US - China Tech Rivalry

Ivy league universities, billions of dollars poured in by government and tech-companies ensured that there was conducive environment for research and development and develop it did, as OpenAI and its GenAI application, ChatGPT took the world by storm, making the US the unchallenged master of the AI revolution. But, the launch of Deep Seek in January 2025, raised suspicion over this mastery. Built supposedly at a fraction of the cost of US-born GenAI models and operating with seemingly fewer and less advanced chips, the Deep Seek unraveled a larger debate on whether the USA is truly a technological master of the world and if it is so, would it be able to retain the position for very long.

Analysts from the Information Technology and Innovation Foundation, a Washington think tank, suggested China had yet to take the lead overall, but "it has pulled ahead in certain areas and in many others Chinese firms will likely equal or surpass Western firms within a decade or so. Chinese firms were performing "the best" in nuclear power, electric vehicles and batteries, though its pace of innovation in advanced semiconductors remains modest. China last year deployed more industrial robots than the rest of the world combined, the study revealed.

A study by the Australian Strategic Policy Institute (ASPI), a security think tank, revealed that China has a “significant lead” in 37 out of 44 critical and emerging technologies. ASPI tracked the most-cited scientific papers, which it said are the most likely to result in patents. The Western democracies are getting left behind in research output, in defence, space, energy and biotechnology. In some fields, all of the world’s top 10 research institutions are based in China.

The US is obviously very much aware of its vulnerabilities and hence, both the Trump and Biden administrations have imposed measures such as trade tariffs, semiconductor export controls and “small yard, high fence” policies to restrain China’s development. In September 2024, the US Commerce Department announced new export controls on quantum computing and advanced chipmaking tools to protect American tech superiority. This followed the department's enactment of export controls in 2022 aimed at limiting China's access to advanced computing chips, hindering its development and maintenance of supercomputers and restricting its semiconductor-manufacturing capabilities. Yet, according to an investigation by the South China Morning Post, most of the goals outlined in the “Made in China 2025” plan have already been achieved.

So, how is it that China, known till very recently as the globe’s factory, ill-famed for its low quality, cheaply produced products has come to rival the world’s superpower?

Larger population, smart people, lesser salaries, are some of the advantages China has. Interestingly, unlike US, China pays much more to engineers than doctors and lawyers. China has a strong leadership interested in technology. The Chinese Science Academy and Chinese Engineering Academy report directly to the President of China and advise him when necessary. China has been building the equivalent of almost one university per week. China produced 4.7 million STEM graduates a year.

By 2049, China aims to emerge as a global leader in three strategic technologies, identified by President Xi Jinping as critical for China’s national rejuvenation: space, AI, and quantum communications and computing. While the Trump administration has unveiled the $500 billion Stargate Project, the largest AI infrastructure initiative in US history. China, for its part, is projected to invest more than US $ 1.4 trillion into technology by 2030.

Also, the US’s lead may disappear even faster following cuts to the National Institutes of Health (NIH), National Aeronautics and Space Agency (NASA) and National Science Foundation (NSF). Reducing the funding envelope to organisations that oversee scientific grants, such as the NIH and NSF, will stifle the scientific innovations and breakthroughs that have been central to the rise of the US as a technology superpower.

For the world, the AI race is a double-edged sword. China’s low-cost, open-source model could empower emerging economies’ own AI innovation and entrepreneurship. It also pressures closed-source firms such as OpenAI to reconsider their stance. However, US-China tech rivalry may deepen global divides, forcing nations to navigate growing complexities. How can nations manage research partnerships with China without jeopardizing collaboration with US institutions? And similarly, how can countries reliant on Chinese materials and exports avoid Chinese technologies?

Dr. Gatra Priyandita: Thanks so much, Heena, and I think that's a very interesting question. For the most part, I think the United States remains the most powerful country in the world, given its military and economic prowess. Yes, it's losing a lot of ground to China, but still, given that it has a huge military, that means a lot of military innovation, and military innovation tends to spill over to the civilian domain.

