WEBVTT - The US Pledged to Contain China’s Tech Ambitions. It’s Not Working 0:00:03.120 --> 0:00:07.480 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.840 --> 0:00:12.480 The US presidential election is a week away, and the 0:00:12.560 --> 0:00:16.760 contest between Donald Trump and Kamala Harris could not be tighter. 0:00:17.520 --> 0:00:20.320 The two candidates are going head to head on everything 0:00:20.640 --> 0:00:25.080 from the economy to immigration, but one area they agree 0:00:25.120 --> 0:00:28.120 on is the need to curb China's rise. 0:00:28.600 --> 0:00:32.640 We've got hundreds of billions of dollars just from China alone, 0:00:32.720 --> 0:00:34.320 and I haven't even started yet. 0:00:34.640 --> 0:00:37.120 But tarifs are two things if you look at it. 0:00:37.200 --> 0:00:39.600 Number one is for protection of the companies that we 0:00:39.680 --> 0:00:40.360 have here. 0:00:40.400 --> 0:00:43.680 In any policy about China should be in making sure 0:00:43.760 --> 0:00:46.680 the United States of America wins the competition for the 0:00:46.680 --> 0:00:50.559 twenty first century, which means focusing on the details of 0:00:50.600 --> 0:00:55.040 what that requires, focusing on relationships with our allies, focusing 0:00:55.040 --> 0:00:58.160 on investing in American based technology. 0:00:58.560 --> 0:01:02.920 So how is the US doing versus China, which superpower 0:01:03.040 --> 0:01:05.920 is leading the race for dominance of the twenty first century? 0:01:07.319 --> 0:01:11.880 Rebecca Chung Wilkins, Bloomberg's Asia Government and Politics correspondent, says 0:01:11.880 --> 0:01:14.440 a good way to try to answer this question is 0:01:14.480 --> 0:01:19.160 by looking at the key emerging technologies that China identified 0:01:19.240 --> 0:01:23.280 as its priority back in twenty fifteen when it announced 0:01:23.280 --> 0:01:25.880 its Made in China twenty twenty five plan. 0:01:27.319 --> 0:01:28.520 Our host came. 0:01:28.760 --> 0:01:31.520 And when you look at that plan now, nearly a 0:01:31.600 --> 0:01:36.240 decade later, new research by Bloomberg Economics and Bloomberg Intelligence 0:01:36.640 --> 0:01:40.440 shows that Made in China twenty twenty five has largely 0:01:41.000 --> 0:01:41.959 been a success. 0:01:42.520 --> 0:01:46.800 So of the thirteen key technologies tracked by Bloomberg researchers, 0:01:47.240 --> 0:01:50.680 China has achieved a global leadership position in five of 0:01:50.720 --> 0:01:57.960 them and is catching up fast in seven others. 0:01:58.240 --> 0:02:01.639 Welcome to the Big tich Asia from Bloomberg News. I'm wanh. 0:02:02.760 --> 0:02:05.200 Every week we take you inside some of the world's 0:02:05.240 --> 0:02:09.840 biggest and most powerful economies and the markets, tycoons and 0:02:10.040 --> 0:02:14.480 businesses that drive this ever shifting region. Today on the show, 0:02:14.919 --> 0:02:19.480 how did China get ahead in key technological advances despite 0:02:19.639 --> 0:02:23.160 US efforts to prevent that from happening? And would a 0:02:23.200 --> 0:02:31.919 Harris or Trump administration change that? Rebecca says back in 0:02:32.000 --> 0:02:35.280 twenty fifteen, when the Maiden China Plan was announced by 0:02:35.280 --> 0:02:38.800 the Chinese Communist Party, it was all about helping the 0:02:38.840 --> 0:02:41.480 country achieve two big goals. 