Cutting off China rather than driving its own innovation hurts U.S. technology developers

Illustration: Xia Qing/GT

Editor's note: Recently, official exchanges between the United States and China have increased. Daniel Krittenbrink, assistant secretary of state for East Asian and Pacific Affairs, will visit China from Sunday through Tuesday, following a phone call between Chinese and American leaders earlier this month and Treasury Secretary Janet Yellen's previous trip to China, the State Department said. He plans to do so. week. Global Times (GT) reporter Wang Wenwen interviewed Ben Harburg (Mr. Harburg), managing partner of venture capital firm MSA Capital. He also serves on the board of directors of the National Commission on U.S.-China Relations. He spoke about bilateral relations from the perspective of an American businessman.

GT: How would you analyze recent communications between the two countries? Harburg: The scariest part was when we weren't speaking. Because when you're not talking, there's no hotline to connect to if something happens, like two ships or planes colliding. Over the South China Sea. That's when the worst-case scenario could happen.

I think it is important to resume communication. The tone was relatively constructive. The tone of the meeting with U.S. Treasury Secretary Janet Yellen was positive. She talked about challenges such as dumping, but also about ways to find ways to solve them. He also acknowledged that we are inseparable and our economies are deeply integrated.

our organization [the National Committee on US-China Relations] He helped arrange a meeting with President Xi. Many of the people in that room are people who do a lot of business with China and are actively involved. It's the companies that are on the fence or on the more hawkish side that need to get involved and get them back on the table. I would like to encourage China to attract more global students and journalists.

All in all, opening lines of communication is the first and most basic step to avoid a complete confrontation.

GT: MSA Capital has invested heavily in Chinese technology companies. How do you view China's technological development?

Harburg: We are now in a different era due to the development of Chinese technology. When we first started investing in China, we were in the 2.0 generation and were primarily responsible for consumer mobile-oriented technology. China is currently evolving into the so-called 3.0 generation, which focuses on opportunities in AI and core technologies, which is not surprising, as China needs to become more efficient and more evolved as a technology ecosystem. It's from. Chinese technology companies developing products that address global markets, particularly cross-border e-commerce and hardware, are also areas where we invest.

China remains the world's largest consumer market and is still in its early stages of development. The US tech ecosystem is 40-50 years ahead of him. China is actually only about 20 years old in terms of technological evolution. This means a huge influx of consumers from rural areas to first-tier and second-tier cities to instill local manufacturing and urbanization efficiencies by investing in all the ways China is building its own capital. It means there's a chance. sufficient. Obviously, as a result of many decoupling movements and deglobalization, China has had to build its own comparable businesses for the global market.

Ben Harburg Photo: Wang Wenwen/GT

GT: China and the United States are engaged in a technology race. We have seen the US technology blockade against China. Do you think such a policy is self-defeating? Harburg: Naturally, any incumbent leader would want to protect his or her advantage. From a competitive dynamics perspective, it makes sense that the US government and companies are doing everything they can to curb China's ability to challenge these companies. Back in 2018, the US ban on core components from ZTE and Huawei exposed China to the vulnerabilities of its technology and supply chain infrastructure. This has forced China to find a way to wean itself from dependence on key US inputs.

In the short term, that will hurt China. Huawei, ZTE and others initially argued that this would have a huge negative impact on their business. But in the long run, China will become completely self-sufficient and independent of US inputs.

In essence, the United States made its major competitors and economic rivals aware of its weaknesses and the areas in which it could do the most damage. The United States also promotes China's self-sufficiency and then, through numerous unforced errors, makes it difficult for students around the world, especially Chinese students, to study in the United States, thereby promoting our own genetic pool and our own unique technologies. leadership was undermined. The net result was that by blocking China's immediate economic and technological breakthroughs, it weakened its long-term competitiveness for short-term gains. My number one recommendation to the U.S. government is not to insist on building a wall against China, but to put its foot on the gas and focus on promoting American innovation.

GT: You believe that China will beat the West in several areas in the coming decades. Amid the current challenges to the Chinese economy, are you confident in the sustainability and resilience of the Chinese economy? Harburg: I ​​am definitely bullish on the Chinese economy in the long term. It is inevitable to me that a country of this size with its own brand of capitalism with Chinese characteristics can still prosper. Therefore, I don't think there are any major challenges from an economic modeling perspective. And we have an incredibly hard-working population, chock-full of some of the brightest PhDs and his STEM (science, technology, engineering, mathematics) graduates in the world.

China did all this under such a compressed schedule. When I was here, when people were criticizing China for bad pollution in Beijing, you have to remember that China went through an entire industrial revolution in just 20 years. In the West, if you go to big cities like London or Pittsburgh, it took 100 years to get rid of that smog.

China faces many headwinds from outside, but there are also headwinds from within. Once these issues are resolved domestically, how China positions itself within global competitive dynamics will become important in order to ensure continued growth.

GT: In a Foreign Policy article last year, you argued that the United States cannot stop China's rise and should stop trying. Do the policy elites in Washington hold the same view today? Harburg: We are proud of the historic and failed attempts by countries to block China's access to other technologies, such as satellites and nuclear. I tried to explain based on evidence and very dualistic and objective terms. technology. And our focus on building walls rather than stepping on the gas, asking other countries to try to restrain China technologically, and insisting on highlighting China's vulnerabilities is actually what our country is doing. He made the argument I mentioned earlier that it would harm his own technological development.

We said the same thing to people in Washington. Are they getting the message? That seems unlikely for now. Until the US begins to realize that it is truly helping China become self-sufficient, establishing leadership and core technology areas in the Chinese market where it was once the undisputed leader. I don't think they will recognize the negative effects of their policies.

GT: From a businessman's point of view, do you think there's a chance that the two countries will ease relations in the future? Harburg: There were some really bad moments at the very end of the Trump administration. Today it feels like a Cold War, but there was a sense that something might spark a hot war. That was probably the lowest moment. We were moving upward little by little. However, since this is an election year, we cannot expect much progress. Both sides of the political aisle will vie for the title of who has been tougher on China.

We all try to predict what will happen in the next few years. Another Biden administration would likely lead to more of the same détente, ensuring that the U.S. side takes continued action against Chinese companies, including restricting the flow of capital and technology into China. Dew. This also has implications for us as businessmen, as we understand that there will be less world capital available to China and fewer world markets accessible to Chinese people. Certain technology industries in China will face difficulties in the short term due to lack of access to U.S. chips and other critical inputs.

If Trump wins, it will be a very binary situation. Expectations are already very low due to his insistence on 60% tariffs on China. But we all know Trump is a dealmaker and deal-oriented. So, ironically, if China comes to the table with serious intentions of striking a deal with President Trump that covers many of the US's grievances, such as intellectual property protections and trade imbalances, then in reality A more binary outcome is likely, with the potential for a significant improvement in U.S.-China relations. All night. It affects our business again. We may experience significant short-term distress. But things may return to normal in the long run.

But in general, I don't expect economic recombination or reintegration to occur. I think we will reach a state of stagnation. What we want at the moment is to keep the lines of communication open, avoid violent wars, and find a balance.

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