美中全球议题对话项目

这次采访是用英语进行的。

Eleanor Albert: Today, our guest is Douglas Fuller. You are an associate professor of political science at the City University of Hong Kong. You also previously taught at Zhejiang University's School of Management, King's College London, the Chinese University of Hong Kong, and American University. Your research interests lie at the intersection of technology policy, and international business with, of course, a geographic focus on China and East Asia.

You are the author of Paper Tigers, Hidden Dragons: Firms and the Political Economy of China's Technological Development, which was released in 2016, as well as articles and volumes on technology policy and technology transfer between the United States, China, Hong Kong, and Taiwan. Finally, you are also a participant in the research group on business and trade with Georgetown's Initiative for U.S.-China Dialogue on Global Issues. Doug, welcome to the show.

Douglas Fuller: Thank you. Thank you for inviting me.

Eleanor Albert: I want to kick off by asking you what your own path into studying this intersection of China's development and technology, how did the focus on the economy and technology come to be and how did China factor in?

Douglas Fuller: To date myself, I went off to college at a time when it was sort of the heyday of Japan's ascendance or supposed ascendance, and so I probably would have studied Japanese, but the college I went to did not offer Japanese at that time. Strangely, they offer it now, but they did offer Chinese, so I said, "Well, I know China's situation is quite different," at least at that time, "But I'm interested in East Asia in general, so why don't I take Chinese?" That then snowballed into studying more about China, in my junior year, going to Taiwan to study more Chinese.

Then when I started off in grad school, I already knew I was interested in technology and economic policy, and I started doing some research on this then not well-known, kind of small firm, albeit, one that had a very impressive trend line. It was up and coming, and that was Taiwan's TSMC, with is now obviously a quite well-known firm.

Then that segued into my working for this research center at MIT called Industrial Performance Center, which is very much focused on technology and industrial policy, and getting involved in projects they had that covered both the People’s Republic of China and Taiwan. That's how this all came together, I guess, from college into graduate school. I skipped all the boring details.

Eleanor Albert: It parallels my own kind of foray into studying China, but my experience didn't necessarily already root me in East Asia. I originally wanted to study Arabic, but the school where I was also didn't have a very well-developed Arabic program, and it was early mid-2000s and everyone was talking about China, and I liked studying language so I said, "Why not try some type of language that is extremely different from anything else I've studied?" The rest is history.

On the technology side, was there something, or a moment in time, or a technological development, that made you aware that this was going to be such an important sector? We can always say that technology has been the root of massive economic developments throughout history, going back to the industrial revolution and far before that, but was it your interest in Japan at the time, or was there something larger going on?

Douglas Fuller: I guess it wasn't an interest in just, in I guess, what we would call the high-tech sector or IT, per se. It was more an interest from my, at least understanding at the time, that these East Asian countries had conducted very successful industrial policies across a lot of sectors that got me interested in these industries and in the policies that may or may not help to foster and support them.

Eleanor Albert: The experience of the Asian Tigers and a rapid catch up game, certainly, I think, got a lot of people's attention.

Douglas Fuller: I wasn't sure that, and I don't think, frankly, that China's trajectory is exactly the same as any one of these Asian Tigers, but I do have to say, when I was doing my dissertation research outside of, of course, China itself, there was not as much interest in China's tech sector as there is today. Even my own wife, who is a Chinese citizen, she always said, "Why are you studying China's tech? There's no tech in China. Why are you wasting your time with that?" It was only in the last five or six years, she's like, "Wow. You might have been right.”

Eleanor Albert: Today's reality on the technology front when it comes to China is significantly different than, I think, a lot of people anticipated. That leads me a little bit to my next question which, if you had to describe the current state of U.S.-China relations in the technology sphere in two or three words, what would they be?

Douglas Fuller: I will apologize by using as one of my two words, a word lots of people hate, but I'm going to say partial decoupling. I know lots of people object to decoupling, but I do think it's, no matter how ambitious or aggressive, or however you want to describe it, the Biden policy becomes, and so far it doesn't look like it's so ambitious in terms of trying to decouple, there's also some decoupling from the Chinese side. It does look that in certain areas, we already de facto have this, but the critique of it is, "Oh, well, decoupling in its entirety isn't possible." I would agree it would be extremely difficult. I don't think it will happen.

Eleanor Albert: A partial parallel decoupling. Do you see this future as being costly, or is there something else driving this partial decoupling? If you wanted to diagnose it in some sense, technology issues have been now at the forefront of bilateral tensions in a way that you were just describing they weren't, whether it's artificial intelligence, Huawei, internet governance, STEM education, semiconductors. How did we get to where we are now, and what do you see as the trend lines moving forward for U.S.-China exchanges in this field?

Douglas Fuller: Part of it are just secular trends in China, but China has had a fair amount of upgrading in various sectors. In some sectors, I would argue, not as much as some people in Washington fear, but overall, it cannot be contested that they've improved their technological capabilities.

