China, Science and Technology, and Hybrid Competition

China’s technology strategy exploits open collaboration with foreign partners, combines civilian and military objectives, benefits both the public and private sectors, and promotes the theft of intellectual property. Beijing has massively increased its own university research capacity, and vastly increased the number of technology graduates. The US and Canada need to respond by strengthening their own innovation capacity.

While many analyses of Chinese hybrid/political warfare strategies note that the country’s increasing science and technology (S&T) capabilities make Beijing a more effective challenger in the grey zone, it is less recognised that China’s innovation strategy itself contains many of the defining elements of hybrid competition. Several groups of analysts have argued, for example, that China’s development of space, cyber, and information technologies allow it to pursue a range of national objectives beyond normal statecraft and below the threshold for armed conflict^{Footnote 34}.

New technological capabilities certainly give Beijing greater flexibility, but it is also worth highlighting that Chinese approaches to S&T are themselves asymmetric, taking advantage of the ways science and technology development are structured and practiced in most liberal democracies. Beijing’s strategy to develop, acquire, and diffuse technology for economic and security interests involves investments in research and development, industrial policy, talent development, and foreign acquisitions. It also shares characteristics with Chinese grey zone competition in other areas: bounded thresholds; uncertainty about military and economic motivations; blurring of public and private actors; and use of counter narratives. In effect, Beijing’s efforts to become a science and technology power have exploited innovation systems grounded in collaboration, globalisation, and openness.

The challenge for Canada, the United States, and others is to protect technology while maintaining the openness that has driven innovation at home. Many countries are tightening restrictions on Chinese access to technology, and, while this is an important component of the response to Beijing, the most successful strategies will mirror a strategy to contest Chinese political warfare: it will be proactive, whole-of-government, and multilateral.

Goals

Chinese S&T strategy has three primary objectives. First, Chinese policy makers want to ensure that domestic companies move up the value chain, moving from labor and energy-intensive manufacturing to more knowledge-intensive sectors. Made in China 2025 (MIC 2025), for example, is the government’s 10 year plan to dominate electric vehicle, next generation telecommunications, new materials and other high-tech industries. The National Development and Reform Commission’s draft plan for 2019 states that it “will prioritise and strongly develop a number of clusters of strategic emerging industries in key fields such as next-generation IT, high-end equipment, biotechnology, and new materials”^{Footnote 35}.

Second, Beijing believes that science and technology are critical to national security. As Xi Jinping said in a December 2014 speech, “A new technological and industrial revolution is brewing, a global revolution in military affairs is accelerating, and the pattern of international military competition is experiencing historic changes”^{Footnote 36}. In a March 2017 speech, Xi told military delegates to the National People’s Congress that science and technology innovation was “key to military upgrading” and called for a greater sense of urgency to push for science and technology innovation and advancement^{Footnote 37}.

The third objective, which permeates the first two, is to reduce dependence on foreign suppliers and become self-reliant on “core” technologies. Chinese technology policy has long been driven by the desire to create “indigenous innovation” and reduce dependence on the West for advanced technologies and on the United States in particular. Chinese leaders have interpreted the Trump administration’s efforts to prevent the flow of critical technologies, through blocks on the operations of Huawei and other Chinese telecoms in the US and other markets, new export control laws, and new restrictions on Chinese investment, as a strategy of containment designed to slow China’s rise as a science and technology power^{Footnote 38}. In the face of this pressure, Xi has highlighted China’s need for innovation and technological self-determination.

Methods: Traditional and Hybrid

In pursuit of these three objectives, China’s main effort has been a mix of technology policy—top, down state directed efforts—and innovation strategy—a more bottom up effort to create an environment supporting technological innovation. Between 1991 and 2015, China increased its research and development (R&D) expenditures thirtyfold, averaging an 18 per cent increase annually since 2000^{Footnote 39}. Beijing has also rapidly expanded the science, technology, engineering, and mathematics workforce. Eight million Chinese students graduated from college in 2017, and the number of science and engineering bachelor’s degrees conferred increased from 359,000 in 2000 to 1.65 million in 2014. China surpassed the United States as the world’s largest producer of natural sciences and engineering doctorates in 2007^{Footnote 40}.

The broad push on science has been matched by more focused industrial policy. China’s current five-year plan stipulates that the biotechnology sector should exceed 4 per cent of GDP by 2020, and state, provincial, and local governments have invested more than $100 billion in the life sciences sector^{Footnote 41}. The 2014 Integrated Circuit Promotion Guidelines is an attempt to build an indigenous integrated circuit industry and involves investments reportedly between $100 and $150 billion in public and private funds. With the Next-Generation Artificial Intelligence Development Plan, Beijing hopes to leverage large amounts of data, entrepreneurial firms, and government support to build an industry worth $150 billion by 2030. In 2017, China’s artificial intelligence (AI) industry received nearly $26 billion in investment and financing^{Footnote 42}.

China’s theft of intellectual property, through cyber-enabled and other means, has remained an important tool of technology acquisition. Former NSA Director and the first commander of Cyber Command Keith Alexander has labeled China’s theft of US intellectual property through cyber means “the greatest transfer of wealth in history”^{Footnote 43}. In November of 2015, National Counterintelligence Executive William Evanina estimated that cyber-enabled economic espionage cost the US economy $400 billion per year with 90 per cent of the theft originating in China. Speaking of the efforts to collect technology, William C. Hannas, James Mulvenon and Anna B. Puglisi claim China “is in a different league altogether, exceeding the international norm not just in scale, the number and variety of transfer venues, the moral agnosticism of its practitioners, and the degree of government support”^{Footnote 44}.