0:02:41.800 --> 0:02:45.680 One is this self sufficiency, not wanting to be reliant 0:02:45.720 --> 0:02:49.120 on other countries. And is preparing for any kind of 0:02:49.160 --> 0:02:52.560 scenario where, for example, China might be cut off from 0:02:52.680 --> 0:02:55.920 say its energy supply or whatever it might be. And 0:02:56.000 --> 0:02:58.800 China more broady, does have a sort of preoccupation or 0:02:58.800 --> 0:03:03.560 prevailing concern with preserving its own security, so standing on 0:03:03.600 --> 0:03:07.120 its own two feet, and the second is becoming increasingly 0:03:07.160 --> 0:03:10.320 competitive and in fact a global leader in some of 0:03:10.360 --> 0:03:12.720 these key strategic areas. So there's both a sort of 0:03:12.720 --> 0:03:15.600 inward and an outward element to the Maiden in China plan. 0:03:16.760 --> 0:03:20.400 The plan highlighted ten priority sectors for the nation to 0:03:20.440 --> 0:03:26.440 focus on, including aerospace equipment, energy saving cars, biomedicine, and 0:03:26.560 --> 0:03:30.679 high end machine tools and robots. And now almost ten 0:03:30.760 --> 0:03:34.639 years later, according to the analysis by Bloomberg, China has 0:03:34.920 --> 0:03:38.280 in fact become a global leader in many of these 0:03:38.360 --> 0:03:39.119 key areas. 0:03:39.440 --> 0:03:43.080 So those sectors include solar panels, unmanned aero vehicles, those 0:03:43.120 --> 0:03:46.760 are drones, graphene which is a coating material that's using 0:03:46.800 --> 0:03:50.400 tons and tons of sectors, high speed rail, and electric vehicles. 0:03:51.120 --> 0:03:54.760 Now, does China have any natural advantages that makes it 0:03:54.840 --> 0:03:57.600 possible that it's been able to take leading positions in 0:03:57.640 --> 0:04:01.000 these sectors or is this simply by design? And the 0:04:01.040 --> 0:04:02.080 world of Beijing. 0:04:02.440 --> 0:04:05.480 Well as worth saying that even in twenty fifteen, China, 0:04:05.600 --> 0:04:08.360 as we determine, was already a global leader in three 0:04:08.400 --> 0:04:13.680 of these sectors, in graphene, solar panels, and in unmanned 0:04:13.720 --> 0:04:16.320 area vehicles, so they had a sort of somewhat of 0:04:16.320 --> 0:04:19.159 a headstart in any case. But the other important element 0:04:19.200 --> 0:04:21.560 here to remember, I think, is that when Beijing does 0:04:21.680 --> 0:04:24.599 signal out an area for support, when it signals out 0:04:24.640 --> 0:04:28.240 a key policy priority, it really is able to throw 0:04:28.320 --> 0:04:33.360 the full weight of its economy essentially behind that. So, 0:04:33.480 --> 0:04:37.240 for example, if it decides that electric vehicles are a priority, 0:04:37.400 --> 0:04:40.960 say it can ask banks to lend it credit cheaply. 0:04:41.279 --> 0:04:44.520 It can get local governments to lease it land cheaply 0:04:44.600 --> 0:04:47.400 or perhaps even at no or low cost. It can 0:04:47.480 --> 0:04:50.880 also get large state owned enterprises to use the sort 0:04:50.880 --> 0:04:54.080 of full force of its resources, it talents, and direct 0:04:54.160 --> 0:04:57.320 it towards those industries. So you know, Beijing has an 0:04:57.320 --> 0:05:02.120 incredibly sort of powerful basis here, an incredibly powerful set 0:05:02.120 --> 0:05:05.720 of resources to direct towards these industries when it has 0:05:05.800 --> 0:05:07.160 selected these priorities. 0:05:08.120 --> 0:05:11.640 But there is one key area where China hasn't caught 0:05:11.720 --> 0:05:16.640 up to the US, and that's in advanced semiconductors. That's 0:05:16.680 --> 0:05:19.840 in part because of some key things the US has 0:05:19.920 --> 0:05:22.560 done to keep its rival from catching up. 0:05:22.880 --> 0:05:25.680 There's sort of three big tools for economic statecraft that 0:05:25.680 --> 0:05:29.719 we've seen. One of them is tariffs, imposing these high 0:05:30.040 --> 0:05:34.040 costs for imports coming into the US, sometimes prohibitively high. 0:05:34.360 --> 0:05:37.839 The second are export controls, essentially trying to prevent the 0:05:37.880 --> 0:05:42.679 transfer of US technology, goods, services overseas to other parts 0:05:42.680 --> 0:05:44.960 of the world. And the final part of that are 0:05:45.080 --> 0:05:49.000 financial sanctions. The big area where we can say that 0:05:49.200 --> 0:05:51.920 some of the US export controls and so on had 0:05:51.920 --> 0:05:56.200 been more effective is in sort of high advanced semiconductors. 