Chinese Tech Isn't the Enemy

On a recent tour of an enormous, impressive set of artificial-intelligence labs in Beijing, I saw a scene straight out of Silicon Valley: Bright 20-something Chinese researchers with hipster glasses and pink streaked hair sat at row after row of open tables, headphones in, working hard. Projects ranged from innocuous applications like the AI-enabled bicycle share Mobike or the online education portal VIPKid, to ones the U.S. government may find worrying, like Face ++, which is widely believed to be the world’s most powerful facial-recognition software. It can be used to sort photos, but the Chinese security services also use it to ensure they can find any potential “troublemakers” on any street corner in Beijing.

After years of being relatively naive about China’s “all of society” push to catch up and dominate key technology sectors, the U.S. government was jarred awake recently, with the Obama administration sounding alarms about Chinese advances in semiconductors in its waning days, the Pentagon’s Silicon Valley outpost warning about Chinese tech investments in the U.S., and President Donald Trump then taking up a steady anti-China drumbeat.   

Well beyond President Trump and Peter Navarro’s trade war, the U.S. is cracking down. Lawmakers have proposed sweeping expansions to powers of the Committee on Foreign Investment in the United States, the government body that reviews foreign purchases of U.S. assets for potential national-security risks. The legislation would broaden the scope of deals up for review to include all that have foreign investor involvement in so-called “critical technologies” (so far undefined) and non-public technical information. Even before any changes to the law, cfius blocked or discouraged approximately 20 Chinese deals in 2017. Members of Congress have asked Education Secretary Betsy DeVos to investigate the Chinese technology company Huawei’s partnerships with more than 50 U.S. universities, and the administration is exploring sweeping visa restrictions for Chinese researchers in science and technology. Investment has responded accordingly: Chinese foreign direct investment fell 35 percent in 2017, while Chinese mergers and acquisitions in the U.S. declined 90 percent in the same time period.

But is the administration solving the right problem? For years, the U.S. was unsuccessful in stopping the Chinese government’s blatant stealing of U.S. intellectual property and its industrial policy that seeks to make the country world-class in key technologies like artificial intelligence and semiconductors—in part for China’s own growing and menacing military to use. The U.S. thereby inadvertently helped China, including its People’s Liberation Army, accelerate its development of these technologies. But in correcting this, the U.S. now risks cutting off too much technology cooperation with the world’s second-largest economy, which would harm U.S. interests more than China’s. The goal should be to protect a few key technologies and come down hard on China’s illegal practices, rather than cutting off technology cooperation generally.