The Battle for Technological Supremacy

Abstract

Abstract Chapter 5 shows how the individual vertical battles discussed in Chapter 4 are now evolving into a broader horizontal conflict between the US and China as the two digital powers are fighting for technological supremacy. Over the past few years, the US has taken a number of measures to restrict China’s access to strategic technologies, citing national security concerns. China is responding in kind, imposing extensive export and investment restrictions on US companies. This ongoing rivalry has also fueled a subsidy race as the US and China both seek to shore up to their capabilities in critical technologies such as semiconductors. Other countries, including those in the EU, are also turning to industrial policy in the midst of the growing US–China tensions and unraveling global supply chains. As a result, the tech war risks entrenching techno-nationalism as a global norm. This can be seen as a victory for the Chinese state-driven model as governments are abandoning the US’s vision of an open, free, and global digital economy. The chapter predicts that the US–China conflict is likely to continue, even intensify. But it also shows how deeply intertwined supply chains and commercial pressures in both the US and China are likely to prevent a full decoupling of US and Chinese technological assets. As a result, the horizontal conflict will remain costly, yet will also feature elements of restraint, ultimately denying both satisfactory resolution and averting a complete balkanization of the digital economy.