Eleanor Albert: Where do you see that variability across sectors?

Douglas Fuller: I see it across sectors, even if we're going to talk about, even within sectors there is quite a bit of variability. If we're looking at semiconductors and chips, there are some very capable chip design firms in China, and China has a lot of chip fabrication, chip manufacturing capacity and assembly capacity, but it's not at the cutting edge of chip manufacturing. In terms of all the other inputs that go into making these chips, whether it's the software called EDA tools for chip design or all the pieces of capital equipment that go into the factories to make the chips, basically, that is all foreign, so there's still lots of areas where they haven't caught up and even areas of deep, deep weakness.

Having said that, that's a very globalized industry, so it would be incredibly costly for any one country, even the United States, to try to do everything itself in that sector. but just to go back to the original question… It's a bit of a cliché, but I think it is true that China, after the global financial crisis – the Chinese government – began to believe some of its own propaganda, get much more confident: "We have the solutions. The West is intellectually and morally bankrupt."

As part of that, being a multinational in China had always been kind of complicated. There's this big or potentially big market there, but trying to get access to it could often be difficult. I think the hopes or illusions of huge benefits from China for a lot of firms started to wear thin.

Then, of course, there was just the bilateral government-to-government relations that during the second Obama administration, I think, they became progressively disillusioned with the prospects for cooperation with what became the Xi administration. All of that came together, even before you have 2016 and Donald Trump. Even without Trump, there'd still be a lot more of this tension.

Even actions by the Chinese government that weren't necessarily directed at the U.S. or at individual multinationals added to this angst. The very ambitious Made in China 2025… China had been trying various policies to build up its technological capabilities for decades, but now that it was much closer to the technological frontier, there was much more worry.

Eleanor Albert: There are obviously political pressures and security dynamics that always overshadow the U.S.-China relationship, whether the leaders want it to or not, but definitely the domestic initiatives by Xi and others to emphasize this future of self-reliance, the indigenous development. That certainly can make signals to multinationals and to other foreign governments.

How can we square China's inward turn to make itself this big technological power, but at the same time, we see China moving into a space where it wants to export some of its technological capabilities around the world? What do you see as the drivers, and are there implications of having Chinese technology adopted more around the world?

Douglas Fuller: Well, frankly, I think if we're talking about the area that raised the most concerns, had the most potential for China exporting its technology and setting standards around the world, then it would be 5G telecommunications equipment and Huawei. There's still going to be a lot of telecom equipment exported from China, but at this stage, one would have to say that the revised Entity List aimed at Huawei has been pretty effective of slowing them down. Whether or not one thinks that was the policy the U.S. should have done, it seems to be having those effects.

It's not just with the U.S. There's just a high level of distrust that's only gotten worse under Xi, the distrust of the Chinese government and its intentions. Then that's extrapolated to Chinese firms. Now, I would argue that Huawei is not really a state-owned firm in the conventional sense. On the other hand, within China, the Chinese state does have various tools of coercion it can use against any person or entity…

Even for those countries that sort of accepted, "Okay. Huawei is not just this state firm that's following all the state's edicts," but even for that type of private firm, you could be worried that it could be forced to share information or other things.

The other claim made often in the U.S. is that if you don't stop Huawei, then they're going to completely dominate 5G standards and there won't be any hope for using non-Huawei equipment. On the one hand, I think that's, from what we know so far, a bit of exaggeration. Yes, they have a substantial patent portfolio, but I wouldn't necessarily call that dominant. This concern does explain the very different treatment of Huawei from ZTE. ZTE also can produce 5G equipment and yet, there aren't quite the widespread concerns from the U.S. about ZTE. They're still able to buy all sorts of American chips for their equipment.

I think the rational reason behind that is that everyone understands that ZTE is not quite competitive. They're sort of like the cheap alternative to Huawei, Ericsson, and Nokia equipment, so no one's really worried about ... Well, few people are worried about them dominating this sector, and they don't really have a very good presence in advanced markets so they're not going to be all over Europe or in Japan and places like that, or sold in Korea.

Eleanor Albert: On that note, the developing world is certainly a huge potential market for China in this regard, and I wonder if, are arguments about the security of developing countries not emphasized? If so, why not? This is a challenging thing to address because, I think, a lot of times, the U.S. will make decisions on the U.S. interests, and then they want everyone to follow along with it, but if those interests only extend to a European market, what does that say for the continent of Africa and the amount of partnerships that they create, and across parts of Asia? I wonder how you see the technological footprint expanding beyond advanced markets to a developing world.

Douglas Fuller: Well, frankly, I think a lot of those countries will end up using quite a bit of ZTE equipment. ZTE has always focused on those markets, between getting very generous loans from the China Development Bank and the fact that those countries, being relatively not well-off, want cheap equipment. It's a good market position for them and has been. I do see that still going on going forward. There has been talk of American initiatives to try to encourage the use of other providers there as well, but it seems so hard for the U.S. to come up with the money for a variety of policies beyond defense policies, so I don't think they will be able to offer the kind of money needed.

