Source Code: Your daily look at what matters in tech.

chinaprotocol | chinaauthorZeyi YangNoneDavid Wertime and our data-obsessed China team analyze China tech for you. Every Wednesday, with alerts on key stories and research.9338dd5bb5

Get access to Protocol

Will be used in accordance with our Privacy Policy

I’m already a subscriber
Protocol | China

China shrugs at US Senate’s $250 billion tech bill

Chinese authorities and state media think the Innovation and Competition Act isn't ambitious enough to fear.

US capitol building
Photo: Al Drago/Getty Images

The U.S. Congress wants to counter Chinese influence by borrowing from China's toolkit. But Beijing, which is used to funneling massive amounts of cash into selected industries, seems to think Washington hasn't gone far enough.

On Tuesday, the U.S. Senate passed the U.S. Innovation and Competition Act — first known as the Endless Frontier Act — 68-32 in a bipartisan vote. After significant changes, the amended bill pledges to spend over $250 billion to boost America's science and technology sectors, with the clear goal of obtaining (or depending on your viewpoint, maintaining) a technological lead over China. It has yet to be passed in the House.

The day after the Senate passed the bill, the Chinese government condemned it. At a June 9 press conference, Wang Wenbin, a spokesperson for China's Ministry of Foreign Affairs, said the bill "gravely interferes in China's domestic affairs" and is "filled with Cold War zero-sum mentality." The National People's Congress, China's legislature, released a statement with similar language, calling the act "paranoid" and "doomed to fail."

But besides the expected, almost routine statements, there are more discussions in state media explaining why the hostile bill isn't particularly threatening to China. In fact, in China, the prevailing narrative is that the USICA is not ambitious enough to give America a real leg up.

Yuyuantan Tian (玉渊潭天), a WeChat account linked to China's state broadcaster, called the bill "too much talk and not enough work" in an article published in late May. A $100 billion investment in scientific research — what was proposed in the original Endless Frontier Act — would only amount for 0.5% of America's annual GDP, the article said. When divided into different research fields, "the number can be quite small."

In the United States, early opposition to the bill also centered around whether investing in applied science will take away funding from basic research. But Yuyuantan Tian thinks the investment in applied science is too little, too late. "If the manufacturing industry — the last link in the chain — continues its path downhill," the U.S. is getting a useless law "no matter how much you invest in the 'frontier,'" the article said.

Some Chinese commentators are asking whether this new bill means the United States is learning from what China calls its "whole nation" strategy and ditching America's small-government tradition.

There's a popular belief in China that what it calls its "whole nation system" (举国体制) has enabled it to concentrate resources in dedicated fields to maximum effect. To Chinese officials, it has worked for the country's research and education sector by pouring a lot of investment into a few cutting-edge fields, and has worked for China's sports industry too, which rapidly grew into a world leader in many competitive sports, although those results have been visibly mixed. But the system is also frequently criticized outside China as authoritarian and interventionist.

So, when it became clear that the USICA sets aside $52 billion to grow America's domestic chip industry, many Chinese commentators asked why America is doing that which it once despised. Yan Xuetong, director of the Institute of International Studies at Tsinghua University and a regular social media user, posted a question on Weibo pegged to the USICA news asking whether "investing the whole nation's resources into scientific research is something only a certain political system can do?" A June 9 editorial by the party-owned tabloid Global Times raised a similar question, calling America "a sick person looking for whichever doctor it can find."

Deng Jinting, a researcher at Beijing-based Renmin University, cautioned that the USICA asks the Department of State to publish a list of all Chinese subsidies to domestic companies, which may become another sanction tool against subsidy recipients. Zhang Qiuju, a researcher at a think tank affiliated with the Chinese Academy of Sciences, told state news service Xinhua the bill will force Chinese-American scientists to take a side because they can only receive funding from one of the two countries.

Chinese officials seem less worried about the actual cash being pumped into U.S. tech and more concerned about the effect on China's reputation. Perhaps none of the original Endless Frontier Act has received as much attention in China as one particular section later added to the bill: Division C, originally introduced by Sens. Bob Menendez and Jim Risch as the Strategic Competition Act. It focuses more on China's human rights violations and online propaganda than its technological chops. In the final version passed by the Senate, Section C would spend $300 million each year on a "Countering Chinese Influence Fund," which would be used to expose Chinese propaganda and raise awareness of the Belt and Road's negative impacts, among other uses.

But when it comes to the big picture, while some U.S. senators have called the bill an unnecessary government intervention, the idea that the state should be an active promoting force of the domestic technology industry is quite mundane in China. The state routinely introduces national policies to incentivize and fund key industries, like Made in China 2025 or the semiconductor-focused "Big Fund." In the June 9 editorial by the Global Times, the tabloid made a rare acknowledgment that the direction USICA is going with, namely increasing internal investment, "looks about right."

Even though there is still a ways to go before the fund and other measures in this section become reality, Chinese state media and nationalist influencers have already started using it to justify the narrative that any anti-Chinese government message online is funded by countries like the United States. "Give me $300 million, and I will slander China," said a headline in the China Daily, a state-owned newspaper.

Latest Stories