Chinese Hegemony: The Data Imbalance in Geopolitics

Source: Financial Times

By Aldo Aragon Gonzalez

Tensions are high between the United States and China. If you listen to President Trump, the story is one in which China skirts the rules to gain a competitive advantage in international trade, driving Chinese domestic growth and military investment. In President Trump’s words, China is “raping” American workers and companies.

If you give any credence to the Chinese interpretation, you’d be confused as to why the world’s foremost superpower is going out of its way to suppress the growth of a developing country that is merely trying to strengthen its middle class.

Each story carries elements of truth, but neither is completely correct. Like all complicated issues, the truth lies in the middle. In reality, this trade conflict is really about something the mainstream media does not address as prominently as it should: who will be the world leader and standard-setter in technology for the coming decades.

That’s the essence of the issue. President Trump might not make it clear in his speeches, but the United States has a problem with China’s ambitions to establish a tech-based economy powered by cheap credit from government-owned banks, defended by the Great Chinese Firewall, and fueled by over 800 million internet users, 98 percent of whom are mobile users addicted to living digitally. China knows that the Made in China 2025 initiative, its most important policy strategy aside from Belt & Road, delineates tactics to turn China into technological superpower. This moves the country up the value chain by funneling subsidies and regulatory protections to Chinese companies.

Despite President Trump’s tariffs, Chinese President Xi Jinping is determined to take the economy to the next stage. China must transition from a manufacturing economy to a high-skill digital service economy balancing a growing middle class and a potential economic addiction to credit.

China’s biggest asset is the oil of the digital economy: data, and lots of it. Artificial Intelligence, machine learning, cyber intelligence security, and 5G communication networks are some of the technologies promising a better future and exciting economic progress. Data is the  essential ingredient needed to catalyze rapid growth in each of these industries. With over 800 million Internet users willing to give their data to Chinese companies and to the Chinese government, China has an unmatched ecosystem of consumer trends, preferences, dislikes, and more to power these technologies.

The American government lacks this asset. In fact, companies like Google recently saw their employees express outrage at the company’s collaboration with the American government to produce AI-based military technology. Through protest and communication with Google executives, Google decided to step away from the military contract.

According to Economics professor Paul Wachtel, “China will soon be a digital resource abundant [power] which has already leveraged its economic power in the global economy.” China can gain leverage in negotiations with other countries to set favorable trade and security terms, scrambling the geopolitical landscape. The race to win the digital revolution is on, and the United States is struggling to catch up.

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