What Really Matters in the Sino-American Competition?

The United States and China are competing for dominance in technology. America has long been at the forefront in developing the technologies (bio, nano, information) that are central to economic growth in the twenty-first century. Moreover, US research universities dominate higher education globally. In Shanghai Jiao Tong University's annual Academic Ranking of World Universities, 16 of the top 20 institutions are in the US; none is in China.

But China is investing heavily in research and development, and it is already competing with the US in key fields, not least artificial intelligence (AI), where it aims to be the global leader by 2030. Some experts believe that China is well placed to achieve that goal, owing to its enormous data resources, a lack of privacy restraints on how that data is used, and the fact that advances in machine learning will require trained engineers more than cutting-edge scientists. Given the importance of machine learning as a general-purpose technology that affects many other domains, China's gains in AI are of particular significance.

Moreover, Chinese technological progress is no longer based solely on imitation. Former US President Donald Trump's administration punished China for its cybertheft of intellectual property, coerced IP transfers, and unfair trade practices. Insisting on reciprocity, the US argued that if China could ban Google and Facebook from its market for security reasons, the US can take similar steps against Chinese giants like Huawei and ZTE. But China is still innovating.

After the 2008 global financial crisis and the ensuing Great Recession, Chinese leaders increasingly came to believe that America was in decline. Abandoning Deng Xiaoping's moderate policy of keeping a low profile and biding one's time, China adopted a more assertive approach that included building (and militarizing) artificial islands in the South China Sea, economic coercion against Australia, and the abrogation of its guarantees with respect to Hong Kong. In response, some people in the US began to talk about the need for a general "decoupling." But as important as it is to unwind technology supply chains that directly relate to national security, it is a mistake to think that the US can decouple its economy completely from China without incurring enormous costs.

That deep economic interdependence is what makes the US relationship with China different from its relationship with the Soviet Union during the Cold War. With the Soviets, the US was playing a one-dimensional chess game in which the two sides were highly interdependent in the military sphere but not in economic or transnational relations....