Whose Century Is It? Don't Ask Trump
August 19, 2020
As the previous piece published here today shows, while the U.S. blows
things up, China builds things, better than the U.S., and that has
infuriated Washington, says Dilip Hiro.
U.S. State Department graphic from its Flickr page, Aug. 7, 2020.
By Dilip Hiro
TomDispatch
For the Trump administration's senior officials, it's been open season on
bashing China. If you need an example, think of the president's blame game
about "the invisible Chinese virus" as it spreads wildly across the U.S.
When it comes to China, in fact, the ever more virulent criticism never
seems to stop.
Between the end of June and the end of July, four members of his cabinet
vied with each other in spewing anti-Chinese rhetoric. That particular spate
of China bashing started when FBI Director Christopher Wray described
Chinese President Xi Jinping as the successor to Soviet dictator Joseph
Stalin.
It was capped by Secretary of State Mike Pompeo's clarion call to U.S.
allies to note the "bankrupt" Marxist-Leninist ideology of China's leader
and the urge to "global hegemony" that goes with it, insisting that they
would have to choose "between freedom and tyranny." (Forget which country on
this planet actually claims global hegemony as its right.)
At the same time, the Pentagon deployed its aircraft carriers and other
weaponry ever more threateningly in the South China Sea and elsewhere in the
Pacific. The question is: What lies behind this upsurge in Trump
administration China baiting? A likely answer can be found in the
president's blunt statement in a July interview with Chris Wallace of Fox
News that "I'm not a good loser. I don't like to lose."
Guided-missile destroyer USS Barry conducts underway operations in the South
China Sea near the Parcel Islands, April 28, 2020. (U.S. Navy, Samuel
Hardgrove)
The reality is that, under Donald Trump, the United States is indeed losing
to China in two important spheres. As the FBI's Wray put it, "In economic
and technical terms [China] is already a peer competitor of the United
States. in a very different kind of [globalized] world." In other words,
China is rising and the U.S. is falling. Don't just blame Trump and his
cronies for that, however, as this moment has been a long time coming.
Biggest Economy
Workers in 2008 perform quality control testing on computer drives; Seagate
Wuxi China Factory Tour. (Robert Scoble via Wikimedia)
Workers in 2008 perform quality control testing on computer drives; Seagate
Wuxi China Factory Tour. (Robert Scoble via Wikimedia)
Facts speak for themselves. Nearly unscathed by the 2008-2009 global
recession, China displaced Japan as the world's second largest economy in
August 2010. In 2012, with $3.87 trillion worth of imports and exports, it
overtook the U.S. total of $3.82 trillion, elbowing it out of a position it
had held for 60 years as the number one cross-border trading nation
worldwide. By the end of 2014, China's gross domestic product, as measured
by purchasing power parity, was $17.6 trillion, slightly exceeding the $17.4
trillion of the United States, which had been the globe's largest economy
since 1872.
In May 2015, the Chinese government released a Made in China 2025 plan aimed
at rapidly developing 10 high-tech industries, including electric cars,
next-generation information technology, telecommunications, advanced
robotics, and artificial intelligence. Other major sectors covered in the
plan included agricultural technology, aerospace engineering, the
development of new synthetic materials, the emerging field of biomedicine,
and high-speed rail infrastructure. The plan was aimed at achieving 70
percent self-sufficiency in high-tech industries and a dominant position in
such global markets by 2049, a century after the founding of the People's
Republic of China
Chinese company CRRC Sifang's light-weight rail car uses carbon fiber in its
construction. (CC BY-SA 4.0, Wikimedia Commons)
Semiconductors are crucial to all electronic products and, in 2014, the
government's national integrated circuit industry development guidelines set
a target: China was to become a global leader in semiconductors by 2030. In
2018, the local chip industry moved up from basic silicon packing and
testing to higher value chip design and manufacturing. The following year,
the U.S. Semiconductor Industry Association noted that, while America led
the world with nearly half of global market share, China was the main threat
to its position because of huge state investments in commercial
manufacturing and scientific research.