Despite these assessments of the damage caused to the US economy, China has so far managed to operate in a space that avoids provoking any serious response from Washington (or any other victims). The US has indicted Chinese hackers, but competing interests in the bilateral relationship, the incrementalism of the effects of the attacks, the difficulty of measuring the economic impact of the spying, the unwillingness of the victims to risk Beijing’s ire, and the lack of global norms on cyber espionage have all combined to prevent effective sanctions against the theft.

While the theft of scientific research and industrial technology is always malevolent, there is some uncertainty about whether operators are acting at the behest of intelligence agencies, in the pursuit of personal economic interests, or both. Chinese hackers, for example, have been known to pursue economic targets for personal gain as well as to help promote Chinese development goals. Some of the researchers involved in the Thousand Talents Program may have been tasked by intelligence agencies to return with specific technologies; others may have “double dipped” or created shadow labs out of greed, or uncertainty about procedures^{Footnote 45}. Chinese venture capital investment in Silicon Valley in AI, quantum technology, and other frontier technologies makes sense from an economic perspective but also provides access to dual-use technologies critical to national security^{Footnote 46}.

This blurring of military and commercial interests is happening across the Chinese economy as the leadership works to link the more innovative civilian economy with the defense industry base. First introduced by then President Hu Jintao in 2009, Civil Military Fusion has intensified under President Xi Jinping. Within his first year in office, the Central Committee voted to elevate civil-military fusion to a national strategy, and in January 2017 Xi created the Central Commission for Integrated Military and Civilian Development, a high-level decision-making and coordination body for civil-military fusion efforts. Civil-military fusion plays a prominent role in both Made in China 2025 and the Next-Generation Artificial Intelligence Development Plan^{Footnote 47}.

Along with the uncertainty about the motivations of actors, there is often confusion about whether an organisation is state-owned or from the private sector. This ambiguity is best reflected in questions about the ownership of Huawei, with company officials arguing that it is owned by its employees, and that no outside organisations, including any affiliated with the Chinese government, own shares^{Footnote 48}. Outside researchers have countered that in fact the company is “effectively state owned” with a trade union committee owning the majority of the company’s shares^{Footnote 49}. Moreover, US officials have increasingly argued for an expansive view of the tech sector’s relationship to the Chinese Communist Party. As Christopher Ford, Assistant Secretary Bureau of International Security and Nonproliferation, put it, “on balance the Chinese technology giants are not purely private actors, but instead function as at least de facto tools of the Chinese Communist Party when it matters most”^{Footnote 50}.

The Chinese approach to technology standards setting also mixes public- and private-sector directives. In AI in particular, Beijing has signaled that it intends to devote considerable resources not only to shaping the technology standards but also the norms that will guide the ethical and privacy issues that will emerge from the deployment of AI systems^{Footnote 51}. The China Electronic Standardisation Institute, an agency under the Ministry of Industry and Information Technology, works with over two dozen companies and major research centers on standards, and in April 2018 Beijing hosted a major conference that set the groundwork for future Chinese influence over AI standards.

Messaging is an additional and important part of Beijing’s hybrid methods. China’s science and technology narrative has at least three strands. First, China’s rise as a science and technology power is good for the world as a whole, a “win-win” of mutual development and advancement. The second is a corollary of the first, arguing that attempts to prevent the flow of technology to China risk slowing down the rate of global innovation. Xi Jinping, for example, used a keynote address at the Chinese International Import Expo in Shanghai to warn countries that they risk stifling innovation if they created “knowledge blockades” preventing cooperation on technology^{Footnote 52}. This argument has also been applied to Huawei, with the company funding an Oxford Economics study on the economic impact of restricting competition in 5G network equipment^{Footnote 53}. Third, Beijing argues that claims it steals intellectual property are slanderous, insulting to the hard work of Chinese scientists, and motivated by ulterior motives such as diverting from the United States own history of cyber espionage.

Recommendations

Chinese hybrid methods take advantage of the open, collaborative, and global nature of science and technology in most liberal democracies. As a result, the default policy response has been to slow the flow of technology to Beijing through a combination of export controls, investment reviews, and increased scrutiny of research partnerships with China as well as Chinese students and scholars. These are necessary but not sufficient measures. An effective strategy must be proactive, whole of government, and multilateral.

The most important response is to ensure the strength of innovation systems at home. In the US, policy recommendations have included raising federal support for basic research, strategic investments in universities, and “moonshots” approaches to society-wide national security problems^{Footnote 54}. In Canada, recommendations include incentives to increase private sector investment in R&D, streamlining federal grants, and funneling R&D into a few select sectors where Canada has demonstrated potential such as artificial intelligence, stem cell research, and autonomous car manufacturing.

A whole of government response is necessary to provide insight into the types of technology important to competition with China, coordinate across bureaucracies, and communicate with academia and the private sector. Some US legislators have suggested the creation of a new Office of Critical Technologies and Security in the Executive Office of the White House, though others have responded that the Office of Science and Technology Policy could do the job if given the right resources and White House backing^{Footnote 55}.

Finally, no one country can outspend or outcompete China. Rather, countries will need to leverage international relationships and networks. Canada may want to work with the US in expanding the National Technology and Industrial Base as well as the Technical Cooperation Program to other nations. Canada also has a large role to play in developing norms of development and use of frontier technologies, such as AI.