Xi calls for tech boost in China after US escalates restrictions

xi Jinping renewed calls for China to step up development of technologies critical to national security, issuing a stark reminder just as escalating US sanctions threaten Beijing’s efforts to become self-reliant in semiconductors.

Citing the so-called “whole nation system” that has driven China’s space and nuclear weapons programs, Xi urged top officials to pool their resources and focus on breakthroughs that are critical to the country’s future. The government should play a more active role in organizing this process, he said at a party summit attended by senior politicians, including Premier Li Keqiang.

While scant on details, Xi’s personal intervention suggests Beijing is growing concerned about Washington’s increased efforts to curb China’s efforts to advance in fields from artificial intelligence and biotechnology to the $600 billion global semiconductor arena.

The U.S., after years of targeting specific companies such as Huawei Technologies Co., is introducing a series of broader restrictions on the entire Chinese economy. The Biden administration has introduced new controls on the sale of artificial intelligence chips to Chinese customers, a blow to the development of cutting-edge technology, and is considering an executive order that would limit investment in the country.

“The U.S. competition strategy tends more clearly to contain China by blocking access to the resources needed to develop advanced semiconductors,” said Kendra Schaefer, a partner at Beijing-based consultancy Trivium China. “Senior leaders are striving to make science technology not just an endeavor for government, innovators and researchers, but a whole-of-society effort, not unlike the Soviet-era space race.”

Read more: What you need to know about China’s massive tech crackdown

An escalation in U.S. efforts would only fuel growing frustration in Beijing over the long-standing failure to develop semiconductors that can replace U.S. circuits.

In recent months, China has launched a wave of investigations against top figures in the chip industry. Senior officials are angry that tens of billions of dollars poured into the sector over the past decade have not produced the kind of breakthroughs that have emerged from previous national science efforts, Bloomberg News reported. Instead, the feeling is that Washington has been able to arm Beijing and successfully rein in its technological ambitions.

In calling for government intervention, Xi follows a pattern that in recent years has prioritized the role of state institutions over private giants such as Alibaba Group Holding Ltd. or Tencent Holdings Ltd. in stimulating technological progress.

An employee works at a chip manufacturing company on April 19, 2022 in Suqian, Jiangsu Province, China

Xu Changliang/VCG via Getty Images

“Competitive advantages in certain sectors must be achieved to win opportunities for strategic initiative,” state-run China Central Television quoted Xi as saying to a high-level Communist Party committee he chairs. “Pool resources to get big things done.”

Xi is expected to retain his top party post at the bi-decade congress next month, despite a slowing economy, geopolitical tensions and disappointment over his zero-tolerance Covid strategy. This gives it a mandate to pursue overarching goals, including a wide range of government-backed technology programs, often involving billions of dollars in direct government funding.

“It remains to be seen how much progress they can make.” Unlike resources, it is difficult for ‘innovation’ to be directed by the state,” said Union Bancaire Privee analyst Wei-Sern Ling.

Read more: How China is using AI to fuel the next industrial revolution

First introduced under Mao Zedong to help then-communist China industrialize, the “whole nation” approach has been crucial in helping Beijing achieve a number of key national priorities, from developing its first atomic bomb in the early The 60s until the achievement of Olympic sports success. It was then largely sidelined as officials focused on economic growth. But after a series of U.S. sanctions exposed the vulnerability of China’s chip capabilities, Xi reactivated the drive to achieve breakthroughs in advanced chip development and manufacturing.

About $1 trillion in government funding has been set aside under the technology initiative, some of which will be used by central and local governments to co-invest in a series of third-generation chip projects, Bloomberg News representativeFrrted. Top chipmakers and research institutes have submitted proposals to the ministries of science and information technology, all vying for a place in the national program and a share of the funding.

Beyond self-sufficiency in technology, Xi also stressed the importance of conserving energy, spurring advances in health care and rural development — familiar policy priorities for the Chinese leader. This includes more efficient use of resources from water and grain to minerals and raw materials, the official Xinhua News Agency said, citing Xi. He called for lower carbon emissions in the production of goods and services and opposed “extravagant consumption and overconsumption”.

Among other things, China should create a pricing mechanism that reflects resource scarcity as well as the cost of environmental damage, Xinhua quoted Xi as saying.

With help from Jason Rogers

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