By then, the U.S. had already fallen behind China in just such scientific
and technological research. A study by Nanjing University's Qingnan Xie and
Harvard University's Richard Freeman noted that between 2000 and 2016,
China's share of global publications in the physical sciences, engineering,
and math quadrupled, exceeding that of the U.S.
In 2019, for the first time since figures for patents were compiled in 1978,
the U.S. failed to file for the largest number of them. According to the
World Intellectual Property Organization, China filed applications for
58,990 patents and the United States 57,840. In addition, for the third year
in a row, the Chinese high-tech corporation Huawei Technologies Company,
with 4,144 patents, was well ahead of U.S.-based Qualcomm (2,127). Among
educational institutions, the University of California maintained its top
rank with 470 published applications, but Tsinghua University ranked second
with 265. Of the top five universities in the world, three were Chinese.
The Neck-and-Neck Race in Consumer Electronics
By 2019, the leaders in consumer technology in America included Google,
Apple, Amazon, and Microsoft; in China, the leaders were Alibaba (founded by
Jack Ma), Tencent (Tengxun in Chinese), Xiaomi, and Baidu. All had been
launched by private citizens. Among the U.S. companies, Microsoft was
established in 1975, Apple in 1976, Amazon in 1994, and Google in September
1998. The earliest Chinese tech giant, Tencent, was established two months
after Google, followed by Alibaba in 1999, Baidu in 2000, and Xiaomi, a
hardware producer, in 2010. When China first entered cyberspace in 1994, its
government left intact its policy of controlling information through
censorship by the Ministry of Public Security.
In 1996, the country established a high-tech industrial development zone in
Shenzhen, just across the Pearl River from Hong Kong, the first of what
would be a number of special economic zones. From 2002 on, they would begin
attracting Western multinational corporations keen to take advantage of
their tax-free provisions and low-wage skilled workers. By 2008, such
foreign companies accounted for 85 percent of China's high-tech exports.
Central business district of Shenzhen, China, 2010. (Manipur20, Wikimedia
Commons)
Shaken by an official 2005 report that found serious flaws in the country's
innovation system, the government issued a policy paper the following year
listing 20 mega-projects in nanotechnology, high-end generic microchips,
aircraft, biotechnology, and new drugs. It then focused on a bottom-up
approach to innovation, involving small start-ups, venture capital, and
cooperation between industry and universities, a strategy that would take a
few years to yield positive results.
In January 2000, less than 2 percent of Chinese used the internet. To cater
to that market, Robin Li and Eric Xu set up Baidu in Beijing as a Chinese
search engine. By 2009, in its competition with Google China, a subsidiary
of Google operating under government censorship, Baidu garnered twice the
market share of its American rival as Internet penetration leapt to 29
percent.
Back From the Valley
Alibaba subsidiary Lazada's warehouse in Cabuyao, Laguna, Philippines, in
2018. (Ben Briones, Wikimedia Commons)
In the aftermath of the 2008-2009 global financial meltdown, significant
numbers of Chinese engineers and entrepreneurs returned from Silicon Valley
to play an important role in the mushrooming of high-tech firms in a vast
Chinese market increasingly walled off from U.S. and other Western
corporations because of their unwillingness to operate under government
censorship.
Soon after Xi Jinping became president in March 2013, his government
launched a campaign to promote "mass entrepreneurship and mass innovation"
using state-backed venture capital. That was when Tencent came up with its
super app WeChat, a multi-purpose platform for socializing, playing games,
paying bills, booking train tickets, and so on.
Jack Ma's e-commerce behemoth Alibaba went public on the New York Stock
Exchange in September 2014, raising a record $25 billion with its initial
public offering. By the end of the decade, Baidu had diversified into the
field of artificial intelligence, while expanding its multiple
Internet-related services and products.
As the search engine of choice for 90 percent of Chinese Internet users,
more than 700 million people, the company became the fifth most visited
website in cyberspace, its mobile users exceeding 1.1 billion.
Xiaomi Corporation would release its first smartphone in August 2011. By
2014, it had forged ahead of its Chinese rivals in the domestic market and
developed its own mobile phone chip capabilities.
In 2019, it sold 125 million mobile phones, ranking fourth globally. By the
middle of 2019, China had 206 privately held start-ups valued at more than
$1 billion, besting the U.S. with 203.