Now, my think tank, the Strategic Policy Institute, has created something called the Critical Tech Tracker, which some of your listeners might have heard of. According to our tracker, out of about 64 critical technologies so these are technologies that are generally considered very important for economic growth as well as national security China leads in terms of research in 57 out of 64 critical technologies.

Now, when I say research, I don't mean just the quality of publications. I think it makes a lot of sense for China to be in the lead for that, but I mean the number of really good quality publications so the H-indexes, for example. These are journal articles that are used all over the world. So China leads in 57, the United States leads in the rest, and I think India also does very well in quite a lot of them.

Now, China has, I think, challenged America when it comes to technological lead. However, where the Americans are still leading is when it comes to engineering and commercializing it. The Americans are really good at research, but they're also really good at commercializing and engineering. The Chinese are good at research, but they're still on their way to commercialization and engineering.

Ms. Heena Goswami: How is it that it is China, who was earlier known as the factory of the world known for its cheaply produced, imitable, and low-quality products that has sort of threatened the supremacy of the USA, and it's not Japan or European countries with, you know, a far greater history of advancement and development? How did this transformation come about?

Dr. Gatra Priyandita: Also, I think a really good question. I think, you know, China has always aspired to become an Asian power. Going back especially to, you know, the Deng Xiaoping era, there has been this vision of modernizing China but not only that transforming China into a major powerhouse for innovation. So there's always been that dream and that goal.

Now, what made China into an innovation power really came about sort of in the late around the 1990s, 2000s, and especially in the 2010s. Basically, there was deep recognition that China was still fairly low in the global supply chain back in the '90s, right? So the response of the government was to do several things.

Firstly, there was a lot of investment placed in research and development. They identified some of the leading companies of the country and provided support when it comes to research and development. So this again matters for things like engineering. Part of the logic, for example, why you have companies like Huawei and ZTE that became major innovation knowledge producers back in the '90s was because of this support from the state. So from the '90s and 2000s onwards, China rapidly grew because of that strong state support.

China was also really good at sort of identifying talent and not only to identify talent domestically but also internationally. So they had programs, for example, which targeted, you know, leading scientists, leading academics, especially of Chinese descent from overseas, offering them good packages to come back to China. So they recognized that there were talent gaps, and they tried to overcome that by investing in domestic education but also poaching in a way foreign talent.

Now, 2010 onwards, China really aspired big. They aspired to basically advance further along the global value chain and produce more higher-technology equipment. So you had something called the "Made in China 2025" project that came about in the mid-2010s. China wanted to be a leading producer or a leading manufacturer, creating, you know, high-tech technologies that were not previously produced in China on things ranging from agriculture all the way to, say, robotics.

And now today, in the 2020s especially in response to US-China tech competition the Chinese are investing in empowering domestic companies that are also producing, that are seen as relatively niche. These are companies where China still is dependent overseas. So these are known as the "little giants." These are companies with niche areas of expertise, for example, with specific talent when it comes to producing semiconductors. China provides a lot of resources, and that empowers them now.

So there's a lot of that a lot of state support but on the downside, there's also a lot of economic cyber-espionage. China has been accused of stealing intellectual property going back for decades now. And really since the 2010s onwards, we have seen in our think tank anyway this rapid growth in the number of cyber campaigns targeted at industry. This includes not just high-tech industries but also, you know, small and medium-sized companies that are producing interesting items of commercial value, not just in the West but also in places like Southeast Asia and South Asia.

So they're investing a lot in research. They're investing a lot in education. But there's also a more malign element too, which is that they steal intellectual property.

Ms. Heena Goswami: Do you think that the US's measures of export control, increased tariffs, and restricting access to certain technology would that help limit China's technological ascendancy? And are these measures more at the behest of large tech corporations in the US, or are they part of the larger political vision that the US has?

Dr. Gatra Priyandita: So I think the logic behind US export controls is multi-layered. There's no doubt that there are some business interests at play, as well as some corporate tech interests, right? But for the most part, going back to the early 2010s, we have seen the emergence of two things, really.

