Why China isn’t leading in tech.

China recently ended its race with the US for dominance in the chip manufacturing sector. While the U.S. stepped up its commitment to rebuild domestic production last summer by pouring nearly $200 billion in private investment into manufacturing projects, China abruptly halted 1 trillion yuan (about $148 billion) in investment. The industry.

In August, reports from the Chinese government revealed a crackdown on anti-graft probes into many of the industry’s top figures, including Ding Wenwu, chief executive of the China Integrated Circuit Industry Investment Fund. Known in the industry as the “Big Fund,” this $45 billion fund is the official vehicle for the Chinese government’s massive investments in chip investments. The fund has invested in several companies, including China’s largest chip maker, Semiconductor Manufacturing International. Corporation

and Yangtze Memory Technologies Co., both crippled by US sanctions.

According to Bloomberg, Chinese officials are “now asking domestic semiconductor material suppliers to cut prices to support domestic customers” and “China is choosing to shift some of its state capital to select areas . . . that are relatively nascent and where no single nation can dominate.”

In this retreat, China quietly conceded. The U.S. ban on exporting advanced chip-making technologies to China has hampered China’s fledgling semiconductor industry, as key partners including the Netherlands and Japan have barred such technology from exporting to China.

But there’s a big reason why China’s high-tech efforts are failing: its communist system stifles innovation. All major subsidies in China are controlled and distributed by the Communist Party. Top scientists need to be in the party system to advance their careers and get funding. The higher their rank in the party, the more funding they can receive. They can also fund projects and government funds for companies owned by their partners to generate wealth and receive large grants. Recent corruption investigations have implicated the CEOs of big funds and executives of high-net-worth companies.

Before the investment stopped, chip startups tied to local government officials who were tasked with recommending and vetting candidates held subsidies. According to an analysis by the South China Morning Post, 15,700 new Chinese semiconductor companies were registered from January to May 2021. According to Chinese media outlet Sing Tao Global, many companies have moved in industries ranging from construction and cement to apparel and pharmaceutical factories. , at least on paper, to chip production, resulting in unfinished projects and frequent closures. But even without this poor allocation of resources, China’s chip development will still be hampered by the country’s lack of long-term vision.

In the year In 2019, I interviewed a data and AI scientist at Huawei, China’s largest and most powerful telecommunications company, which was preparing to take over the global rollout of 5G at the time. Despite Huawei’s successes, he told me, a hunger for rapid success has gripped the company. While the company’s founder and CEO, Ren Zhengfei, publicly promotes new research, he may cut off funding if there are no significant successes in a project’s first two years. This pattern has led to very consistent innovation at Huawei, which is only done at the application level. The company rewards innovations that can make money immediately, but the long-term research that can change the world is not being done.

This is not just Huawei. Chinese society under communist control is typical. Great creativity comes from a free and curious mind. Such minds need to be nurtured, and China cannot do that today, despite its impressive skyscrapers and smart cities.

China’s test-oriented education stifles creativity and independent thinking. The Communist Party uses propaganda to instill a sense of loyalty and gratitude in the population, undermines trust, and encourages widespread questioning. All this, combined with the sense of accomplishment from China’s recent economic successes, has made the Chinese completely focused on success. The goal is always to get the greatest benefit for the least cost. Dreams and desires are unrealistic and expensive, even foolish. They must be thrown away.

If China cannot develop independent ideas, it will always be a follower, not a leader, as the West thinks and creates in the future.

Ms. Gao is a journalist and host of “Zooming In With Simone Gao,” an online current affairs program.

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