US-China Tech War: State-Business Relations and Policy Implications

Abstract

The rise of Chinese tech firms and the U.S.-China technology rivalry has certainly received much attention. Yet thus far, few academic works provide frameworks to systematically capture the influence of such a tech cold war. To fully understand the impact of China’s technological development and whether the U.S. response is effective, one has to incorporate perspectives from weaponized interdependence, global value chains and government-business relations. This paper starts with the state-business alliance behind China’s joint venture period and the engagement with the global value chain period, when the incentives of the state and firms were often misaligned. Then it proceeds to analyze how the interruption of the global value chain acted as an external shock that reshuffled state-business relations by aligning the incentives of the state and businesses under the structure of a new technology innovation system. It evaluates how such state-business relations, in turn, influence the effectiveness of US policies in the short and long run.

Keywords: US-China; Tech War, Trade War, Technology Policy, China, State-Business Relations, Huawei