Odd Lots - Big Take Asia: The US Pledged to Contain China’s Tech Ambitions. It’s Not Working.

Episode Date: November 1, 2024

China is making steady progress in its quest to dominate key industries of the future, despite years of US tariffs, export controls and sanctions.  Check out this special episode of Bloomberg's Big Take Asia podcast, as hosts K. Oanh Ha talks to Bloomberg News correspondent Rebecca Choong Wilkins about how the US is struggling to curb Beijing’s technological advances, and whether the upcoming presidential election could change the dynamic.Then come back on Thursday, as Rebecca joins the next episode of Odd Lots -- along with Bloomberg economic analyst Gerard DiPippo -- to take a further look at the ongoing tech rivalry between the US and China. Read more: The Big Take: Efforts to Contain Xi’s Push for Tech Supremacy Are FalteringSee omnystudio.com/listener for privacy information.

Thanks for listening to Odd Lots. Follow the show on Amazon Music for more future episodes or just ask, Alexa, play the Odd Lots podcast on Amazon Music. Hey, Odd Lots listeners. This episode you're about to hear is from another podcast here at Bloomberg, the Big Take Asia podcast. And in this episode, you are going to hear about China's efforts to dominate industries of the future. Specifically, it is looking at China's 10 years old made in China plan to see how the country. is actually faring when it comes to advancing key technologies. This episode of Big Take Asia will give you a preview of the next episode of Odd Lots arriving on Thursday when we'll speak with co-authors of a new Bloomberg report. We're going to be speaking with Bloomberg's Asia Government and Politics Correspondent, Rebecca Chune Wilkins, as well as Bloomberg economic analyst Gerard DePippo.

They will help us unpack the China 2025 plan and what their research has uncovered. In the meantime, enjoy this episode of the... Big Take Asia. Bloomberg Audio Studios. Podcasts, Radio, News. The U.S. presidential election is a week away, and the contest between Donald Trump and Kamala Harris could not be tighter. The two candidates are going head to head on everything, from the economy to immigration.

But one area they agree on is the need to curb China's rise. We've got hundreds of billions of dollars just for. from China alone, and I hadn't even started yet. But tariffs are two things, if you look at it. Number one is for protection of the companies that we have here. A policy about China should be in making sure the United States of America wins the competition for the 21st century, which means focusing on the details of what that requires, focusing on relationships with our allies, focusing on investing in American-based

technology. So how is the U.S. doing versus China? which superpower is leading the race for dominance of the 21st century. Rebecca Chung Wilkins, Bloomberg's Asia government and politics correspondent, says a good way to try to answer this question is by looking at the key emerging technologies that China identified as its priority back in 2015 when it announced its made-in-China 2025 plan. And when you look at that plan now, Nearly a decade later, new research by Bloomberg economics and Bloomberg intelligence

shows that made in China 2025 has largely been a success. So of the 13 key technologies tracked by Bloomberg researchers, China has achieved a global leadership position in five of them and is catching up fast in seven others. Welcome to the Big Tech Asia from Bloomberg News. I'm Wanha. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever-shifting region. Today on the show, how did China get ahead in key technological advances, despite U.S. efforts to prevent that from happening?

And would a Harris or Trump administration change that? Rebecca says back in 2015 when the Made in China Plan was announced by the Chinese Communist Party, it was all about helping the country achieve two big goals. One is this self-sufficiency, not wanting to be reliant on other countries and is preparing for any kind of scenario where, for example, China might be cut off from, say, its energy supplied or whatever it might be. And China more broadly does have a sort of preoccupation or prevailing concern with preserving its own security. So standing on its own two feet. And the second is, becoming increasingly competitive and in fact a global leader in some of these key strategic

areas. So there's both a sort of inward and an outward element to the maiden in China plan. The plan highlighted 10 priority sectors for the nation to focus on, including aerospace equipment, energy-saving cars, biomedicine and high-end machine tools and robots. And now, almost 10 years later, according to the analysis by Bloomberg, China has, in fact, a global leader in many of these key areas. So those sectors include solar panels, unmanned aerial vehicles, those are drones, graphene, which is a coating material that's used in tons and tons of sectors, high-speed rail and electric vehicles. Now, does China have any natural advantages that makes it possible that it's been able to take leading positions in these sectors?