Firstly, general US concern about China's usage of technology, especially for military purposes. In China, they have something called the civil-military fusion, where civilian industry and the military are closely interlaid and married up. So, technologies developed by civilian industries very much can also support the military.

Early 2000s, early 2010s onwards, we also saw China becoming a lot more assertive in, say, the South China Sea and the East China Sea. So there was concern that a lot of the scientific, technological, and economic cooperation coming in from America, as well as the broader West, was actually empowering the military. It was empowering it to actually conduct a lot of the maritime adventurism that we see in the East and the South China Sea.

There was again that concern about IP theft. So part of the logic behind the export controls was to sort of limit how much tech and how much scientific engagement there is between the US and China on particular sectors that are seen to be empowering the Chinese military, as well as human rights abuses. I forgot to mention that, because some of these technologies and some American and Western companies benefit from things like forced labor in Xinjiang.

So the focus was again on: how can America stop China from doing all these things using the tools that they have? And that was in part to limit that scientific and technological cooperation, at least in certain areas more than others.

Now, does it have any effect? I mean, that's a good question, and I think it's something that we'll reflect on and have more clear answers for, I guess, in the next decade or so.

I mean, looking at very important areas semiconductors right now there are obvious effects. It's somewhat slowed growth in certain sectors of China's innovation system. This is part of the logic again, that China is now trying to invest more in domestic industry.

There has been this longstanding concern about supply chains leading to the West as being a form of vulnerability, going back to the 2010s. So now, investing in the little giants, as I mentioned, was a way to sort of rectify that.

Now, in semiconductors, China is doing well in some things and not doing well in others. So the export controls have uneven implications. For example, they seem to be doing quite well in things like memory chips and testing, but they don't have the capabilities yet to reach the levels of creating logic chips, which are fairly advanced. They're still way behind couple of years behind, say, the Netherlands or Taiwan. But they're getting there. I mean, again, the Chinese government is investing a lot of money into these things because of conducting cyber operations.

So, for the most part right now, the outcome has been uneven.

Ms. Heena Goswami: The U.S.-China technological rivalry what does it mean for the rest of the world? Is the world going to be divided into blocs where some countries depend on China for their tech-related needs and others on the U.S.? And would it lead to larger geopolitical divisions?

Dr. Gatra Priyandita: I think that is the worst-case scenario. I think the technologies that we use today on day-to-day basis things like smartphones, things like television their production is so globally intertwined, right? I mean, you could have I mean, the Apple phone, for example, is American software, some of the chips from Taiwan, manufactured in Chinese factories. And that means that if you want to see complete decoupling, which I think in part the Trump administration is somewhat aspiring to, then that would be both very expensive and will take a long time.

The implications of American tech competition globally have been varied. I think for the most part it really does depend on how far the Americans well, both the Americans and the Chinese because the Chinese are also doing export controls how the Americans and Chinese are willing to pressure third-party countries from using other countries’ technologies. It also depends on the degree in which they are willing to tolerate interoperability between, say, American and Chinese technologies.

So right now, the Americans are not using their tools of power in order to coerce, for example, Southeast Asian countries from using Chinese ICT products. The use of, say, Huawei ICT equipment does not necessarily mean you cannot trade with the Americans. It may mean that, for example, there will be restrictions on, say, cyber cooperation or military cooperation where secrets are exchanged. But for the most part, the Americans have not fully extra territorialized the China policy.

There are elements in which they have done that semiconductors is again a good example where they have pressured the Netherlands, for example, not to provide high-quality advanced chips to China. But at the moment, we are still at a level where de-risking or decoupling is only partially there. We are unlikely to see a world right now where we operate on two distinct technological systems. But that doesn't mean that that wouldn’t be able to happen in the long term, right? Because again, it depends largely on the quality of U.S.-China tech competition and just how difficult it is to ensure that American and Chinese tech can be interoperable.

Ms. Heena Goswami: Thank you so much for joining us for this discussion and giving your insightful remarks.