Tech innovation drives national power and patents lock in tech leadership. Chinese leadership ends the liberal international order

Strategy documents invariably recognize the importance of science and technology to the US way of life, prosperity and security. Those pronouncements tend to be generic, however—when they get specific, advanced technology policies emphasize the role that science and technology play in honing military capabilities, and the accompanying need to develop and maintain a National Security Innovation Base.

That significantly understates the importance of these technologies. Technology has not only been an agent of change within countries, but it has also redistributed power among nations and transformed international relations themselves. It is one of the main factors shaping relations among states, and in many ways science and technology have created the modern international system. Technological capacity—the ability to innovate and then to apply those innovations—is a determinant of global power. The wealth it creates yields status and influence, accelerating the race between countries to be first movers and early adapters. According to the OECD, “technology leadership has long underpinned the economic prosperity and security” of member countries.4 If those innovations alone prove insufficient to advance the interests of technologically advanced nations, then those countries will rely on the economic and military power which technology gives them. Plainly, technological superiority equates with geopolitical pre-eminence.

The world is on the brink of yet another industrial revolution, one that will be shaped by new and emerging technologies such as artificial intelligence, biotechnology, quantum computing, and other technologies which, analysts from the McKinsey Global Institute summarize, will “affect billions of consumers, hundreds of millions of workers, and trillions of dollars of economic activity across industries.” 5 That transition—a revolution in many ways—will be the fulcrum upon which global power and the world order will balance. As the National Intelligence Council summarized in its last Global Trends Report, “some technological areas appear to offer the potential for transformative change . . . advances in these areas will combine with other technologies, such as energy storage, to shape societies, economies and perhaps even the nature of power.” 6

Most simply, there are economic advantages that flow from leading the way. Leadership in those new and emerging technology sectors will yield revenues which facilitate a virtuous cycle of investment, research and development, securing dominance in this and future generations of technology. Leading promotes the creation of international standards which lock in that principal position; patent holders can generate substantial revenues from licensing—Qualcomm generated about €5.2 billion from licensing in 2017, more than 20 percent of its profit—and those royalty payments constitute a de facto tax on second-place competitors, providing an immediate advantage in subsequent research into next-generation technology. Standards also create dependencies, as they encourage the use of related technology throughout a network even as new generations of equipment develop. An integral part of China’s Belt and Road Initiative (BRI) is the proliferation of and reliance upon Chinese standards to encourage integration with and dependence on Chinese tech providers such as Huawei, the telecommunications giant. Tech supremacy confers legitimacy on that country’s innovation model, reinforcing its soft power.

The green technology industry provides insight into how this future could look. There is consensus that China is already pacing development of these vital technologies, holding “a commanding lead” in manufacturing most low-carbon technologies. China is responsible for the production of about 90 percent of the world’s rare earth elements critical to this transition. It is also responsible for at least 80 percent of all stages in making solar panels, and 60 percent of production of wind turbines and electric-vehicle (EV) batteries—and increasing capacity in both areas. In some niche components, its share is even higher. Economists applaud China’s efforts to lower costs and speed the green transition, but the massive subsidies afforded China’s solar panel producers have led European competitors to warn that they are being pushed to the brink of bankruptcy by these unfair practices.7

This “cornering of the clean tech supply chain” has been compared to Saudi Arabia’s power over the oil market and the geopolitical influence it created in the 20th century. 8 If China’s dominance continues and even extends into other new technologies, Beijing would accelerate its own growth and position in the global economy today, while also taking the lion’s share of revenues generated in multi-trillion-dollar industries and laying the foundations for future generations of China-created green tech. This would then endow China with enormous soft power as the leader of the energy transition critical to the planet’s survival.

What makes some new and emerging technologies different is that they not only generate wealth and prosperity, thereby validating the companies, countries and social systems that create them. That would be powerful enough. But some, such as AI and quantum computing, also provide insight into and potential control over the processes by which future decisions—no matter how distant—are made. Their effect is not just temporal, but enduring potentially for generations. Because they are capable of tipping the balance of power in a variety of ways, pre-eminence in these new technologies will determine who makes the rules and how the world works. Failure by the United States and its allies to lead in this competition will undercut their ability to construct or maintain a global order that favors their values and interests. That is what makes these technologies different.

Russian President Vladimir Putin gets it. As early as 2017, he argued that “Artificial intelligence is the future, not only for Russia, but for all humankind. … Whoever becomes the leader in this sphere will become the ruler of the world.” 9

China’s supreme leader Xi Jinping gets it. Xi has said that new technologies—artificial intelligence, big data, quantum information and biotechnology—will trigger “earth-shaking changes” that will give China an “important opportunity to promote leapfrog development,” and overtake competitors. 10 According to China technology scholar Tai Ming Cheung, Xi’s mindset is “a Hobbesian backdrop of a life or death struggle for the economic and strategic renaissance of China … an intensive zero-sum technological revolution … to effectively compete for the global commanding heights.” 11

China scholar Rush Doshi, now serving as deputy senior director for China and Taiwan at the National Security Council, has warned that “Beijing believes that the competition over technology is about more than whose companies will dominate particular markets. It is also about which country will be best positioned to lead the world.” While party officials are reticent to speak bluntly, Doshi pointed to “commentaries and think tank pieces [that] seem to suggest that surpassing the United States in high technology would end its era of global leadership, and presumably, usher in one of Chinese leadership.” 12

Consider one sobering scenario for 2033: a world in which China has surpassed the United States as the leading tech power and is typically first to announce breakthrough scientific discoveries and turn them into technologies. 13 Shenzhen has eclipsed Silicon Valley as the world’s leading source of innovation. China has closed the defense gap and can field weaponry as good as—if not better than—that of the US. Its technology is preferred across much of the developing world and has been eagerly adopted by autocrats and authoritarians who use it to impose China’s political model. The spread of “smart cities” that rely on its data, algorithms and technology provide Beijing with the ability to manipulate even mundane decisions on the platforms China provides. Imagine the mischief that can be done with—or the intelligence that could be gleaned from—control over computer systems that process visas, for example.

Moreover, the insights afforded by access to all those systems accelerates the development of artificial intelligence in China and extends its reach even further. Domination of China’s home market, combined with unfair trading practices abroad, ensures that Chinese companies maintain a competitive advantage over other businesses. This lead facilitates the spread of Chinese-supported international standards across multiple types of technology, favoring the power of the state over individual freedom globally and providing a technological underpinning to an increasingly illiberal international order.