0:05:56.560 --> 0:05:58.359 And it's important to remember in this context it's just 0:05:58.360 --> 0:06:01.320 a handful of companies involved in this kind of really 0:06:01.360 --> 0:06:04.760 advanced semiconductor tech manufacturing. And it's fair to say the 0:06:04.760 --> 0:06:10.159 Biden administrations they have been successful in building consensus among allies, 0:06:10.279 --> 0:06:14.680 among other countries trying to contain China's access to semiconductors, 0:06:15.200 --> 0:06:19.800 and so we saw Dutch companies, Japanese companies essentially falling 0:06:19.839 --> 0:06:25.120 in line in preventing China from accessing the actual products 0:06:25.120 --> 0:06:28.160 needed to manufacture these types of chips. 0:06:28.000 --> 0:06:31.440 And in light of that of the US having allies 0:06:31.480 --> 0:06:35.280 to support its approach to trade on China and its 0:06:35.320 --> 0:06:38.520 approach to contain China, what has China done to make 0:06:38.560 --> 0:06:41.520 sure it has access to the technologies it needs. 0:06:41.960 --> 0:06:44.800 China's actually has been stoppiling like that. That's the sort 0:06:44.839 --> 0:06:47.920 of fundamental basis of this. They're stopped piling a record 0:06:47.960 --> 0:06:52.320 amount of semiconductor equipment, and that includes these high end 0:06:52.760 --> 0:06:57.120 video chips. It's preparing essentially for a number of further curbs. 0:06:57.120 --> 0:06:59.920 It's looking further out thinking if we see these kind 0:07:00.160 --> 0:07:03.320 moves accelerate, if they're expanded, where will we be and 0:07:03.400 --> 0:07:05.719 how do we try and future prefagainst that. 0:07:06.240 --> 0:07:09.200 But it's not just semiconductors where the US is trying 0:07:09.240 --> 0:07:14.240 to use export controls to slow China down. After the break, 0:07:14.440 --> 0:07:17.040 a look at the other tools the US is using 0:07:17.880 --> 0:07:32.600 and will a new administration keep them going. The US 0:07:32.640 --> 0:07:36.080 has leaned on its allies to limit China's access to 0:07:36.160 --> 0:07:41.600 advanced technologies like semiconductors. Meanwhile, the US is also concerned 0:07:41.640 --> 0:07:44.560 about its ability to be a leader in other sectors 0:07:44.560 --> 0:07:48.320 as well. Some of these areas were outlined back in 0:07:48.360 --> 0:07:52.200 twenty twenty two by National Security advisor Jake Sullivan. 0:07:52.080 --> 0:07:56.800 Computing related technologies, biotech, clean tech are true force multipliers 0:07:56.840 --> 0:08:00.000 through the tech ecosystem, and leadership in each of them 0:08:00.080 --> 0:08:04.720 these areas is a national security imperative. We're investing in 0:08:04.760 --> 0:08:08.000 the industries of the future and strengthening the resilience and 0:08:08.080 --> 0:08:09.760 security of our supply chains. 0:08:10.560 --> 0:08:16.000 Sullivan calls these technologies a national security imperative. Bloomberg's Rebecca 0:08:16.040 --> 0:08:19.080 Chung Wilkins says that's an important thing to take note 0:08:19.120 --> 0:08:22.440 of because over time she's seen a change in the 0:08:22.480 --> 0:08:25.520 way the US talks about the need to restrain China. 0:08:25.880 --> 0:08:28.360 Yeah. I think in the early days of the trade war, 0:08:28.440 --> 0:08:30.760 a lot of the focus was on the sort of 0:08:31.160 --> 0:08:35.959 wrongdoing as they alleged of Chinese companies, But over time 0:08:36.000 --> 0:08:39.440 that has really morphed into this whole discussion over national 0:08:39.480 --> 0:08:44.800 security and increasingly this focus on China's preparedness for a war. 0:08:45.360 --> 0:08:49.240 And in fact, we've almost seen the true real concerns 0:08:49.280 --> 0:08:52.840 at the heart of some of these economic policies over 0:08:52.920 --> 0:08:56.720 sort of military might. Essentially, it's this question of deterrence 