Xi Calls for Tech Push in China After U.S. Escalates Curbs

Xi Jinping renewed calls for China to step up the development of technology critical to national security, issuing a forceful reminder just as escalating U.S. sanctions threaten Beijing’s efforts to become self-reliant in semiconductors.

Invoking the so-called “whole nation system” that propelled China’s space and nuclear weapons programs, Xi exhorted top officials to pool their resources and focus on breakthroughs critical to the country’s future. A Party summit was attended by Premier Li Keqiang and other senior policy-makers.

While scarce on details, Xi’s personal intervention suggests Beijing is growing increasingly concerned about Washington’s stepped-up efforts to contain China’s efforts to advance in fields from artificial intelligence and biotech to the $600 billion global semiconductor arena.

After targeting certain companies, such as Huawei Technologies Co. for years, the US has imposed a series more severe restrictions on all aspects of China’s economy. China is facing new restrictions from the Biden Administration regarding the sale artificial intelligence chips. It has hampered the advancement of cutting-edge technologies and they are considering an executive order which would restrict foreign investment.

“US competition strategy is leaning more blatantly towards containing China by blocking off access to the resources needed to develop advanced semiconductors,” said Kendra Schaefer, a partner at Beijing-based consultancy Trivium China. “Top leaders are seeking to make sci-tech not just an endeavor for the government, innovators, and researchers, but a whole-of-society effort not dissimilar to the Soviet-era space race.”

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A US escalation would only fuel frustration in Beijing. This is despite years of failure to produce semiconductors capable of replacing U.S. circuitry.

China’s anti-graft investigations have intensified in the past few months, with a series of probes targeting top figures from the chip industry. Senior officials are angry at how tens of billions of dollars funneled into the sector over the past decade haven’t produced the sorts of breakthroughs that emerged from previous national-level scientific endeavors, Bloomberg News has reported. Washington appears to have managed to impose control on Beijing, and thus successfully restrain its technological ambitions.

Xi has called for government intervention. This is a continuation of Xi’s playbook, which in recent decades prioritizes the role and responsibility of state institutions rather than private corporations such as Tencent Holdings Ltd. or Alibaba Group Holding Ltd. when it comes to technological advancement.

On April 19, 2022, an employee worked at a chip-making company in Suqian (Jiangsu Province, China).

Xu Changliang/VCG via Getty Images

“Competitive advantages should be achieved in certain sectors to win strategic initiative opportunities,” state broadcaster Central China Television cited Xi as telling a high-level Communist Party committee he chairs. “Pool resources to get major undertakings done.”

Despite a slower economy and geopolitical tensions, Xi will likely retain his top Party position at the two-a-decade Congress next month. This is despite frustrations about his Zero-Tolerance Covid strategy. This gives him the mandate to achieve broad goals, including funding a wide range of tech programs that are government-backed. These often involve billions in state funding.

“It remains to be seen how much progress they can make. Unlike resources, it’s difficult for ‘innovation’ to be state-directed,” said Union Bancaire Privee analyst Vey-Sern Ling.

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First introduced under Mao Zedong to help the then-fledgling Communist China industrialize, the “whole nation” approach was crucial to helping Beijing attain a number of top national priorities, from developing its first atomic bomb in the early 1960s to achieving Olympic sporting success. It was mostly abandoned after that as the government shifted their focus to economic growth. But following a series of U.S. sanctions that exposed the vulnerabilities of China’s chip capabilities, Xi is once again reactivating the mechanism to achieve breakthroughs in advanced chip development and manufacturing.

Bloomberg News reports that nearly a trillion dollars worth of federal funding were set aside as part of the technology initiative. This will allow central and local governments, to pool their resources for investment in projects related to third-generation semiconductors. The ministries of science, technology and innovation have received proposals from top chipmakers and research institutions to compete for funding.

Beyond self-sufficiency in technology, Xi also stressed the importance of conserving energy, spurring health care advances and rural development — familiar policy priorities for China’s leader. This includes more efficient resource use, from water and grains to minerals and raw material, according to the official Xinhua News Agency. He called for lower carbon emissions in the production of goods and services, and opposed “extravagant consumption and over-consumption.”

Xi said that China must establish a pricing system to reflect resource scarcity and the costs of environmental damage.

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