US China Trade War
In the coming weeks, the heat from the US presidential election is reaching its peak. The increasing tension is not only drawing the attention from US citizens but also global business leaders. The reason is clear — the US’s policy changes towards foreign affairs could affect global supply chains and international trade, in many aspects. One aspect in particular is in innovation and high-tech domains (such as AI, 5G, digital currency, and IC industries). How the US-China trade war evolves is likely to impact the formation of collaboration in technology between global allies.
The challenges continue
In fact, no matter the results of the election, global leaders may continue to feel perplexed. As analyzed in Innovation’s Crouching Tiger, co-competition between China and the US will undoubtedly continue for decades. No matter where you are, their cooperation, disputes, debates, and both good and bad developments will remain a focus of attention as they shape almost every aspect of the global economy. No one will remain unaffected by this most intense yet unpredictable dynamic of the century.
In addition, China’s integration into the global innovation arena is creating an urgent need for the global community to understand China’s innovation ecosystem, the behavior or actions of these Chinese counterparts, and the US’s reactions towards technology transfers, cybersecurity, and the protection of intellectual property. China’s innovation ecosystem is like the epicenter to the shifting of global continental plates.
Looking into this epicenter helps to understand new economy norms. Observations on the change of China’s innovation ecosystem driven by the US-China trade war are providing us with several important insights.
The forces reinforcing the change
First, the level of awareness surrounding IP protection among Chinese entrepreneurs has now reached a record high. The news about the trade war and changes in the business environment concerning tariffs and embargoes have frequently made headlines. The entrepreneurs recognize that the US’s demand for IP protection is a key component in this war, and thus they are ready to think more deeply about the value of IP.
Second, Chinese businesses must now move upstream in the value chain. The trade war has broken the current models of global collaboration in many aspects and forced numerous OEM/ODM companies in China to upgrade their operations with independent innovation —otherwise, they will perish. When they had the freedom of choice, their mentality of opportunism dragged the change. When other options are no longer available, innovation becomes a must. In facing this new reality, Chinese businesses are now projecting their new position in the value chain. This behavioral change is expected to increase the volume of quality IPs, which are the fuel for continued innovation.
This second observation concurs with the recent view of Mr. Kai-Fu Lee, ex-Google China President, an AI expert, and innovation observer. He believes the trade war has created “parallel universes”, where two sets of distinctive technology systems and industrial standards co-exist to serve half of the world’s population. China’s innovation ecosystem is finding its way to becoming a dominant force in one of these two parallel universes.
Third, China’s regulatory regime is responding to the ongoing US-China negotiation pressure with more concrete rules to punish willful IP violations. For example, according to a new regulation jointly promulgated by 38 Chinese authorities in 2018, individuals who repeatedly infringe others’ IPs or refuse to comply with IP protection judgments will be deprived of certain privileges, deeply inconveniencing them.
Under this regulation, at a business level, a violator will be disqualified for certain social welfare subsidies or participation in governmental procurement. At a personal level, violators will be excluded from public transportation, such as trains or planes. The violators can no longer hide behind their corporate shields if they infringe others’ IPs. As a result, business decision-makers are becoming more serious in respecting the value of their own and others’ IPs, the fruits of innovation manifest.
Fourth, and more generally, intellectuals are forming a consensus that the trade war could be used as potential leverage to improve and strengthen China’s innovation regime. Any settlement agreements with the US do not necessarily contradict China’s long-term interests; it may just speed up the transformation along a track that China has already paved. For example, for top-level policy-makers, the merits of IP protection to economic growth are well-recognized. While being an unpleasant pressure, the demands from the US push for a change in the same direction.
Tools to observe the trends and gain insights
The above observations are just a few examples providing global business leaders with insights to deploy their resources after the new US presidency commences. If global business leaders have a functioning tool, like a telescope, they could see through the mists and form insights based on their own observations.
How will these trends in China’s innovation ecosystem continue? Will these trends change again under the new US presidency? How will the rest of the world be impacted? How will young professionals, business leaders, innovation scientists, researchers, and think tanks anchor themselves and help their organizations strategize in this new era? The essence of this observation tool as well as a few insights gained through it will be revealed by Dr. Chung on November 16th, though the ELSA (European Law Students' Association) Webinar, which is open to the global audience. If you are interested, follow us on ictiger2020.com for further event details.