IVA's President: some thoughts on China

Dear IVA friends,

While Europe is fully preoccupied with President Trump’s various initiatives, a very deliberate movement is under way in another corner of the world—namely, China’s scientific and technological advancement. President Xi Jinping and the Communist Party have a clear plan for the future: global leadership in technology and science, free from awkward dependencies on other countries (read: the EU and the USA).

I see three areas that deserve greater attention:

First: China is making major investments in basic research focused on areas such as artificial intelligence, biotechnology, and quantum technology. At the same time, China is also pouring significant resources into existing technologies—all with the aim of reducing, or eliminating, dependence on other countries. This includes semiconductors, robotics, nuclear and renewable energy sources, and more. The objective is clear: to overtake the USA and the EU and make China the world’s dominant centre of technical and scientific power.

Second: China is acting strategically to encourage companies to absorb and deploy technology in their operations to become more efficient. This is most evident in the manufacturing industry, where digitalization - not least AI - and automation are now priority areas.

Third: China has now intensified its efforts to recruit researchers who are leaving the USA due to restrictions on academic freedom. These include American researchers, researchers from other countries, and also Chinese researchers who are tempted to return after a period in the USA. Those who move to China bring with them considerable expertise and invaluable networks.

Finally, I would like to highlight the trade war between the USA and China. It is clear that China is not the most vulnerable party in this trade war. China is to far more self-sufficient in goods, services, and technology, and it enjoys better and more diversified supply chains than the USA. In addition, China has an ace up its sleeve — export restrictions on strategic metals and minerals, a field in which it accounts for over 70% of global extraction and up to 95% of global refining. Last week, China introduced special export licences for several of these metals for export from China to the USA and the EU. More of this can be expected.

Another advantage for China is that it holds US government bonds of significant value, making the American economy directly vulnerable to the decisions of Beijing and the Communist Party.

My conclusion is that it is not enough to be prepared for how the USA will act in this new situation. We need to pay equal attention to how China acts—not least with major overcapacity and the need to sell its goods elsewhere than to the USA.

In this context, Europe has no reason to despair. We enjoy considerable academic freedom, several EU Member States—especially Sweden—rank highly in important innovation rankings, we have a modern and adaptive manufacturing industry, our startups are at least as innovative as those in Silicon Valley, and we have a well-educated and healthy population and a high quality of life. In addition, in many EU Member States, we have strong leadership with clear priorities: stronger innovative capacity, self-sufficiency in defence, and increased investment in research and education.

I am hopeful about developments, while not naïve. We can emerge stronger from this, but it will require focus, awareness of our strengths and weaknesses, and resolute action.