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The U.S. is Blindsided in Efforts to Block China’s High-tech Rise

Mar 27, 2024

The US was shocked out of its 20th century global isolationism on December 7, 1941 when Japan attacked Pearl Harbor. Ever since that era when a dirt-poor, war-torn China was still being derided as the “sick man of Asia”, the US has kept trying to maintain its lock on advanced technological global hegemony, doing whatever it takes to be #1, albeit with declining success.

Today, the US and “partners” still soldier on in this futile task with China in its crosshairs, the most recent shameful examples being the continuing attempts to kill Huawei, and the ongoing tiff to divorce TikTok from the inventive country that birthed it with both efforts based on paranoia and unproven security concerns.

China, however, is neither sick, nor the shambles it was during its century of humiliation caused by Western imperialist forces. Instead, as exemplified by Huawei and ByteDance, TikTok’s parent, China is rising, resembling its storied past as global and technological leader for millennia.

Huawei has been falsely maligned as a communist stooge since its founding in 1987. In truth, Huawei has been employee-owned-and-operated with one of the best corporate social responsibility footprints of any company anywhere.  

ByteDance, like Huawei, a small startup, founded a quarter-century later, has faced nonstop unproven Western accusations of secret back doors giving the Chinese government and CPC complete access. I believe the reason for aggressive Western pushback is that Huawei, ByteDance and peers are more nimble and innovative.

Huawei is the top-ranked Chinese company in patents filed, and a global leader in professional standards-setting bodies that define the rules by which high tech global industries operate.

TikTok rose to the top social media rankings at warp speed. The key to its success is in its proprietary algorithms that keep its users engaged at much higher levels than any of its competitors. It’s the most downloaded app globally and its user base continues to explode exponentially.

This explains why western leaders see China threatening US’s #1 status as global high-tech leader and why British Intelligence James Bonds and CIA spooks tried mightily to find backdoors and enter them. Because the backdoors are figments of imagination, and there’s no smoking gun, or any gun, these sleuths came up empty handed, but the West still persists in hopes of weakening China.

Lacking proof, US and “partners” have imposed multiple round trade restrictions, increasingly cutting off Huawei’s chip supplies from western companies, while blocking access to western technology to self-design chips and have them manufactured. Reportedly, in one case, Huawei replaced over 13,000 components with non-banned substitutes, forcing Huawei to redesign 4,000 circuit boards at a cost of $2 billion.

Instead of killing the company, which they nearly did, sanctions made it stronger by causing Huawei to diversify its lines of business and become more technologically innovative through hard work and continued massive R&D investments.

It was the West, however that shot itself in the foot. Consider just one country.

In 2020, UK imposed a ban on certain Chinese components in domestic 5G networks in the midst of its 5G rollout. The ban’s double whammy delivered both inferior services, while needlessly ripping out and replacing Chinese components.  

According to CNBC, UK ranked last in European 5G performance, citing the ban as a possible reason for the poor performance. CNBC reported London “is falling behind its European peers for a number of reasons, including Huawei’s forced exit from the UK’s 5G rollout.”   Estimated cost of removing Chinese 5G components in UK alone exceeds $5 billion.  In Germany, the cost is multiples of UK’s.

TikTok’s case is different and encompasses three of my favorite truisms observed firsthand during my Washington years: “politics makes strange bedfellows”, “follow the money” and “money talks and bullshit walks”.

The bottom line is that ByteDance is currently seen as threatening US’s #1 global high tech leader status, merely because it’s considered Chinese and that’s why the House of Representatives overwhelmingly passed the “Protecting Americans from Foreign Adversary Controlled Applications Act”. Being anti-China is about the only issue that unites Democrats and Republicans.

However, on closer inspection, is ByteDance really Chinese? No, Huawei is clearly Chinese but ByteDance is Sino-American.

ByteDance is registered in Cayman Islands, three of its five-member Board of Directors are American. Its largest investor is US behemoth BlackRock with $10 trillion in assets under management. The Chinese government owns 1%.

One of ByteDance’s largest individual investors, Jeff Yass, owns 7% valued at $21 billion. Yass is also one of the largest contributors to the Republican Party and to Donald Trump, which these days are one and the same. He’s reported to have lobbied Trump and others against the House bill and the legislation will have much more difficulty surviving in the Senate.

Even though ByteDance stores all its data on US-based Oracle servers, which should have alleviated security concerns, it hasn’t done so because TikTok is perceived as Chinese. So in the US, opposition to TikTok, like Huawei, is based on theoretical security, or rather perceived, insecurity. The biggest sin of both companies is that they’re seen as Chinese and ipso facto, therefore pose a security risk.

No US intelligence official, has ever said that either company has been proven a security risk—not the Director of National Intelligence, not the head of the CIA, not the head of the FBI. They only say that either may or could be!

So as President Clinton liked to say “There’s no there, there.” It’s purely theoretical.

Given ByteDance’s overwhelming non-Chinese ownership, American control and the army of lobbyists being deployed, not to mention transactional Trump and his acolytes being “Ya$$” men, TikTok’s fate can easily change.   

I believe the two companies will be treated completely differently and with a cosmetic change here and a legal sleight of hand there, ByteDance will be given a pass and the US will be laser-focused on its self-perceived high-tech enemy #1, Huawei, especially if Trump wins.

You can observe this already. Biden appears poised to further sanction Huawei-linked high-tech companies from further innovating chip technology. Rather than competing on a level playing field, the US is reduced to conceding US dominance and taking the low-road of bigger yard and higher fence, attempting to further contain or reverse China’s high-tech rise.

It's easy to see why; despite the billions showered on US and ally high-tech companies by the Inflation Reduction Act like Intel and Samsung to build chip fabs in the US, many are pulling out and cutting their already considerable losses because the US is no longer competitive as their costs rise precipitously to near $30 billion for a 2nm fab, not to mention uncertainties such a lack of skilled labor, water and energy shortages, and regulations that further stifle innovation.

And just as the US has tried unsuccessfully to maintain its #1 high tech global status, it has missed many opportunities in the post-war years. To this day, it continues to be blindsided.

America was shocked when the Soviets launched Sputnik in 1957. The US auto industry, based on gas guzzling vehicles, failed to quickly adapt to oil price shocks in the 70s, and froze like a deer in oncoming headlights. Asian and European automakers with more fuel- efficient vehicles, gobbled up the domestic and international car market, seemingly overnight. That’s all old news but is still being repeated.

The US had a growing environmental movement predating the oil shock, and could have been global leader in renewables. Instead, in the midst of domestic civil unrest at home, and fighting hot and cold wars abroad, the country was again blindsided. We were distracted by energy companies, automobile companies, the Military-Industrial Complex and their vast armies of lobbyists, not noticing that the world had changed and that China had risen.

Now the US continues to zero-sum itself out with culture wars and a dysfunctional political model that seems irrevocably broken and it hasn’t noticed that China, similar to Huawei and TikTok, has seemingly overnight taken the lead in renewable energy: electric vehicles, wind power, wave power and the like because of a different model that serves its own people that has lifted more than 800 million Chinese out of extreme poverty.

In the meanwhile we face so many existential threats such as environment, global public health, arms control and the like. It’s a no-brainer that we should be working together in a new model of great power relations to build a community of shared future for all.

We aren’t and that’s downright ominous! 

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