Or is this simply by design and the will of Beijing? Well, it's worth saying that even in 2015, China, as we determine, was already a global leader in three of these sectors in graphene, in solar panels and in unmanned area vehicles. So they had a somewhat of a head start in any case. But the other important element here to remember, I think, is that when Beijing does signal out an area for support, when it signals out a key policy priority, it really is able to throw the full weight of its economy, essentially, behind that. So, for example, if it decides that electric vehicles are a priority, say, it can ask banks to lend it credit

cheaply. It can get local governments to lease it land cheaply or perhaps even at no or low cost. It can also get large state-owned enterprises to use the sort of full force of its resources, it talents, and direct it towards those industries. So, you know, Beijing has an incredibly sort of powerful basis here, an incredibly powerful set of resources. to direct towards these industries when it has selected these priorities. But there is one key area where China hasn't caught up to the US, and that's in advanced semiconductors. That's in part because of some key things the US has done

to keep its rival from catching up. There's sort of three big tools for economic straitcraft that we've seen. One of them is tariffs imposing these high costs for imports coming into the US, sometimes prohibitively high. The second are export controls, essentially trying to prevent the transfer of US technology, goods, services overseas to other parts of the world. And the final part of that are financial sanctions. The big area where we can say that some of the US export controls and so on have been more effective is in sort of high advanced semiconductors. And it's important to remember in this context, it's just a handful of companies involved in this kind of really

advanced semiconductor tech manufacturing. And it's fair to say, the Biden administration, they have been successful in building consensus among allies, among other countries, trying to contain China's access to semiconductors. And so we saw Dutch companies, Japanese companies, essentially falling in line in preventing China from accessing the actual products needed to manufacture these types of chips. And in light of that of the U.S. having allies, to support its approach to trade on China and its approach to contain China. What has China done to make sure it has access to the technologies it needs? China essentially has been stoppiling like Matt.

That's the sort of fundamental basis of this. They're stoppiling a record amount of semiconductor equipment. And that includes these high-end Vidiya chips. It's preparing essentially for a number of further curves. It's looking further out, thinking if we see these kind of moves accelerate, if they're expanded, where will we be? And how do we try and future-prooficates that? But it's not just semiconductors

where the U.S. is trying to use export controls to slow China down. After the break, a look at the other tools the U.S. is using. And will a new administration keep them going? The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra.

Join us every Saturday and Sunday. Sunday for the new Bloomberg this weekend. I'm Christina Rafini. We'll bring you the latest headlines, in-depth analysis, and big interviews, all the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture. On Saturday mornings, we put the past week's events into context, examining what happened in the markets and the world. That on Sundays, we speak with journalists, columnists, and key political figures to prepare you for the week ahead. Join us as soon as you wake up and bring us with you wherever your weekend plans take you.

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It's important to understand where you spike, but also really acknowledge where you don't and find people who can fill those gaps. Listen to Leading by Example, executives making an impact on the IHeart Radio app, Apple Podcast, or wherever you get your podcast. The U.S. has leaned on its allies to limit China's access to advanced technologies like semiconductors. Meanwhile, the U.S. is also concerned about its ability to be a leader in other sectors as well. Some of these areas were outlined back in 2022 by National Security Advisor Jake Sullivan. Computing related technologies, biotech, clean tech are true force multipliers through the tech ecosystem. And leadership in each of these areas is a national security imperative. We're investing in the industries of the future and strengthening the resilience and security,

of our supply chains. Sullivan calls these technologies a national security imperative. Bloomberg's Rebecca Chung Wilkins says that's an important thing to take note of, because over time, she's seen a change in the way the U.S. talks about the need to restrain China. Yeah, I think in the early days of the trade war, a lot of the focus was on the sort of wrongdoing, as they alleged, of Chinese companies. but over time that has really morphed into this whole discussion over national security and increasingly this focus on China's preparedness for a war.