I guess, the one thing to be said in defense of all of this U.S. policy in telecom infrastructure equipment is we're not really doing it on the behalf of American firms. We don't have a real provider of 5G equipment, manufacturer of 5G equipment in the U.S., so it wasn't killing off Huawei so an American firm could do well. I'm sure, over time, it's really going to help Nokia, Ericsson, and especially, actually Samsung, who was more of a peripheral player but with hopes of doing more. Given its pretty substantial technological capabilities and worldwide market reach in other areas, it won't be surprising if it becomes a big player, given the weakening of the Chinese ones.

Eleanor Albert: We've talked about some of the strengths of China's technological advancements. What are some of the weaknesses? What are some of the things that in the DC Beltway get over-hyped?

Douglas Fuller: I think even in the areas where China is very, very good, such as Huawei and 5G equipment, or maybe in some chip design, or AI, I think their abilities are still over-hyped. There's a bit too much of a reaction, maybe, not enough people taking seriously in the past how quickly China has caught up in some areas. I actually think across the board, a lot of these weaknesses go back much more fundamentally to China's institutions. Yes, it's a developing country and so in certain areas, they're still catching up and learning things, which is to be expected.

I also think there's some pretty serious weaknesses that are somewhat baked into the system they have now, which for those concerned about China's rising competitiveness is something of a silver lining. What I mean by this is the Chinese government, over time, has loved to use state procurement to try to foster new technology and industries. Now, arguably, some of that worked where those industries are newish, worldwide, and you just need to scale up. Maybe you can make an argument this has worked well with wind turbines, though even there, I've heard arguments that on the service and software side of that industry, the Chinese players are weak.

Arguably, China's done much better in those sectors where it sort of allowed a free-for-all. A lot of these mid-tech sectors where China itself had a large market and they allowed all sorts of competitors, MNCs, state-owned firms, private firms, kind of hybrid firms, part state-owned and part private... Encourage entry into those areas that they advance more quickly.

So first point, state procurement. They haven't used that really well. They tend to keep choosing the same firms or don't really have good standards for which firms to choose. Then the second problem is this predilection to turn to state-owned firms or to take over firms that seem promising and make them state-owned firms. This predilection has really gotten much worse under Xi Jinping.

And frankly, overall, the track record, particularly in fast-moving tech sectors of the Chinese state, isn't that great. I think this is something that China really needs to confront. I don't think there's any evidence right now that they are, because it's really an institutional drag on their performance.

Eleanor Albert: It seems that the realities of today have made an overly politicized executive dynamic between the U.S. and China, as well as other developed countries, but I'm curious if you see any areas that present opportunities for tech and business exchanges, or are we more bound to some entrenched strategic competition in the tech sector for the foreseeable future?

Douglas Fuller: There still are opportunities for cooperation, but I do think a bit of the calculus has changed. “Indigenous innovation,” that was the slogan, but I think a lot of businesspeople in China did not take it very seriously when they could just buy American or other foreign inputs that they needed, easily. Then under the Trump administration and reinventing this Entity List mechanism to control technology exports to Chinese commercial firms, as well as to other firms that we might much more legitimately have an issue with, even under the old military firms or firms involved in Xinjiang, and that sort of thing.

Now it's unclear how far these export controls are going to go. And they also impact some exports from third-party countries as well, so this makes Chinese firms less of a usefully ally for foreign businesses. "Well, we can't really trust that your governments are going to allow us to buy your products, so we better think of some other alternative." I don't want to take that too far, but I do think that is a concern.

Now, it's much more, "Okay. Let's use the foreign product as long as we can, but we better have a plan B of a domestic product and take that domestication slightly more seriously than was done in the past."

There hasn't been this massive increase in export controls. When they have expanded it, it seems the sort of reasons that one could understand. "Oh, it's a military affiliated firm. Oh, this is something to do with human rights." That at least gives some measure of predictability to the Chinese side. There's still so much business and cooperation going on. BGI, the biggest human genome-based firm in China, where do they get all their genome sequencers? The vast majority from Illumina in the U.S. There are many examples of these kind of relationships.

I think maybe going forward, much more concerning, or where there's probably going to be widening, maybe much wider controls would be on the investment side. That's not a done deal either, but the lack of clarity, at this point, about what will or won't be forbidden makes it very difficult for Chinese firms to decide, "Oh, yes. We do want a list in the U.S." Or, "We're going to work with these foreign venture capitalists with an eye, sometime in the future, of listing abroad." Or, "Maybe we don't want to take this venture money now," now that there are these wider concerns about investment controls.

This could potentially become quite broad and as of today, foreign venture capital firms in China, while they're not the majority of the VC funding, they're still a very large contingent of it, so I would think that that would be a worry.