Bezos and Ma
Among the country's many successful entrepreneurs, the one who particularly
stood out was Jack Ma, born Ma Yun in 1964. Though he failed to get a job at
a newly opened Kentucky Fried Chicken outlet in his home city of Hangzhou,
he did finally gain entry to a local college after his third attempt, buying
his first computer at the age of 31.
Jack Ma in 2007 at a business forum in China. (Rico Shen, CC BY-SA 4.0,
Wikimedia Commons)
In 1999, he founded Alibaba with a group of friends. It would become one of
the most valuable tech companies in the world. On his 55th birthday, he was
the second richest man in China with a net worth of $42.1 billion.
Born in the same year as Ma, his American counterpart, Jeff Bezos, gained a
degree in electrical engineering and computer science from Princeton
University. He would found Amazon.com in 1994 to sell books online, before
entering e-commerce and other fields. Amazon Web Services, a cloud computing
company, would become the globe's largest.
U.S. Defense Secretary Ash Carter, left, meets with Amazon founder Jeff
Bezos at the Pentagon, May 5 , 2016. (DoD, Adrian Cadiz)
In 2007, Amazon released a handheld reading device called the Kindle. Three
years later, it ventured into making its own television shows and movies. In
2014, it launched Amazon Echo, a smart speaker with a voice assistant named
Alexa that let its owner instantly play music, control a Smart home, get
information, news, weather, and more.
With a net worth of $145.4 billion in 2019, Bezos became the richest person
on the planet.
Deploying an artificial intelligence inference chip to power features on its
e-commerce sites, Alibaba categorized a billion product images uploaded by
vendors to its e-commerce platform daily and prepared them for search and
personalized recommendations to its customer base of 500 million. By
allowing outside vendors to use its platform for a fee, Amazon increased its
items for sale to 350 million - with 197 million people accessing Amazon.com
each month.
China also led the world in mobile payments with America in sixth place. In
2019, such transactions in China amounted to $80.5 trillion. Because of the
Covid-19 pandemic, the authorities encouraged customers to use mobile
payment, online payment, and barcode payment to avoid the risk of infection.
The projected total for mobile payments: $111.1 trillion.
The corresponding figures for the United States at $130 billion look puny by
comparison.
In August 2012, the founder of the Beijing-based ByteDance, 29-year-old
Zhang Yiming, broke new ground in aggregating news for its users. His
product, Toutiao (Today's Headlines) tracked users' behavior across
thousands of sites to form an opinion of what would interest them most, and
then recommended stories.
By 2016, it had already acquired 78 million users, 90 percent of them under
30.
TikTok Goes the Clock on US Dominance
Screen grab from Tik Tok's rolling videos on company's U.S. home page, Aug.
19, 2020.
In September 2016, ByteDance launched a short-video app in China called
Douyin that gained 100 million users within a year. It would soon enter a
few Asian markets as TikTok. In November 2017, for $1 billion, ByteDance
would purchase Musical.ly, a Shanghai-based Chinese social network app for
video creation, messaging, and live broadcasting, and set up an office in
California.
Zhang merged it into TikTok in August 2018 to give his company a larger
footprint in the U.S. and then spent nearly $1 billion to promote TikTok as
the platform for sharing short-dance, lip-sync, comedy, and talent videos.
It has been downloaded by 165 million Americans and driven the Trump
administration to distraction.
A Generation Z craze, in April 2020 it surpassed two billion downloads
globally, eclipsing U.S. tech giants. That led Trump (no loser he!) and his
top officials to attack it and he would sign executive orders attempting to
ban both TikTok and WeChat from operating in the U.S. or being used by
Americans (unless sold to a U.S. tech giant). Stay tuned.
Huawei's Octane-Powered Rise
Huawei expo at industrial exhibition in Berlin, 2018. (Matti Blume, CC BY-SA
4.0, Wikimedia Commons)
But the biggest Chinese winner in consumer electronics and
telecommunications has been Shenzhen-based Huawei Technologies Company, the
country's first global multinational. It has become a pivot point in the
geopolitical battle between Beijing and Washington.
