The continuing U.S. trade imbroglio with Huawei is one example of ways China will prove to be the single most significant global business disruptive force in the coming decade, according to a new study released Monday by the non-partisan Information Technology and Innovation Foundation.
Relations between China and the U.S. and other western nations will prove to be more important than advances in seismic technology in artificial intelligence or quantum computing, according to the authors of “Competing with China: A strategic framework.”
“China looms as the single most significant business disruptor over the full course of the 2020s—even more than artificial intelligence and everything else going on in the digital world,” they write. “A rising China is now the leading edge of change.”
The authors set out 20 steps that the U.S. and other nations of the West should take to win economic competition against China. Among them: provide direct financial grants and tax breaks to Western companies to reduce dependencies on Chinese technology and materials. Also: create government tax incentives for investments by U.S. and allied companies in R&D, skills and capital goods.
The study also takes a big-picture view, including expanding the market of competitors lined up to oppose China. That approach includes trade integration agreements between the U.S. and other nations in the Americas, a U.S.-India free trade and a U.S.-E.U. trade agreement.
“Although China will eventually become the world’s biggest economy, it will still only be about 15% of the global GDP,” the study adds. “If large portions of the rest of the world are highly integrated economically, they will add up to far more than that. That means avoiding excessive nationalism and protectionism in much of the non-Chinese world.”
The study’s authors are David Moschella and Robert Atkinson. Atkinson founded ITIF, while Moschella heads the Leading Edge Forum and formerly headed up worldwide research at International Data Corporation.
They also take on China for oppression of Tibetans and Uighurs as well as crackdowns on Hong Kong but said a greater competitive mindset with the West and China is needed. Noting that China has lifted its nation from an impoverished status to a global superpower in less than 50 years, they add, “perhaps China has something to teach the West as well.”
In one lengthy discussion, the authors tackle the questions of how best to deal with Huawei, noting that Huawei is both a major customer for Intel, Broadcom and Qualcomm, but also is viewed as a national security risk by the U.S., the UK and Australia. “The Huawei case has suddenly brought U.S./China tensions to a head,” they write. “Although it’s certainly possible that tensions will defuse, it increasingly looks like a win/lose economic struggle that will test which nation is stronger and which is likely to prevail in…semiconductors, drugs and aerospace.”
They also analyze eight economic sectors affected by China’s economic disruption, from defense to banking and IT. For IT, they argue: “It’s no secret that China seeks to be both self-reliant and a global leader in AI, robotics, autonomous systems, drone, 5G/telecom, semiconductors, facial recognition, quantum, and other emerging areas. As these technologies will underpin just about every other industry sector, this is arguably the most important competition of all.”
One of the authors’ 20 recommended steps calls for leveraging English as the countries speaking English will account for a greater GDP, especially as India modernizes. “There is little chance that Chinese will rival or replace the global role of English for many decades, if ever,” they write.