Asia-Pacific The Tech War and the Global South

Nobukatsu Kanehara is a professor in Doshisha University’s Department of Political Science, and a visiting fellow at Perry World House. This piece was written for Perry World House’s 2023 workshop “Economic Security and the Future of the Global Order in the Indo-Pacific.”

Free trade and the global free market expanded in the 1960s, when many Asian and African nations were established, increasing the number of nations from 50 to 200. Since then, the world economy has grown by a factor of 60 by volume.

The second big bang came in the 1990s, when the complete erosion of the communist bloc brought Russia, as well as countries across Eastern Europe, the Caucasus, and Central Asia into the free market system. Since then, world trade volume has become four times bigger. The free trade system and the free market substantially enriched both the Global North and the Global South.

Despite the immense growth of the free market system, it has faced a number of challenges. At the turn of the century, big external shocks affected global supply chains. In 2011, Japan was devastated by the Tōhoku earthquake and tsunami, which damaged its northeastern coast. This combination shattered the supply chains of high-tech parts produced by Japan.

In 2020, factories all over the world shut down in response to the COVID-19 pandemic, and again supply chains of all kinds were badly hurt. Consumer prices around the globe have increased as a result, together with energy prices pushed up by Russia’s invasion of Ukraine in 2022. The neoliberalism that dominated since the 1980s now needs to be reassessed in light of these new situations.

In this context, China has become a concern of many nations for a variety of reasons. China has tended to punish other nations by shutting its market, a practice that has existed since the time of the Ming Dynasty. In the contemporary world, Lithuania, which received trade representatives from Taiwan in Vilnius in 2022, can no longer sell its products in China. Australia, which said that the origin of COVID should be investigated in 2020, can no longer sell its wine in China. Japan, which arrested a captain of a vessel illegally fishing near the Senkaku Islands in 2010, could not buy any rare earth elements from China for some time. In addition, competition between the US and China is gaining new momentum. The US finally recognized that China, with an economy equivalent to 75 percent of the US economy and a military budget at 30 percent of US defense spending is a threat that needs to be addressed. This is even clearer when you realize that the US accounts for half of global military expenditure.

Nobody knows how much the People’s Liberation Army is spending on preparations for high tech warfare. For the first time the US, which spends $100 billion on research and development for national security purpose, can feel China breathing down its neck in terms of military technology.

Today’s battlefield is no longer the same as the Pacific Theater of the Second World War. Intelligence is gathered in space, in the air, at sea, on the ground, and in cyberspace. Every second, an astronomical amount of data flows through the military system. Advanced computing, artificial intelligence, and top-notch semiconductors guarantee that the commander in the field can get the best advice for his battlefield decisions in the most efficient way. There are other high-tech domains, too, that could drastically change future battlefields: biotechnology, 3D printing, hypersonic missiles, and brain-machine interface, etc.

In fact, the battlefield has changed drastically. A pilot’s seat in a fighter or bomber looks like a seat in a game center for kids, with a big screen and a joystick. In 1990, Saddam Hussein’s army was instantly destroyed by US forces using space assets for intelligence, surveillance, and reconnaissance. In 2014, Russia annexed the Crimean Peninsula overnight in a hybrid war combining cyberattack and special forces. And in 2022, Azerbaijan surprised the world by using drones to inflict heavy casualties on Russian tanks operated by Armenian forces.

Science and technology now determine who wins a war. China has made systematic efforts as a nation to copy advanced technology from the West. They have used students, professors, mergers, and buyouts of Western tech companies, and even cyber theft.

As a result, the US has started to think that the unrestricted flow of technology, in particular semiconductors, to China should no longer be tolerated. Without such a change, American soldiers fighting a future war with China could be killed by American technology.

The fear of a war with China is real. Xi Jinping was recently chosen as general secretary of Chinese Communist Party for an unprecedented third term. He is an ambitious man who wishes for his reputation to rival that of past strongman leaders like Mao Zedong or Deng Xiaoping. But, in reality, he has neither Mao’s charisma nor Deng Xiaoping’s economic achievements. He brutally destroyed freedom in Hong Kong, but he would claim this as a correction of history distorted by the Opium War. And he dreams of taking part Taiwan. In his view, Taiwan is a Chinese island taken by Imperial Japan after the Sino-Japanese War in 1895, and to which Chiang Kai-shek fled in 1945 to spare the Republic of China. The truth is that Taiwan is a free nation today. Taiwan’s then-president, Li Teng-hui, courageously democratized the island in 1996. The Taiwanese have their own identity as a free people, distinct from the Chinese state. On the other hand, Beijing, which is suffering from recent pushes for self-determination by Tibetans, Uyghurs, and Inner Mongolians, cannot accept Taiwan’s new identity. They will and must crush Taiwan’s democracy, by military force if necessary.

The risk is a tremendous one. An invasion would hurt not only Japan, Taiwan, the United States, and China, but also the global economy as a whole. If the top three big economies on earth fight against each other, Taiwan, southern Japan, coastal China, Guam, and Hawaii could be heavily damaged.

Supply chains would be cut off or damaged on a global scale. Trade would be massively reduced. Sea lanes in the East and South China Seas would not be available during the war. The world would be plunged into chaos and recession. The shock would be far bigger than the Russian war in Ukraine. Russia is a power only in the energy market, and its economy is only as big as that of South Korea.

The semiconductor market would be damaged the most and would become highly volatile the case of an invasion of Taiwan, because there are only three “foundry” nations: China, Taiwan, and South Korea. The US, UK, the Netherlands, and Japan have become “fabless” nations. If China invades Taiwan, then the two biggest foundry nations could stop supplying their products in the world semiconductor market. The risk seems real, so the US has invited the Taiwan Semiconductor Manufacturing Corporation to Arizona. Japan has done the same in Kumamoto.

The trends of reshoring or friend shoring are being accelerated. These trends are not only driven by geopolitical risk, but also more fundamentally by China’s decreasing population, the steady rise of their wages, and the opaque decision-making process of the Chinese Communist Party. Over the course of the next twenty years, China may reach is peak as an industrialized nation, like Japan or European nations before it. The beginning of the end can already be glimpsed.

The West should be united to engage China from a position of strength. The West can do this, simply because the West is two times bigger than China in economic terms. China will never be able to dominate the West if it can show a united front, as it has done in the war in Ukraine.