Tech Turmoil: Will the 2024 U.S. Presidential Elections Shape the Destiny of China’s Revolution?

As the U.S. presidential election approaches, China’s technology sector finds itself at a crossroads, grappling with the potential impact of either a Donald Trump or Kamala Harris presidency. The outlook for Chinese tech firms is complicated, with executives weighing the possible outcomes of both candidates’ sanctions and export control policies. This article explores the current landscape of China’s tech industry, the implications of U.S. election results, and how companies are adapting to an uncertain future.

The Stakes for Chinese Technology Firms

The election of Donald Trump could significantly alter the trajectory of Chinese technology firms. From 2017 to 2021, Trump’s presidency was marked by the initiation of a trade war with China. He implemented strict export controls and sanctions that heavily impacted Chinese tech companies, especially in the semiconductor sector. The uncertainty surrounding his unpredictable policy approach has left many executives pondering whether a Trump presidency might exacerbate restrictions or unexpectedly ease them.

Trump’s Legacy on Tech Policy

During his time in office, Trump adopted a combative stance towards China, citing national security concerns and unfair trade practices as justifications for imposing tariffs and sanctions. High-profile companies like Huawei and SMIC were directly affected, facing severe restrictions that limited their access to critical technology and markets.

According to a report by Shanghai-based Topsperity Securities, Trump’s return to power would likely intensify export controls, particularly against China’s semiconductor industry. “As the initiator of a comprehensive upgrade in the containment of China’s science and technology,” the report suggests, “if Trump comes to power again, the domestic semiconductor industry may be further suppressed.”

Harris’s Approach: Predictable Yet Challenging

In contrast, a Kamala Harris presidency is expected to maintain the current administration’s policies, which have focused on more incremental changes rather than sweeping overhauls. Executives in the Chinese tech sector view this predictability as beneficial, allowing them to plan for long-term strategies rather than responding to abrupt shifts in policy.

Many analysts believe the Harris administration would continue leveraging international alliances to impose coordinated restrictions on China’s technological advancements. The strategies will likely be more stable but could present longer-term challenges for Chinese firms.

Perspectives from the Tech Industry

In a candid analysis of the potential outcomes, Chinese industry groups and think tanks have provided insights that reflect a nuanced understanding of the electoral landscape. While half of these analyses view a Trump victory as detrimental, citing a heightened risk of intensified sanctions, the other half note the possibility of Trump’s policies encountering resistance from U.S. allies.

For instance, a July editorial from Material Energy Times stated, “Trump’s unilateralist policies may also encounter opposition and non-cooperation from the international community,” highlighting the complexity of global supply chains in the semiconductor industry. This sentiment resonates with many executives who believe cooperation among U.S. allies could weaken the effectiveness of unilateral sanctions.

The Current State of China’s Tech Industry

Regardless of the election outcome, the tech sector in China has become increasingly self-sufficient. Over the past few years, Chinese companies have significantly reduced their reliance on foreign technology, a trend accelerated by the trade war and sanctions. As of 2023, China had initiated a remarkable increase in domestic procurement projects, shifting away from foreign hardware and software.

A Focus on Domestic Solutions

In 2016, China had just four government procurement projects exceeding 10 million yuan ($1.4 million) to replace foreign technology with domestic alternatives. In stark contrast, by 2023, this number had surged to 169 projects, with 75 of them involving state funding of over 50 million yuan. This transition highlights a concerted effort by the Chinese government and private sector to bolster domestic capabilities in technology and manufacturing.

Robert D. Atkinson, president of the Information Technology & Innovation Foundation, noted, “We have slowed them down on semiconductors, but in other sectors like robotics, they can meet their needs internally.” This increasing self-sufficiency positions China’s tech industry to better withstand external pressures from sanctions or export controls.

The Role of Global Relations

U.S. policies and global relations will significantly impact China’s tech sector. Observers note that Trump’s erratic approach could destabilize U.S. alliances with countries like Japan and South Korea, which have vested interests in China. This situation might lead to a fragmented global response to U.S. restrictions, potentially allowing Chinese firms to circumvent some imposed sanctions.

An editorial from EETop, an information platform for Chinese electronics firms, pointed out that Trump’s criticisms of U.S. trade relations with allies could jeopardize cooperation. “Especially in the globalized semiconductor industry chain, unilateral suppression by the United States is ineffective,” the editorial said, underscoring the challenges the U.S. may face in enforcing its policies globally.

Investing in Future Technologies

Despite the uncertainty, Chinese tech companies continue investing heavily in advanced technologies, particularly artificial intelligence (AI) and semiconductor manufacturing. As of July 2023, China accounted for 36% of the world’s large language models, trailing only the U.S. with 44%. This investment reflects a strategic pivot to enhance domestic innovation in response to external pressures.

Even as export controls tighten, many Chinese firms are focusing on building their capabilities in AI and other cutting-edge fields. The Biden administration’s expansion of technology restrictions has dashed hopes for a more lenient approach, pushing companies to adapt swiftly to the evolving landscape.

A New Normal

Chinese executives acknowledge the unpredictable environment in which they operate. “We’re operating under a new normal now,” said a Chinese technology company executive. “We are blind to know what might come next, so we just keep going, as fast as we can.” This mindset illustrates a pragmatic approach to navigating an increasingly complex geopolitical landscape.

Conclusion

As the U.S. presidential election approaches, the implications for China’s tech industry remain uncertain. Trump and Harris presidency promise challenges, yet Chinese firms’ resilience and adaptability signal a readiness to confront whatever comes next. With an increased focus on self-sufficiency and domestic innovation, China’s tech sector is better equipped to handle the fallout from potential sanctions and export control escalations.

Regardless of who wins, the evolving dynamics of global technology competition will shape the future of China’s tech landscape. As the industry adapts to these changes, it remains crucial for stakeholders to stay informed and agile in their strategies.