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By William Dowell
Special to the Tampa Bay Times
Napoleon Bonaparte famously observed that when China awakens, the world will tremble. The world is not trembling quite yet, but it is safe to say that it is paying attention.
China's experiment with Marxism effectively ended with the rise of Deng Xiaoping following Mao's death in 1976. From the start, Deng was clear about China's strategy for the transition to a market-based economy. It was "copy, understand, innovate." The transfer of Western technology in order to gain access to the China's enormous market has irritated competitors, but the Chinese argue that most of today's industrially advanced countries have engaged in similar practices. Beijing's ultimate argument is that no one is being forced to sell in China.
While intellectual property remains a contentious issue, China is fast moving beyond any urgent need to steal foreign technology. According to the Geneva-based World Intellectual Property Organization, China filed a record 236,600 new patent applications in 2017, compared to only 16,200 in the United States. Much of this may have been for minor improvements in existing technology, but the Washington-based Center for Strategic and International Studies reports that China's nominal research and development expenditures now exceed that of Japan, Germany and South Korea combined.
Last year, China launched more satellites than any other country (35 compared to 30 by the United States). In October, China landed a space probe on the dark side of the moon and Beijing has announced plans soon to launch its own permanently manned space station. China's Micius satellite, launched in 2016, is so far the world's only communications satellite capable of quantum encryption, a system that even the United States does not have and which no hacker or foreign government can crack.
Beijing has optimistically set 2030 as the target date to take the world lead in artificial intelligence. It is not unreasonable to expect that it just might achieve that goal. Until last summer, China's Sunway "Taihu Light" supercomputer operated speeds at five times faster than its U.S. counterpart. The United States regained the lead when it commissioned its new "Summit" supercomputer, twice as fast as the Taihu Light, in August last year, but the race is clearly heating up.
China's progress in building its internal infrastructure is nearly as impressive. More and more of China's rail lines now operate at high speeds that match or exceed Europe's high-speed trains. The MagLev train from Shanghai's Pudong Airport to the center of the city takes just eight minutes to cover 20 miles at a mind-blowing 267 miles an hour.
Initially, China's expansion seemed fairly low key. Deng Xiaoping, emphasizing openness to the West, insisted on maintaining a low public profile while China closed the gap with western technology. Beijing has always been skeptical about America's approach to politics, but at the same time it had a deep admiration for America's business acumen. That changed with the global financial crisis of 2008. The fact that China sailed through the crisis, while the United States struggled to recover, convinced China's leadership that it had been right all along to insist on a centralized, authoritarian approach. Britain's problems with Brexit, partisan political paralysis in the United States and the spread of populism across Europe have only strengthened that conviction.
Today, there is, nevertheless, a growing uneasiness in Beijing that Xi Jinping's haste in rapidly expanding China's influence amounts to dangerous overreach. The risk, as even the Chinese themselves see it, lies in isolating China from the international markets that currently sustain China's growth. The rapid expansion into Africa and Beijing's New Silk Road-Belt Road initiative, which is building a transportation network across Asia along with China's artificial island building and territorial claims to the South China Sea, have raised suspicions that China may be more interested in neo-colonialism than in development.
China is now openly challenging U.S. notions concerning the relationship between business and government. While the United States maintains that business should finance itself, Beijing has poured billions of dollars into those sectors where it most wants influence. While U.S. business usually demands an immediate return on investment, Beijing has demonstrated that it will forgo an immediate profit, if the geopolitical payoff warrants it.
A major test will come with the rollout of the 5G ultra-wide band, cellular network, which is likely to define the next generation of global communications. The Chinese communications giant, Huawei, is developing much of the system. While Huawei insists that it is just another private corporation that is not that different from AT&T or Verizon, Beijing has made it clear that it expects China's private companies to play by Beijing's rules.
For obvious reasons, the United States has blocked Huawei's access to sensitive functions in the United States. So far, the rest of the world doesn't appear overly concerned. Whether Washington approves or not, much of the 5G network may be designed in California, but it is more than likely to continue to be manufactured in China. Tariffs won't change that. Diplomacy and maintaining strong relationships with allies, just might.
William Dowell is the co-author, with Winter Nie, of an account of the rise of Chinese major corporations, "In the Shadow of the Dragon: The Global Expansion of Chinese Companies — And How It Will Change Business Forever." The book is available on Amazon.