China's march to global tech dominance is hitting some serious stumbling blocks
- Experts have deemed China's takeover of the world's tech all but inevitable.
- A new book, "The Digital Silk Road: China's Quest to Wire the World and Win the Future," also argues China is on the rise.
- But the book accidentally reveals the problems with this narrative and the weakness of Beijing's plans.
- Jonathan A Knee is Professor of Professional Practice at Columbia Business School and a Senior Advisor at Evercore.
- This is an opinion column. The thoughts expressed are those of the author.
- For more stories go to www.BusinessInsider.co.za.
When I first visited Beijing as a student in the 1980s, just before the Tiananmen Square massacre, there were only a couple of ring roads surrounding the city. The second of these loops ran for 32 kilometres near where the city walls once stood and enclosed a population of around six million. Fast forward to today and the sixth ring road, completed in 2010 and well over a 160 kilometres long, now encircles a booming metropolis of over 20 million inhabitants.
But for all the changes, much about China has remained the same. On my first trip into the centre of the capital city I sat next to a student on a crowded bus who was eager to engage me in order to practise his English. As we passed what looked like a new Western-style hotel along the way, I observed that the parking lot was empty. The student moved in closer and explained in hushed tones that the building had been a signature government project but that an engineer had miscalculated the correct pitch of the elevator shaft. Due to the miscalculation, the elevator could not reach the revolving restaurant that sat atop the modern empty structure. The engineer, according to the student, had been executed.
I was reminded of this chance encounter as I read Jonathan Hillman's engrossing account of China's digital aspirations, "The Digital Silk Road: China's Quest to Wire the World and Win the Future." During that first trip in the 80s, it would never have occurred to me that the combination of grand ambition, central control and ruthless determination - even when sometimes paired with comical inefficiency - would ultimately succeed in turning China into the economic powerhouse it has become. That rise has also got the notice of many democracies, who view China's growing stature and authoritarian nature as a threat. Hillman's book is meant to echo those concerns and serve as a call to democracies around the world to actively thwart inevitable Chinese digital dominance. But Hillman's own thorough reporting suggests that the threat may not be as dire as his far-reaching policy proposals imply.
An empty threat
The Digital Silk Road is the technology arm of China's Belt and Road Initiative, a massive project launched in 2013. The idea is to build physical and digital infrastructure in countries around the world, connecting them to China and driving President Xi Jinping's bid to become a global superpower by 2050. Hillman weaves together academic research with on-the-ground journalism to paint a vivid picture of China's Digital Silk Road efforts to dominate a number of hardware businesses critical to global communications infrastructure.
There are many cautionary tales: the story of how the once giant Nortel partnered with the Chinese government to gain access to its gigantic market only to end up bankrupt with its intellectual property in the hands of its Chinese competitors' is reminiscent of Circuit City and Borders who partnered with Amazon to execute their digital strategies to the same deadly effect. But many of the cases that Hillman describes sound like high tech versions of the white elephant hotel story I heard thirty years ago: undersea cables that carry no traffic, building smart cities in rural Africa that attract no investment, a succession of failed satellite launches. And in many of the critical technologies of the future like cloud computing and low earth orbital (LEO) satellite deployment, China is so far behind that it has no reasonable prospect of catching up.
Hillman's core argument seems to be that by giving China free reign to undertake money losing projects in developing countries, democracies are mortgaging their future. As these countries being wooed by China represent an increasing percentage of global GDP, democratic nations will be left out from this booming segment of the world. However, everything about the highly transactional nature of these governments described in "The Digital Silk Road" suggests that they will be happy to abandon China in the future if something better and cheaper comes along. And it sure feels like in the not too distant future Western-owned LEO satellites will provide that cheaper and better thing. Many of Hillman's policy proposals seem animated by legitimate concerns regarding the growing digital divide not just globally but in rural America. These deserve serious consideration, but not primarily because of the China threat.
The failure of China to make more headway along the Digital Silk Road is a function of both its insistence on total control at home and its nefarious activities abroad. Despite its mixed record in technology hardware, China is home to two of the largest companies in the world: Tencent and Alibaba. Why the same factors that have constrained China's growth on the technology hardware side have apparently not hampered its ability to nurture these leaders in consumer internet services, is a topic oddly ignored in "The Digital Silk Road." So too are the many policy questions beyond those related purely to technology infrastructure that the extraordinary success of these increasingly global internet giants raise.
Sixty years ago, Joseph Heller observed in Catch 22 that "just because you're paranoid doesn't mean they aren't after you." The Digital Silk Road certainly demonstrates the legitimate basis for American paranoia about China's intentions. Hillman's call to establish a multilateral Coalition of Open and Resilient Economies to address these dangers, however, faces a long list of practical obstacles. As he points out, these countries have very different objectives and America's own credibility to influence such a group has rarely been lower. That doesn't mean we shouldn't try, just that expectations should be modest. In light of these limitations, the best news contained in "The Digital Silk Road" may unintentionally simply be how surprisingly ineffective China's massive efforts to control the global communications networks outside of its borders have actually been.
Jonathan A. Knee is Professor of Professional Practice at Columbia Business School and a Senior Advisor at Evercore. His most recent book, "The Platform Delusion: Who Wins and Who Loses in the Age of Tech Titans," was released last month.
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