U.S. Technological Decoupling from China: Process and Impact

Decoupling is becoming a new phenomenon in international relations and the world economy. Of all the areas of decoupling， the most striking is that of technology， given the special feature of high-tech and its close connections with trade. The United States is implementing a policy of decoupling itself from China in the entire range of high-tech. IMF experts predict that technological decoupling will not only define the strategic competition between China and the U.S.， but also in turn have a strong impact on Europe.

HOW TECHNOLOGICAL DECOUPLING BECAME A POLICY

Technological decoupling can be defined as restricting or blocking cross-border trade and investment in high-tech goods and services. High-tech underpins the global economy. It is not only just a sector， but an unprecedented driver for innovation and economic development， with a profound impact on the world’s production and consumption patterns. It is by nature at the center when the industrial chain is restructured. Among the many sectors of the global economy， high-tech companies are the most valuable， followed by companies whose growth is driven by technologies.

The U.S. interest in technological decoupling from China began in Obama’s second term. It was able to grow into a policy due to influences from the following four factors.

First， a growing number of Americans in the strategic and diplomatic circles embraced the theory of “China threat”， arguing the Obama administration’s China policy was too weak. The domestic pressure led to the hardening of Obama’s China policy in the last two years of his second term. Under Donald Trump’s presidency， American perceptions of China changed fundamentally， and China began to be seen as the biggest strategic competitor. The Trump administration was convinced that China would take advantage of its close ties to American technologies to steal secrets， spread false information and try to gain an upper hand in competition， which could hurt the American economy， and， more broadly， lead to the global technological dominance by the so-called authoritarianism. When technology becomes a key battleground of competition between states， blocking China’s high-tech development is put on U.S. government’s agenda.

Second， the United States feels threatened by China’s rapid advances in high-tech. In artificial intelligence， China ranks second in the world in academic research， patents， investment， labor force and the number of hardware units， only next to the United States. Some Chinese companies， with cutting-edge research and industrial products， are already considered to be leading the world in such fields as 5G telecommunications， mobile devices， commercial drones， high-speed rail， wind turbines， supercomputers， quantum computing， space launch vehicles and satellites， and liquid crystal display. The gap between China and the U.S. and 27 EU countries is closing fast as Chinese publish more scientific papers and file more patent applications than most of the countries， with the number of patent applications rising from 4，800 in 2005 to 57，598 in 2018.

Third， the United States believes that the tremendous development of science and technology in China is primarily due to government support for high-tech R&D. America has paid close attention to Made in China 2025， a strategic document for manufacturing upgrading， according to which the Chinese government will “support companies’ overseas mergers and acquisitions， equity investments and venture capital investment” to reduce the country’s dependence on foreign technology. And based on that， U.S. Government believes that it must take counter measures.

Fourth， “techno-nationalism” has risen， an ideology that sees technology not as neutral， but as a tool of competition among nations. Edward Snowden’s revelation that U.S. government required some tech companies to take on the role of national information monitoring caused an international uproar. Given the important value of digital technology in espionage and war， countries all over the world have come to recognize the necessity of safeguarding digital sovereignty.

The Trump administration set technological decoupling from China in motion. The Biden administration， despite its mild verbal criticism of Trump’s policies， has in fact continued this policy. The Republicans and Democrats have now agreed on a policy of technological decoupling from China. The Trump administration decided in May 2020 to block Huawei from using American technologies to design or make semiconductor chips， marking a significant fracture in the technology supply chain between the two countries， also widely recognized as the beginning of the decoupling. Given the pervasive nature of technology， technological decoupling has greatly limited the economic interactions between China and the United States.

U.S. DECOUPLING MEASURES TO SUPPRESS CHINA

Currently the United States has adopted two kinds of decoupling measures， those to suppress the development of science and technology in China by restricting the export of Chinese products and services， and those to strengthen its own scientific and technological power through government support for research and development and through policy coordination and cooperation with allies and partners for the shared goal of curbing China’s advances and maintaining America’s global leadership in science and technology. During the four years of the Trump presidency， the U.S. decoupling measures were predominantly “suppressive.”

Most of the laws and regulations the suppressive measures were based on were made during the Trump administration. For example， the Export Control Reform Act passed by Congress in 2018 states that “The national security of the United States requires that the United States maintain its leadership in the science， technology， engineering， and manufacturing sectors， including critical technologies for innovation.” And “Such leadership requires that United States persons are competitive in global markets.” It requires a robust process to identify and control emerging and critical technologies that are essential to U.S. national security， and to prevent China from accessing potentially important American technologies.