When ‘America First’ meets China’s ‘National Rejuvenation’

Innovation in China today must closely align with of what Communist Party General Secretary Xi Jinping calls the “National Rejuvenation,” including a revival of the economic trajectory toward self-sufficiency and independence.

This singular bent on self-sufficiency may be familiar with “America First” observers in the U.S., but it has roots stretching back almost to the foundation of the People’s Republic of China.

{mosads}Evan Feigenbaum of the Paulson Institute traced China’s ambitions for economic self-sufficiency to the 1950s, when Mao Zedong emphasized the need for Chinese government-driven security solutions.

Reeling from the departures of Soviet Union academics and resources, China’s leadership identified the need for cutting-edge technology as a means for preservation and survival.

The current iteration of the Chinese government, complete with a newly anointed leader-for-life, presents China-led private sector organizations with something of an ultimatum out of this survival instinct that predated China’s market economy.

Firms either cooperate with Party initiatives and directives or inhibit their own capacity to survive. Wang Xiaochun, head of search engine Sogou, said as much himself: “If you think clearly about this, you can resonate together with the State…But if it’s in your nature to go your own way…then you’ll find that things are more painful than the past.”

This newfound necessity of corporate loyalty to the Party and government is an important component of China’s “National Rejuvenation.” The last few years have seen the China-first ideology rapidly codified into the cybersecurity and corporate governance laws that domestic and foreign firms must follow.

Media and technology firms are likely to face future scrutiny by new reform moves that move key media regulation and cybersecurity regulation organizations closer to central powers. China’s anti-corruption indictments, which have taken out Party and government leaders, have also brought down private-sector bigwigs that pose political nuisances to Xi and Xi-ism.

China’s current private sector is operating in a continuously narrowing space when conducting domestic and international business. Corporations themselves may not be the originators of compliant actions to the Chinese government, but may have to comply with Party directives all the same.

Foreign firms operating in China are now facing a harsh course-change by an environment that once sought partnerships and capital. In their 2017 survey of member firms, the U.S.-China Business Council found that 20 percent of trade union members were asked to transfer technologies, providing China with additional leverage.

Pressure levied on technology companies like Apple and Airbnb are requiring local data storage for China operations — including access to that data by request of Chinese authorities.

Censorship of American cultural exports to China is also expected to continue. Kissinger Institute Fellow Aynne Kokas’ recent testimony before the House Foreign Affairs Committee found two key types of film regulations that pushed production firms to partner with Chinese counterparts: a 34-film foreign movie quota and a rule that co-productions could be the exception to the quota rule.

But regardless of the makeup of production firms, strict censorship rules on politics and social rules set by the Chinese government are the deciding factor of which Hollywood stars grace Beijing’s silver screens.

The prevailing warning for America’s services are: In order to profit from cultural products and services within China, firms must follow the same exacting rules that China’s corporations follow.

The tidewinds of domestic Chinese pressure will contribute to uncertainties for American firms’ profitability and operational freedoms in China. Hitting back at China and only China on perceptions of cheating is not, in itself a way to bolster innovation and competitiveness of U.S. firms in China.

Retaliatory tariffs between China and the United States are unlikely to alter the course China has charted to pursue technological dominance and develop a service sector, even if it means continuing to shut out market access to American corporations via cybersecurity and censorship.

After the dust from tariff and investigations-related headlines settle, the strategy of determining means to persuade or push China toward more economic and cultural openness will be the far trickier question.

Rui Zhong manages “Mapping China’s Cultural Genome,” a curated project that collects top-level speeches and commentary on China’s global cultural ambitions as a program assistant at the Kissinger Institute on China and the United States at the Wilson Center.