Huawei (in Chinese, it means "splendid achievement") makes phones and the
routers that facilitate communications around the world. Established in
1987, its current workforce of 194,000 operates in 170 countries.
In 2019, its annual turn-over was $122.5 billion. In 2012, it outstripped
its nearest rival, the 136-year-old Ericsson Telephone Corporation of
Sweden, to become the world's largest supplier of telecommunications
equipment with 28 percent of market share globally. In 2019, it forged ahead
of Apple to become the second largest phone maker after Samsung.
Several factors have contributed to Huawei's stratospheric rise: its
business model, the personality and decision-making mode of its founder Ren
Zhengfei, state policies on high-tech industry, and the firm's exclusive
ownership by its employees.
Born in 1944 in Guizhou Province, Ren Zhengfei went to Chongqing University
and then joined a military research institute during Mao Zedong's chaotic
Cultural Revolution (1966-1976). He was demobilized in 1983 when China cut
back on its engineering corps. But the army's slogan, "fight and survive,"
stayed with him.
He moved to the city of Shenzhen and worked in the country's infant
electronics sector for four years, saving enough to co-found what would
become the tech giant Huawei. He focused on research and development,
adapting technologies from Western firms, while his new company received
small orders from the military and later substantial R&D (research and
development) grants from the state to develop GSM (Global System for Mobile
Communication) phones and other products.
Over the years, the company produced telecommunications infrastructure and
commercial products for third generation (3G) and fourth generation (4G)
smartphones.
As China's high-tech industry surged, Huawei's fortunes rose. In 2010, it
hired IBM and Accenture PLC to design the means of managing networks for
telecom providers. In 2011, the company hired the Boston Consulting Group to
advise it on foreign acquisitions and investments.
Car for U.S. Secretary of State John Kerry waits outside the Purple Light
Pavilion in Beijing, China, 2013. (State Department, Flickr, Alison
Anzalone)
Like many successful American entrepreneurs, Ren has given top priority to
the customer and, in the absence of the usual near-term pressure to raise
income and profits, his management team has invested $15 to 20 billion
annually in research and development work.
That helps explain how Huawei became one of the globe's five companies in
the fifth generation (5G) smartphone business, topping the list by shipping
out 6.9 million phones in 2019 and capturing 36.9 perecent of the market. On
the eve of the release of 5G phones, Ren revealed that Huawei had a
staggering 2,570 5G patents.
So it was unsurprising that in the global race for 5G, Huawei was the first
to roll out commercial products in February 2019. One hundred times faster
than its 4G predecessors, 5G tops out at 10 gigabits per second and future
5G networks are expected to link a huge array of devices from cars to
washing machines to door bells.
Huawei Hysteria
Huawei's exponential success has increasingly alarmed a Trump administration
edging ever closer to conflict with China. Last month, Secretary of State
Pompeo described Huawei as "an arm of the Chinese Communist Party's
surveillance state that censors political dissidents and enables mass
internment camps in Xinjiang."
In May 2019, the U.S. Commerce Department banned American firms from
supplying components and software to Huawei on national security grounds. A
year later, it imposed a ban on Huawei buying microchips from American
companies or using U.S.-designed software. The White House also launched a
global campaign against the installation of the company's 5G systems in
allied nations, with mixed success.
Ren continued to deny such charges and to oppose Washington's moves, which
have so far failed to slow his company's commercial advance. Its revenue for
the first half of 2020, $65 billion, was up by 13.1 percent over the
previous year.
From tariffs on Chinese products and that recent TikTok ban to slurs about
the "kung flu" as the Covid-19 pandemic swept America, President Trump and
his team have been expressing their mounting frustration over China and
ramping up attacks on an inexorably rising power on the global stage.
Whether they know it or not, the American century is over, which doesn't
mean that nothing can be done to improve the U.S. position in the years to
come.
Setting aside Washington's belief in the inherent superiority of America, a
future administration could stop hurling insults or trying to ban enviably
successful Chinese tech firms and instead emulate the Chinese example by
formulating and implementing a well-planned, long-term high-tech strategy.
But as the Covid-19 pandemic has made abundantly clear, the very idea of
planning is not a concept available to the "very stable genius" presently in
the White House.