And in fact, we've almost seen the true, real concerns at the heart of some of these economic policies over sort of military might essentially. It's this question of deterrence whether or not Beijing and Washington will essentially adopt this idea that the costs of this. trade conflict and trade war and the costs of this increasing competition are worth it or not. It comes sort of, I suppose, of this fundamental question of, to what extent both sides feel that their own national security is fundamentally at risk. On the campaign trail, Trump and Harris have advocated different approaches toward China,

even as both agree on the need to thwart its rise. I asked Rebecca what Trump currently has in mind here. Well, we just in a way have just seen an amplification, perhaps unsurprisingly, of some of his previous policies. He's mentioned this possibility of 60% tariffs across all Chinese imports into the U.S. That would be crazy high. That would be crazy high. And it would really hurt the Chinese economy. One bank, for example, estimates that it could essentially halve Chinese GDP growth.

So it would really be a significant hit to China. but also a significant hit to the US, if that then results in a higher cost of goods. Bloomberg's editor-in-chief, John McElthwaite, pressed Trump on that point in an interview earlier this month. You're talking about 60% trade on that, 60% tariffs on that. You're talking, as you said, 100, 200% on things you don't really like. You're also talking about 10, 20% tariffs on the rest of the world. That is going to have a serious effect on the overall economy. And yes, you're going to find some people who would gain from individual tariffs.

the overall effect could be massive in terms of big. I agree it's going to have a massive effect, positive effect. It's going to be a positive, not a negative effect. Let me just take. No, no, let me tell you. The other thing to remember with Trump is that he has taken a more protectionist stance writ large. He's not just concerned about Chinese imports,

but he's concerned about imports from everyone, including, for example, the European Union. What do we know about Harris' approach if she wins? Well, Harris' approach, we expect to be more consistent with the Biden administrations. I will say she, too, has focused on this idea of jobs and sort of American industrial policy, trying essentially to build up some of those manufacturing bases again. She's been critical of Trump's proposed tariffs, but she has been quite firm on some of the national security risks that the U.S. faces. So, Rebecca, is either approach really doing a great

job in containing China's tech development? Well, if we look at the success of the Biden administration and we look just going back to the beginning at some of those made in China targets, for example, we can see that actually they aren't successful or they haven't been successful in certain key areas. If we exclude semiconductors, actually trade has found a way to get through. Sanctions haven't been hugely successful. So that's one of the first. question for Harris, that this need to perhaps recalibrate the approach. Despite the U.S. efforts to slow down China, the world outside the U.S. is increasingly driving Chinese EVs, surfing on Chinese smartphones, and powering their homes with Chinese solar

panels. And Rebecca says, there might be better approaches for the U.S. to maintain its competitiveness. One approach to thinking about what would be more effective than sanctions is this, idea that Adam Pozen from the Peterson Institute has mentioned, which is suction, not sanctions, essentially that the U.S. should be making use and taking up talent, resources, innovation coming from China and partnering with it in order to advance its own industries and its own key sectors. So basically taking away all the talent so that the U.S. makes use of it. Taking the best of what China has developed and then building on that to develop.

and innovate at a faster pace. This is the Big Take Asia from Bloomberg News. I'm Wanha. If you'd like to hear more about Bloomberg's research on the Made in China Plan, check out the conversation on Odd Lots with my colleagues Joe Wisenthal and Tracy Allaway. The other thing that happened that I think was actually a bigger deal from the Chinese perspective was when the U.S. added Huawei to the Commerce Department's entity list in early 2019.

Because what that signal was that the United States was affecting. trying to kill what was arguably China's best global technology company. The U.S. would say we're not trying to kill it, but the restrictions are pretty draconian, and there's very much that vibe. And check out our last episode, where you can hear more about one critical market that China's focusing on, EVs, and how one Chinese carmaker, BYD, is dominating the electric auto market globally. That's on our big take, Asia Feet.

This episode was produced by Yang Yang, Jessica Beck. and Naomi M. It was mixed by Alex Sugera and fact-checked by Eddie Duan. It was edited by Caitlin Kenney and Daniel Tan Kate. Naomi Shaven is our senior producer. Elizabeth Ponso is our senior editor. Nicole Beamster-Bower is our executive producer. And Sage Bowman is Bloomberg's head of podcasts. Please follow and review the Big Tick Asia wherever you listen to podcasts. It really helps new listeners find the show. See you next time. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moscow here to tell you about our new on-demand news report delivered right to your podcast feed. Bloomberg News Now is a short five-minute audio report on the day's top

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