority in Xinjiang.

Those blacklisted include chip giant SMIC, leading AI and surveillance firms such as Megvii and Hikvision, and drone maker DJI. Smartphone maker Xiaomi was added to a US military blacklist in January while just last week the US blacklisted Chinese supercomputing organisations, saying the technology could serve military purposes.

Denis Simon, executive director at the Centre for Innovation Policy at Duke University, said the Strategic Competition Act of 2021 would create further impetus for greater tech self-reliance in China. Beijing's new five-year plan is committed to steering the country towards self-sufficiency despite analysts warning that it could lead to even bigger conflicts with the United States.

"In many ways, it [the new US bill] will strengthen the position of the techno-nationalists inside China who are convinced that the processes of globalisation are no longer working in China's favour," said Simon.

However, the proposed bill provides few specifics on what type of action the federal government would be expected to take.

"China will initially take a wait-and-see approach as the bill, regulations and implementation may be different than currently stated," said Cameron Johnson, an adjunct faculty instructor at New York University and a partner at Shanghai-based Tidal Wave Solutions. The legislation could also take many months to ratify, added Johnson.

However, Johnson also said the US should prepare for a "counterpunch" from China at some point, which could include a clampdown on US tech in China and a ramp-up of its Belt and Road trade initiative.

This article originally appeared on the South China Morning Post (SCMP).

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