Exploring China's shift towards cutting out American tech quietly, contrary to recent US actions against TikTok. Insights from journalist Liza Lin reveal China's strategic move towards domestic tech in state-owned enterprises, hardware sectors, and self-sufficiency. Challenges in high-end chip production, national security implications, and debates on creating a 'Splinter Net' for security are discussed.
China is mandating a shift from foreign to domestic tech, targeting everything from software to hardware infrastructure.
Chinese state-owned enterprises are transitioning to domestic tech, accelerating after Huawei's entity listing and emphasizing self-reliance.
Deep dives
Chinese Decoupling from American Technology
China is quietly decoupling from American technology, as highlighted by a mysterious directive known as Document 79 issued by the Chinese regulator for state-owned enterprises. This directive mandated shifting procurement from foreign to domestic tech alternatives in China's tech infrastructure. Everything from software for managing businesses to operating systems like Unity OS or Kiling OS is being transitioned. This shift initially targeted hardware, where Chinese companies have excelled in manufacturing, particularly in the cell phone market.
Evidence of Decoupling in Practice
Tangible evidence of China's tech decoupling effort is surfacing through increased orders from local governments and state-owned enterprises to transition from foreign-made technology to domestic solutions. The acceleration of this localization push occurred after Huawei's entity listing, isolating it from advanced Western technology. The push includes timelines for companies to wean off foreign tech, emphasizing a concerted effort to eliminate reliance on foreign software and hardware.
Private Sector Response to Localization Efforts
While state-affiliated companies are aligning with the localization directive, private sector reactions vary as businesses make decisions based on commercial viability. Non-tech businesses in China still prefer Western technology for reliability, but are gradually shifting procurement to local vendors. Chinese hardware makers are now supporting local chip vendors like never before, allowing them opportunities to refine products for potential collaboration.
Strategic Motivations Behind Tech Decoupling
The tech decoupling trend stems from concerns over national security, illustrating a response to American initiatives that raised apprehensions of backdoors into Chinese systems. The Huawei incident triggered China's resilience-building efforts, aiming to avoid dependency on Western technology. While strategic partnerships have contributed to China's tech advancements, ensuring self-sufficiency and reducing vulnerabilities to external influence drive the decoupling narrative.
Last week, President Joe Biden finally signed into law a bill that would take TikTok off app stores in the US, eventually rendering the app obsolete there. This is not the end of the saga, as TikTok has vowed to take legal action. In the US, the drive to decouple from Chinese tech continues to rumble on.
In this episode, we’ll be taking a look at the reverse trend – the Chinese decoupling from American tech. It’s a story that tends to go under the radar in light of bans and divestments from the US, but you might be surprised at how much China is cutting out American tech too – and doing it much more quietly.
I'm joined by the journalist Liza Lin, who has been following this story in her detailed coverage for the Wall Street Journal. She is also a co-author of Surveillance State: Inside China's Quest to Launch a New Era of Social Control.
You can also join Cindy Yu at The Spectator's Chinese wine lunch on June 14th. To find out more and buy tickets, visit spectator.co.uk/chinesewine.
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