Cold War 2.0 Will be of Global Tech Supremacy

One plausible scenario is emerging that there will be a subtle shift from China to go for an all-out conventional geopolitical tussle with an eye for Global tech supremacy.

The pandemic and its severity have changed the game for both China & the US, more so for China. Both will compete for new coronavirus vaccine and digital tech dominance including advanced telecom networks.

It's not that both don't want to use a proxy war strategy, but it is not a feasible way to compete in the digital era.

Tech War is the new Cold War 2.0

With the onset of the pandemic and the subsequent lockdowns, Tech has moved to the centre of discourse. The significance of Tech has been felt across the spectrum -by governments, people, corporates, institutes, hospitals et all. The post COVID inflicted world has become Tech induced.

The level of impact on digitization, e-commerce, social media, home entertainment, tele-education, and telehealth is well articulated.

From here will emerge the fault lines where which will split the world asunder that would be the Cold War 2.0 aka Tech Cold War.

The Game of Tech Thrones would be the between two tech empires (regimes) - One US-centric and other China-centric, with no interoperability.

Recently, Deutsche Bank (DB) Analysts created a DB Tech Cold War Index, tracking the tech war listing in the proxy newswires. This Index has spiked since April 2020, as the COVID driven crisis has brought forth strong reactions from governments across the globe against China.

Why This Time is different

When we look back, the previous cold war between the US and USSR lasted for more than four decades and had a major diverging factor, unlike the current war. There was no co-dependence, but this time Chine has been in lockstep with the US in terms of the level of tech integration.

This decoupling of the Tech regimes will be a prolonged and painful one with many casualties which will put the recent 5G spat as a minor skirmish.

US won the last Cold War by outspending USSR in terms of innovation race, the recent War has brought forth different policy strategies by the US.

Initially, the reaction was more of denial followed by knee jerk like going after key Chinese companies like Huawei and post COVID it has gone into hyperdrive bordering xenophobia.

The DB Analysts have created a China versus US Geopolitical Tech Ratio* using primary technology segments - Semiconductor capacity, Telecom infrastructure, VC Funding, High-end AI engineering talent, Quantum computing

capacity, Tech R&D, Patent applications, etc.

Since 2015 this ratio has been showing a yearly gap narrowing between the two countries, with China at 0.6 of US Geopolitical Tech capability in 2018. If this trend continues then China would reach at par with US in terms of Tech parity between 2025-2030, which is in line with their target as mentioned in their Industrial Policy document which President Xi is assiduously trying to achieve.

'Innovation Mercantilism' by China- a key to its Technological rise

Way back in 2012, Robert Atkinson, President Information Technology and Innovation Foundation (ITIF) made a forceful presentation titled "Enough is Enough: Confronting Chinese Innovation Mercantilism". In that he pointed that IM as a strategy of the Chinese policymakers has moved to the center of their Tech domination strategy and unless there is triage formed between US, Japan & EU, China will move to gain not merely competitive advantage, but an absolute advantage.

They will go for forces IP transfer and even IP thefts to gain control of all advanced technology products and services.

The post COVID world has put this debate on the centrefold with most of the policymakers going for the call for 'decoupling' from China. This has got the support of the Trump administration and also been hailed as the new strategic orientation and the only logical path going forward.

This would mean to keep U.S. companies from doing business with China, including selling key inputs, to cripple China's advanced tech companies. The decouplers protagonists believe that China is hell-bent on global dominance—both politically and economically —and that it is impossible to get China to change its policies, even with strong unilateral or multilateral pressure.

Who will bend the knee!

As the Tech Cold War rages, each regime: US & China will try to build their tech empires. Both will try to bring their satraps to read countries, under their operating domains which will resemble a 'Tech firewall' with non-operability.

Countries will increasingly be forced to choose sides and the post-Covid scenario looks adverse for China with erstwhile neutral bloc like the EU is showing stress and moving towards anti-China bloc.

All this Tech schadenfreude will have huge costs to the companies which means deploying internet platforms, communication networks (5G/6G's), IoT networks, payment gateways. This will cost an additional $5 trillion to the ICT sector, as per the Db Analysts estimate, " could amount to yearly demand destruction of around two percent and another two-to-three percent increase in costs".

If we weigh these costs against the COVID impact which the world is reeling under it is imperative that the policymakers should formulate strategies to prevent this Cold War which none can afford at the moment.

This Tech War once unlocked can go on for decades with no real winners. One should look back in history which tells us that no one country can lay claim to monopolize Technology as Innovation ensures its equitable distribution over time.

This article was published in Swarajya magazine,

June 17th, 2020:

https://swarajyamag.com/technology/game-of-tech-thrones-why-this-is-cold-war-20