How American Technology Aids China’s Global Ambitions

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How American Technology Aids China’s Global Ambitions
By Judith Bergman

Originally Published by the Gatestone Institute.

US technology has enabled China to build and successfully test an advanced nuclear-capable hypersonic missile that experts and politicians fear could evade US missile-defense systems, and succeed in striking the US mainland.

“The People’s Liberation Army now has an increasingly credible capability to undermine our missile defenses and threaten the American homeland with both conventional and nuclear strikes,” said Rep. Mike Gallagher (R-WI), member of the House Armed Services Committee. “Even more disturbing is the fact that American technology has contributed to the PLA’s hypersonic missile program.”

Take, for instance, computer chips. For China to build advanced weapons — of which the hypersonic missile is one example — it needs microchips, or semiconductors, as they are also known. Semiconductors, in fact, are so important to China that the Chinese Communist Party (CCP) has made it one of its highest priorities to become self-sufficient in the field, and Vice Premier Liu He has been put in charge of national chip development. The US, however, still leads in the semiconductor field, especially in chip design tools, so China, largely, still has to rely on American technology.

A recent investigation by New York-based research firm Rhodium Group for the Wall Street Journal puts on display the extent to which American companies are willing to fill China’s technological gaps — and that is just for the microchip sector. According to Rhodium, in the years 2017-2020, “U.S. venture-capital firms, chip-industry giants and other private investors participated in 58 investment deals in China’s semiconductor industry… more than double the number from the prior four years.”

Intel and San Francisco-based Walden International are among the U.S. investors in Chinese semiconductors. Walden International alone made 25 investments in Chinese chip companies during the 2017-20 period. In addition, since the beginning of 2020, China-based affiliates of US firms Sequoia Capital, Lightspeed Venture Partners, Matrix Partners and Redpoint Ventures have made at least 67 investments in Chinese chip-sector companies. Overall, billions of dollars have been raised for Chinese companies producing computer chips, according to the Rhodium investigation. Earlier, between 2013 and 2016 alone, “China-based firms leveraged… state funding to attempt to acquire or invest in at least 27 U.S. semiconductor firms totaling more than $37 billion,” according to research by the US-China Economic and Security Review Commission.

Apart from investments, US companies are supplying Chinese companies with the trained manpower to boost their own microchip industry. China is intensively recruiting senior engineers and executives from US companies and their China affiliates. “Veteran engineers and high-level executives are leaving top U.S. chip design toolmakers for Chinese rivals as Beijing looks to break America’s near monopoly on this key segment of the semiconductor industry”, Nikkei Asia wrote in November 2020. “Three Chinese startups established since September last year were founded by or have hired executives and engineers from Synopsys and Cadence Design Systems of the U.S.”

Intel, for instance, is backing a Chinese chip company, Primarius Technology, established in 2010 by, among others, a former Cadence executive. The semiconductor field in China is booming: More than 22,000 new semiconductor companies were reportedly registered in China in 2020, and another 4,350 in the first two months of 2021.

Even though many of those companies might ostensibly operate for civilian purposes, China operates a strict policy of civil and military fusion. That policy boils down to an all-of-society effort towards boosting China’s military modernization through the use of all technological means at Chinese society’s disposal. It takes place, according to the Pentagon, by “blending military and civilian expertise and knowledge, building military requirements into civilian infrastructure and leveraging civilian construction for military purposes”.

That, however, is just the chip industry. There are several other technological fields, in which American companies are aiding China’s technological and military ambitions, such as artificial intelligence (AI). China has made AI its highest priority, vowing to lead the field globally by 2030. Like semiconductors, AI is a dual-use technology, used for civilian, as well as military purposes. China has used AI to achieve progress in unmanned surface vessels, which China plans to use in the South China Sea, and unmanned tanks, according to the Pentagon.

To gain on the US lead in the field — which is drastically narrowing — China has for years been investing in AI worldwide, and US companies have not been shy about investing in AI in China. In 2017, for instance, American company Synopsys set up a $100 million strategic investment fund for the Chinese market “to collaborate with local companies and venture capital in investing in the areas of chip design, artificial intelligence cloud-computing, software security and EDA tools.”

The unrestricted flow of American technology to China was highlighted in a research report published in 2019 by the US-China Economic and Security Review Commission, “How Chinese Companies Facilitate Technology Transfer from the United States”. The reports points to the massive magnitude of the problem in general — not just with regard to semiconductors and AI. In China, “Over 6,000 new China-based JVs [joint ventures] with foreign partners were established in 2015 alone, accounting for around $27.8 billion of FDI [foreign direct investment] flows to China,” the research report states.

“In several industries, foreign firms must form a JV with a Chinese partner in order to invest or operate in China… Frequently, the Chinese partner in a JV will require that its foreign partner share technology and knowhow, leading to technology transfer to China.”

As the research report notes:

“Because the Chinese government enforces stringent restrictions on FDI inflows, U.S. and other foreign businesses have few options other than to acquiesce to Chinese firms’ JV requirements and sign over their… technology to access the Chinese market.”

From 2010 to 2016, Chinese firms invested in at least 51 AI startups in the US. However, according to the US-China Economic and Security Review Commission, “analysis of Chinese investment in the United States generally underestimates the real level of Chinese economic activity in the United States.”

In other words, American businesses rushing to invest in China — a country openly dedicated to unseating the US and dominating the planet “economically, militarily and technologically” — should have everyone worried.

Judith Bergman, a columnist, lawyer and political analyst, is a Distinguished Senior Fellow at Gatestone Institute.

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