0:08:57.240 --> 0:09:01.520 whether or not Beijing and Washington will essentially adopt this 0:09:01.640 --> 0:09:06.600 idea that the costs of this trade conflict and trade 0:09:06.640 --> 0:09:10.079 war and the costs of this increasing competition are worth 0:09:10.080 --> 0:09:13.719 it or not. It comes sort of, I suppose, to 0:09:13.800 --> 0:09:17.840 this fundamental question of to what extent both sides feel 0:09:17.920 --> 0:09:22.360 that their own national security is fundamentally at risk. 0:09:25.080 --> 0:09:28.840 On the campaign trio, Trump and Harris have advocated different 0:09:28.880 --> 0:09:33.040 approaches towards China, even as both agree on the need 0:09:33.200 --> 0:09:37.200 to thwart its rise. I asked Rebecca what Trump currently 0:09:37.280 --> 0:09:39.559 has in mind here, Well, we just. 0:09:39.640 --> 0:09:43.040 In a way have just seen an amplification, perhaps unsurprisingly, 0:09:43.400 --> 0:09:46.480 of some of his previous policies. He's mentioned this possibility 0:09:46.520 --> 0:09:51.240 of sixty percent tariffs across all Chinese imports into the US. 0:09:51.400 --> 0:09:52.480 That would be crazy high. 0:09:52.640 --> 0:09:55.680 That would be crazy high, and it would really hurt 0:09:55.679 --> 0:09:58.960 the Chinese economy. One Bank, for example, estimates that it 0:09:58.960 --> 0:10:02.040 could essentially harm of Chinese GDP growth. So it would 0:10:02.080 --> 0:10:05.360 really be a significant hit to China, but also a 0:10:05.400 --> 0:10:08.160 significant hit to the US if that then results in 0:10:08.400 --> 0:10:10.000 a higher cost of goods. 0:10:10.360 --> 0:10:14.080 Lumberg's editor in chief, John Mickelsweet pressed Trump on that 0:10:14.120 --> 0:10:16.320 point in an interview earlier this month. 0:10:16.600 --> 0:10:19.120 You're talking about sixty percent trade on that sixty perent 0:10:19.160 --> 0:10:21.199 tariffs on that you're talking, as you said, one hundred 0:10:21.280 --> 0:10:24.160 two hundred percent of things you don't really like. You're 0:10:24.160 --> 0:10:26.960 also talking about ten to twenty percent tariffs on the 0:10:26.960 --> 0:10:28.880 rest of the world. That is going to have a 0:10:28.880 --> 0:10:31.480 serious effect on the overall economy. And yes, you're going 0:10:31.520 --> 0:10:34.640 to find some people who were gained from individual tariffs. 0:10:34.960 --> 0:10:37.199 The overall effect could be massive. 0:10:37.240 --> 0:10:41.600 I agree, it's going to have a massive effect. Positive effect. 0:10:41.880 --> 0:10:45.040 It's going to be a positive not let me just no, no, 0:10:45.160 --> 0:10:48.120 let me committed. The other thing to remember with Trump 0:10:48.200 --> 0:10:51.840 is that he has taken a more protectionist stance. Writ large, 0:10:52.040 --> 0:10:54.720 He's not just concerned about Chinese imports, but he's concerned 0:10:54.720 --> 0:10:58.520 about imports from everyone, including, for example, the European Union. 0:10:58.800 --> 0:11:00.640 What do we know about hair approach? 0:11:00.679 --> 0:11:03.280 If she wins Will Harris's approach, we expect to be 0:11:03.440 --> 0:11:07.120 more consistent with the Biden administrations. I will say, she 0:11:07.240 --> 0:11:09.679 too has focused on this idea of jobs and sort 0:11:09.720 --> 0:11:13.240 of American industrial policy, trying essentially to build up some 0:11:13.280 --> 0:11:17.520 of those of manufacturing bases. Again, she's been critical of 0:11:17.600 --> 0:11:22.320 Trump's proposed tariffs, but she has been quite firm on 0:11:22.360 --> 0:11:26.800 some of the national security risks that the US faces. 0:11:26.880 --> 0:11:30.280 So Rebecca is either approach really doing a great job 0:11:30.440 --> 0:11:32.440 in containing China's tech development. 