Moving Away from Fight or Flight: Key Lessons from China's Tech Regulation

Technology Policy Internet Policy

Moving Away from Fight or Flight: Key Lessons from China's Tech Regulation

Posted on: 13th October 2022
By Multiple Authors
Matthew Nguyen
Digital Governance Lead, Internet Policy Unit
Rhea Subramanya
Policy Lead - Economist, Internet Policy Unit
Melanie Garson
Cyber Lead, Internet Policy Unit

Over the past two years, China has embarked on one of the world's most expansive technology regulatory agendas and its approach is establishing a sphere of influence that rivals the Brussels Effect.

The crackdown on consumer internet companies that started with the scrapping of Ant Financial’s $37 billion IPO saw a broad range of regulatory action across antitrust, data protection, privacy, cybersecurity and content governance. Meanwhile, financial and political investment in critical and emerging technologies in China was bolstered, reaffirming decades-long industrial strategies to establish China as a modern science and technological power.

Governments across the world are seeking to align technological advancement with their national priorities and China is no different. How China approaches this task (and whether it is successful) will provide key insights for the rest of the world and a cautionary tale on trade-offs that might threaten international norms. China's regulatory approach to technology should be used as a catalyst to inspire proactive steps in the policies of liberal democracies rather than falling into reactionary positions that cement a false binary of "us versus them". Are there lessons that may enhance our digital transformation journeys? How do we structure a productive relationship with China as Xi Jinping cements his role as General Secretary while staying true to our values-based aspirations for technology?

To investigate this further, the Tony Blair Institute and the Progressive Policy Institute recently convened a discussion in Washington, D.C. to examine China’s current approach to tech regulation.


TBI Audience Poll

Source: TBI audience poll, September 2022

Drawing on the expertise of cultural historian Professor Jing Tsu, geotechnology expert Xiaomeng Lu and economic and data policy expert Jordan Shapiro, we discussed the repercussions of China’s recent action in the broader context of Chinese history, the current shifts in American innovation industrial policy and the impact of great power competition in the Asia-Pacific region.

To ensure that the benefits of technology are distributed globally, three core themes emerged:

1. Secure an Open Internet through Pragmatic Approaches

We are in the middle of an interventionist period in tech regulation around the world. The revival of American industrial policy, the European Union’s privacy agenda and China’s tech crackdown signal global anxiety around understanding and steering technological development.

As tech sectors in other parts of the world develop, a pragmatic approach on how these regulatory agendas interact and interoperate will be a key challenge as we emerge into an increasingly multi-polar world. To maintain a secure, open and interoperable internet, policymakers must find a careful balance between a values-led approach and the need to make practical progress.

2. Promote Innovation by Enhancing Local Strengths

Framing efforts to spur technological development solely within a "great powers" struggle, like a US-China tech war, should be avoided. Industrial policies that force innovation within key strategic areas, like semiconductor manufacturing, so that "supremacy" can be maintained or achieved could slow down overall progress, as resources and capacity are inefficiently invested and scaled to achieve these politicised goals. Further, the hyper-securitisation of various aspects of the tech ecosystem could drive efforts to weaponise technology based on speculation.

This is harmful not just for the great powers; it is even trickier for smaller countries trapped in the middle. They may be forced to side with a particular supplier rather than optimise for their digital transformation. We are starting to see this with pressure on the Dutch firm ASML, which manufactures critical machinery for semiconductor manufacturing and may be prevented from selling to China.

Understanding how to drive innovation by enhancing the unique strengths of each nation will lead to more robust progress. A future where different markets are leaders in specific technical areas need not be feared if we can still facilitate the international transfer, collaboration and adoption of technology.

3. Enhance Interdependencies to Counter Tech Decoupling

The recent escalation of tensions between the US and China has seen their tech sectors start to decouple. Attempts to establish competing technical standards, restrictions on trade and efforts to eliminate dependencies in critical technologies such as semiconductors reveal how these two economies are diverging.

However, the technology development pipeline relies on connection, from collaboration within scientific research to global supply chain interdependencies. Efforts to pushback on decoupling could mean relying on enhancing these intrinsic tendencies for cooperation. Technical cooperation, foreign investment, researcher cooperation and talent exchange all work in tandem to layer interdependence within the science and technology sectors, and barriers to achieving these outcomes should be removed. Recent examples, such as in space exploration and electric vehicles, show what is possible when international collaboration occurs.

Policy approaches to tech regulation that are based on fear are ultimately counterproductive. Piecemeal regulatory reactions to China that focus on countering every move, like the US approach to semiconductor manufacturing, could foster the very fragmentation that we are trying to avoid.

Instead, China’s regulatory approach to technology should be used as a catalyst to inspire proactive steps in our own policies. China's actions on domestic internet companies should galvanise our examination of Big Tech and its longer-term view on strategic technology development should prompt productive competition rather than securitised short-termism. Even the more controversial elements of China's tech agenda, like coercive applications, offer valuable warnings to catalyse debates at home on how tech and civil society interact.

Most significantly, we cannot lose sight of the larger context of this relationship and the global ramifications of each action and reaction. Efforts to entrench collaboration and communication might be the only way to ensure that the benefits of technological progress continue to evolve sustainably.

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