China’s Technology Strategy: Leverage Before Growth

Key Points

• Unlike many commentators, Xi Jinping does not emphasize economic growth. He stresses China’s system as best suited to win the long-term competition with the US. His strategy is to use state tools to build economic leverage and political advantage. Technology is a central component.
• As in its military strategy, China’s economic strategy is “asymmetric,” taking advantage of a US system founded on openness and wealth creation. In contrast, China protects large firms at home, coerces technology transfer, then seeks to eliminate leading foreign competitors.
• The US has done little to blunt Chinese predation, indirectly supporting it with money and technology. If the most innovative American companies lose intellectual property and market share without consequence, China will control more sectors of the global economy.

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Introduction

Whether China likes it or not, sustained and fast economic growth is not in its present or future. Political and military strategies dependent on fast growth are no longer viable options. This hardly means Chinese Communist Party (CCP) Chairman Xi Jinping has given up. He has outlined new objectives, and his regime has implemented new strategies flowing from those objectives.¹ The US and others have only partly recognized this shift and have barely begun to respond to it.

Similar to its military strategy, the People’s Republic of China’s (PRC) current economic competitive strategy is asymmetric. Beijing focuses on the PRC’s “strengths,” which include being able to produce at scale, having some of the world’s largest consumer market segments, employing predatory regulatory practices, and using coercive technology acquisition. China is trying to neutralize American advantages stemming from an open, wealth-seeking, highly innovative economy. If the US keeps competing as if its rival is another open-market economy organized for individual prosperity, it risks losing the crucial contest for economic leverage and political influence. To defeat the PRC’s geo-economic strategy, the US needs to ensure it no longer helps Chinese companies seeking to catch up and consider defending its most innovative companies.

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Notes

1. Dan Blumenthal and Derek Scissors, “Breaking China’s Hold,” Atlantic, December 23, 2022, https://www.theatlantic.com/international/archive/2022/12/china-economic-coercion-united-states/672524.