0:11:32.679 --> 0:11:36.839 Well, if we look at the success of the Biden 0:11:36.840 --> 0:11:39.520 administration and we look just going back to the beginning 0:11:39.559 --> 0:11:42.240 at some of those maiden China targets, for example, we 0:11:42.320 --> 0:11:46.560 can see that actually they aren't successful, or they haven't 0:11:46.600 --> 0:11:51.520 been successful in certain key areas if we exclude semiconductors. 0:11:51.920 --> 0:11:55.640 Actually trade has found a way to get through sanctions 0:11:55.720 --> 0:12:00.840 haven't been hugely successful. So that's one quest for Harris 0:12:00.880 --> 0:12:03.520 that this need to perhaps recalibrate the approach. 0:12:05.080 --> 0:12:08.520 Despite the US efforts to slow down China, the world 0:12:08.559 --> 0:12:13.160 outside the US is increasingly driving Chinese evs, surfing on 0:12:13.240 --> 0:12:17.160 Chinese smartphones, and powering their homes with Chinese solar panels, 0:12:17.880 --> 0:12:20.760 and Rebecca says there might be better approaches for the 0:12:20.880 --> 0:12:23.319 US to maintain its competitiveness. 0:12:23.960 --> 0:12:28.400 One approach to thinking about what would be more effective 0:12:28.520 --> 0:12:31.679 than sanctions is this idea that Adam Posen from the 0:12:31.720 --> 0:12:36.280 Peterson Institute has mentioned, which is suction not sanctions. Essentially 0:12:36.600 --> 0:12:40.040 that the US should be making use and taking up 0:12:40.400 --> 0:12:45.840 talent resources innovation coming from China and partnering with it 0:12:45.920 --> 0:12:49.400 in order to advance its own industries and its own 0:12:49.480 --> 0:12:50.719 key sectors, so. 0:12:50.720 --> 0:12:53.880 Basically taking away all the talents so that the US 0:12:53.880 --> 0:12:54.480 makes use of. 0:12:54.440 --> 0:12:57.760 It, taking the best of what China has developed, and 0:12:57.840 --> 0:13:01.120 then building on that to develop and innovate at a 0:13:01.160 --> 0:13:02.040 faster pace. 0:13:06.640 --> 0:13:09.560 This is the big take Asia from Bloomberg News. I'm 0:13:09.600 --> 0:13:12.720 wan ha. If you'd like to hear more about Bloomberg's 0:13:12.720 --> 0:13:15.479 research on the Maiden China Plan, check out the conversation 0:13:15.640 --> 0:13:19.200 on Odd Lots with my colleagues Joe Weisenthal and Tracy Alloway. 0:13:19.360 --> 0:13:21.400 The other thing that happened that I think was actually 0:13:21.440 --> 0:13:24.920 a bigger deal from the Chinese perspective was when the 0:13:25.000 --> 0:13:29.160 US added Huawei to the Commerce Department's entity list in 0:13:29.480 --> 0:13:32.400 early twenty nineteen, because what that signal was that the 0:13:32.480 --> 0:13:35.960 United States was effectively trying to kill what was arguably 0:13:36.200 --> 0:13:39.760 China's best global technology company. The US would say, we're 0:13:39.800 --> 0:13:42.760 not trying to kill it, but the restrictions are pretty draconian, 0:13:43.080 --> 0:13:44.600 and there's very much that vibe. 0:13:45.040 --> 0:13:47.520 And check out our last episode where you can hear 0:13:47.559 --> 0:13:51.679 more about one critical market that China's focusing on EVS 0:13:52.120 --> 0:13:56.000 and how one Chinese carmaker BYD is dominating the Electric 0:13:56.080 --> 0:14:00.280 auto market globally. That's on our Big Take, Asia Feet. 0:14:00.559 --> 0:14:03.920 This episode was produced by Young Young, Jessica Beck and Naomi. 0:14:04.800 --> 0:14:07.040 It was mixed by Alex Suguera and fact checked by 0:14:07.160 --> 0:14:10.200 Eddie Dwan. It was edited by Caitlin Kenny and Daniel 0:14:10.200 --> 0:14:14.080 ten Kate Naoy Shaven as our senior producer, Elizabeth Ponso 0:14:14.240 --> 0:14:17.720 is our senior editor, Nicole Beamster Bower is our executive producer, 0:14:18.120 --> 0:14:21.880 and Sage Bauman is Bloomberg's head of podcasts. Please follow 0:14:21.920 --> 0:14:25.240 and review The Big Tick Asia wherever you listen to podcasts. 0:14:25.400 --> 0:14:28.200 It really helps new listeners find the show. See you 0:14:28.240 --> 0:14:28.760 next time.