China’s president has called for technological self-reliance in the escalating rivalry with America, but experts believe Beijing’s late start on tech and relatively backward capabilities could make that a mission impossible.

China has no doubt made an amazing transformation, from a former basket case wracked by mass famine and political upheaval to a highly connected society marked by growing use of renewable energy, a space programme, and bullet trains criss-crossing the country.

But a closer look reveals that while China is adept at assembling foreign technologies into commercially successful products at home, its ability to innovate remains deeply hampered, tech experts said.

China is adept at assembling foreign technologies into commercially successful products at home, its ability to innovate remains deeply hampered

Take semiconductors, the building blocks of the global digital architecture.

China’s government has poured money into an effort to develop its own semiconductors and chip designs but has not been able to close the gap with US, Japanese and South Korean rivals.

“One way to look at (China’s situation) is that someone may be able to make beautiful designs out of Legos, but they don’t know how to make the Legos themselves,” said Gabriel Chou, Asia chair for World Semiconductor Trade Statistics, a grouping of semiconductor-product companies.

“(China) is aggressively attacking the end-market, such as mobile phones or other consumer products. But semiconductors require many very fundamental science skills” that China struggles with, Chou added.

The risks are now clear following last week’s move by Washington to ban Chinese telecom and smartphone giant Huawei’s access to critical American chips and other technology.

The ban has thrown the company’s future into doubt, causing a number of Huawei partners around the world to bail on the company and emphatically illustrating US tech clout.

Long March: President Xi Jinping this week telegraphed his alarm, calling for self-reliance in “key core technologies” while saying China faced a “Long March” against foreign challengers — a reference to a now-legendary 1934-35 strategic retreat by Communist revolutionaries.

But a state-directed approach is a bad idea, said Paul Triolo, head of geotechnology at the Eurasia Group.

Triolo said the world’s top tech companies got where they are because open competition with rivals forced them to develop better products and attract the best human capital.

And being plugged into the world tech ecosystem encouraged them to constantly tailor products to evolving market needs to stay ahead of the pack — or die.

“It’s incredibly hard to wean yourself off foreign suppliers in such a highly market-driven sector where you must be on the cutting edge, and that edge is constantly changing and moving outward,” Triolo said.

The very idea of national self-reliance flies in the face of reality, he adds.

Different countries have excelled in different areas and focused on their core competencies to survive, leading to a complex and interconnected global supply chain.

“The US has a lot of dominance, but there are other big players too. China simply can’t be an island and recreate a whole globalised technology ecosystem at home,” Triolo said.

“To reduce dependence they will have to take a different paradigm from the rest of world and that’s tough. It’s not something money is going to solve over the short-term.”

Software glitch: Software is another glaring weak spot. As in the rest of the world, there is no viable alternative in China to Microsoft and Apple on personal computing systems — or to Google’s Android or Apple’s iOS on mobile phones.

US companies also dominate the Chinese landscape for enterprise software.

The United States suspects Huawei has ties to China’s military and fears the company’s installation of telecom networks worldwide could put sensitive data at risk. Huawei denies the charges.

But Chinese software shortcomings leave Huawei vulnerable even on these global networks — the company relies heavily on US software to power them, Triolo said.

“A database has to be really robust and no company in China can do that database software,” he said.

China could nonetheless be a formidable player in next-generation technologies like artificial intelligence, driverless cars and automated manufacturing.

Xi’s government has singled out such futuristic technologies for state development — a programme partly responsible for triggering US pushback on tech.

“We believe China is in a commanding position to become a far more influential player in disruptive technologies globally,” said Kenny Liew, a tech analyst with Fitch Solutions.

He adds that the US-China tech rivalry “will contribute positively to the global technological landscape.”

Published in Dawn, The Business and Finance Weekly, May 27th, 2019