How US-China Trade War Will Shape the Future of Asia

Recently the media has been abuzz with the news of an ongoing US-China trade war. Tariffs have dominated most of the discussion and why shouldn’t it – the annual value of Chinese products now subject to the U.S. punitive import tariffs is about $50 billion. While this can be mistaken for Trump bashing China to milk political favours and potentially increase his vote count, it fails to tell the larger story at play here.

This confrontation is, in fact, a new war for supremacy in which the rise of new global power is at stake. It is only apparent when you connect the dots littered across these past few years – most recently of course, there is the incident on December 1st last year, when Meng Wanzhou, CFO of Huawei – a Chinese technology giant – and daughter of founder Ren Zhengfui was detained in Canada on suspicion of violating US trade sanctions.

Huawei has long been under investigation for the same by federal authorities. The official reason for her arrest is that Huawei is suspected of selling technology to Iran, in violating US sanctions. It is the second big Chinese tech company to be accused of breaching those sanctions in a matter of years. The first was ZTE Corp in 2017. The US punished ZTE by forbidding it from buying American components. It seemed as if Huawei will undergo similar scrutiny, but the story changed when US efforts were far and thorough in seeing the downfall of Huawei. One might wonder why.

This is because of another trade war that has been running on the background – a much stealthier conflict, fought with weapons of a subtler nature and certainly more devastating than any tariffs. And the prize here is domination of the information-technology industry. The US wants to prevent China from challenging its digital supremacy and will deliberately try to derail Made in China 2025 – the industrial policy that has been set up to establish China as a high-tech superpower. This subtle, far-sighted nature of approach suggests that the impetus for this high-tech war that is brewing goes beyond any Trump. It’s even possible that US tech companies, as well as military intelligence communities, are influencing the policy here, with Trump being but a puppet on strings soaking up all the limelight while the rest ploy their way through.

Silicon Valley had not been able to crack China. The desperation of Google and Facebook are seeping into politics. Because at stake is the opportunity to control the global economy at a scale that was not previously possible. The US has always been the centre of technology but had started to shift dramatically by early 2018 when among the 20-leading Internet-based companies across the world, 9 were Chinese. The remaining 11 were from the US. This alone shows the dominance of these two countries.

China, though, did not begin as a powerhouse in technology. It was in manufacturing that they found their roots. This shift in China’s technology sector – from being low-cost manufacturers to innovation leaders – has grown in two parts. One – it was fuelled by the changing nature of the Chinese economy. Two – the many technologies that were coming China’s way from US giants to be manufactured there had slowly but surely leaked out into the Chinese market wherein the big giants like Facebook and Amazon were absent. This lack of competition and Chinese own high demographics and tech-leaning population meant that Chinese internet-based companies received an unprecedented advantage. The large local market, high internet penetration, limited foreign competition and supportive government policies paved way for Chinese dominance in the global arena.

It has been labelled as cold-war in the media, but it is inadequate to describe what is happening here. I understand the dramatic appeal that it might imply because it conjures two giants up in arms against each other, but in today’s complex world, it fails to account for the ideological and geopolitical tensions that are growing in a deeply connected and integrated technological environment. It does put India in an interesting position, however. This trade war between the US and China would mean that US companies then would have no option but to consider the next big market for manufacturing. India. Given how our own Make in India policy has been a big success, we are certain to be able to lure the US companies including tech giants like Apple here. This alone could shape the future of Asia – India then is poised to become the superpower in the East.

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