China to Step Up Domestic Tech Innovation in the Face of US Restrictions

Domestic innovation has been at the center of General Secretary Xi Jinping’s plans for China over his first ten years leading the country. This week, Xi Jinping has reemphasized this push for domestic innovation and technological self-sufficiency, in the context of a new US ban on exports of certain advanced computer chip technologies to China.?

In his speech before the 20th?Party Congress on Sunday, Xi identified “education, technology, and talent” as the fundamental drivers of China’s continued efforts at modernization and economic development. The Party Congress is expected to provide a new plan for China’s national development over the next five years, with Xi Jinping staying on at the helm.?

According to Xi, “technology is the foremost productive force, that talent is the foremost resource, and that innovation is the foremost impetus…” for the nation’s economy.

It lists “greater self-reliance and strength in science and technology” as being among the priorities for the coming five years – a crucial period as the nation strives to become a tech powerhouse by mid-century. The report also highlights the need to bolster China’s professional workforce and create a high-quality talent pool.?

Xi wants China to build “momentum to make breakthroughs in leading original technologies” of the future, and to become a global attractor of talent in technology. Many in China see attracting international talent as a critical factor in cultivating domestic innovation.??

The new export controls announce by the US Department of Commerce restricting exports of certain technologies to China and restricting involvement of US nationals in microchip manufacturing facilities in China are viewed in the country as evidence of the need for China to stand on its own in key technologies. With these new restrictions from the US, some see a changed role for China in a more economically divided world.?

In implementing Xi’s vision for Chinese innovation, we may expect new efforts at acquiring technologies from abroad, particularly by acquisitions of foreign technology companies wherever possible, through covert methods, as well as allocation of new investment monies into developing China’s high tech manufacturing and research and development sectors.?

Several major Chinese cities have laid out plans for broad policies and incentives to promote new investment in technological development and domestic innovation. Shenzhen, known as the center for much of China’s tech industry, as a plan for subsidization of semiconductor companies operating in the city. At the same time, Shanghai has presented a plan for development of high-tech industrial clusters over the next 10-15 years, focusing on “industries of the future” like AI, Health and biotech, quantum computing, and aerospace.