US Faces Tough Challenge Mitigating Tech Risks Posed by China: Experts

The U.S. can’t go it alone on protecting technologies like 5G and supply chains and needs to work with Asia, Michael Green, Center for Strategic and International Studies senior vice president-Asia, said during a CSIS webinar Wednesday. Speakers warned the U.S. faces steep challenges if wants to separate the U.S. and Chinese economies to reduce risks.

Leaders in the U.S. are “committed to deepening cooperation on sensitive supply chains, particularly semiconductors,” with Japan and South Korea, said Charles Edel, CSIS Australia chair. The U.S. and Australia are working together on minerals needed in high-tech products like smartphones, he said. Democracies in the Indo-Asian region share “a converging set of strategic imperatives,” he said. They share concerns about “reliable, secure and diverse supplies of critical technologies” and want technology to be developed and used “in a way that aligns with their liberal, democratic values,” he said.

These nations realize they won’t get “complete policy alignment; that’s not going to happen,” Edel said. “Some degree of shared best practices” can mitigate risks from hostile actors like China, he said.

China intentionally let U.S. companies enter China “in part to buy them off,” said Information Technology and Innovation Foundation President Robert Atkinson. “The Chinese know that if they can get Wall Street to be more engaged in the Chinese market and see the dollar signs … that they’re going to oppose or resist active measures of decoupling,” Atkinson said. U.S. firms are already deeply invested in China, which “has the ability to punish them at will,” he said. When the U.S. was in a trade war with Japan 40 years ago “the Japanese government never did that, never threatened to do that, never could do that,” he said: “Our firms are in some ways being held hostage.”

Japan worked with the U.S. to change its policies and ease tensions, Atkinson said. “That’s not possible with China,” he said: “China will not change.” Trade negotiations during the Trump administration demonstrated that change isn’t possible, he said.

Compared with the Cold War, the “risk” presented by China is “much more amorphous,” said James Lewis, CSIS senior vice president: “This isn’t a classic arms race.” The U.S. has to rely on “rickety” alliances with other counties with ambivalence in many European nations, though “they’re shifting, slowly, in our direction, he said. “We’re moving towards two loosely connected supply chains that will compete for a single global market,” he said.

Experts are excited by the rapid reduction in communications latency that will come as a result of AI and advanced semiconductors, Green said. They’re “horrified” that latency “will be reintroduced if you have two systems -- one based on Huawei and one based on whatever we come up with,” he said.

“It doesn’t matter whether we want to bifurcate the internet or not, the Chinese do,” Lewis said. “Sit on the sidelines or take some action,” he said: “We are going to need to think about how we move China out of the interconnected economy that we have now. That’s the fundamental problem.” Not every transaction with China comes with risk, but the U.S. has to figure out which ones do, he said. Americans still don’t take the risks “quite seriously enough,” he said.

Congress is “ready now” for “full-on economic decoupling with China regardless of the risk and not actually understanding the risk to the U.S. economy of doing so,” said Kurt Tong of the Asia Group and former U.S. consul general to Hong Kong. Some U.S. businesses hope the issue will go away, while others support “selective, targeted, partial technology decoupling,” he said. Partial is the key term, he said. If we try to completely separate the U.S. from China “the economic cost will be overwhelming, and it won’t work,” he said.