US Needs to Emphasize Industrial Tech Policies to Counter China, Experts Say

The U.S. needs to swiftly implement industrial policies to counter China’s technology rise and compete against Chinese state-owned companies or risk lagging behind in innovation, experts said. Without targeted policies, the U.S. could quickly cede technology leadership to China in a variety of sectors, the experts said during a Feb. 16 Center for Strategic and International Studies event.

“I could see a significantly smaller Intel, for example. I could see a significantly smaller Boeing,” Robert Atkinson, president of the Information Technology and Innovation Foundation, said about the risks the U.S. faces from Chinese policies over the next decade. “Unless we have our own real robust policies here in the U.S., I think we can see a decline in market share globally in a lot of major sectors.”

The semiconductor industry in particular has pushed for more federal funding and incentives for chip-related research and development. Although Congress included funding for the semiconductor industry in the 2021 defense bill, the industry believes more can be done to help U.S. companies better compete with China (see 2102110011).

“We need to focus mainly on strengthening the domestic resilience of our own individual country systems, particularly the United States,” Arthur Kroeber, co-founder of the Chinese research service Gavekal Dragonomics, said during the event. “Frankly, in the economic sphere, that means that we need to do more industrial policy within the United States.”

Atkinson said the U.S. needs a “real industrial policy,” one that is “thoughtful and focused on how do we get firms in the U.S. to be able to be stronger technology leaders globally.” He said the U.S. should start down that path soon because of how challenging it may be. “Countries have used legitimate industrial policy or tech policy to go with the market to support firms, not to replace them, in a way that advances innovation and tech competitiveness,” Atkinson said. “And that's what we should be doing.”

James McGregor, who oversees the greater China region for APCO, a consulting firm, also said other countries use industrial and technology policy to support their firms and urged the U.S. to do the same. Because many China issues are largely bipartisan, he believes the U.S. can pass legislation to further support technology innovation. “You’ve got these conservative Republicans with very strong industrial policy bills,” McGregor said, referencing the Creating Helpful Incentives to Produce Semiconductors for America Act, which was introduced in part by Texas Republican Sen. John Cornyn (see 2006110038). “We have a chance now with Congress and the White House where we can come together, and we can wake up and grow up and compete.”

But McGregor also advocated for more “patient money,” including from the government. He said semiconductor companies have been forced to take “Chinese money because private venture capital [firms] wouldn't invest in them, because return wasn't quick enough.” The U.S. “government needs to be involved,” McGregor said. The White House didn’t comment.