Latest / China Considered / Tech Titans at War: The US-China Innovation Race with Jimmy Goodrich

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Tech Titans at War: The US-China Innovation Race with Jimmy Goodrich · China Considered

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>> Elizabeth Economy: Welcome to China Considered, a podcast that brings fresh
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insights and informed discussion to one of the most consequential issues of our time,
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how China is changing and changing the world.
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I'm Liz Economy, Hargrove, Senior Fellow and Co-Director of the US-China and
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the World Program at the Hoover Institution at Stanford University.
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Today I'm joined by Jimmy Goodrich, Senior Advisor for Technology Analysis to
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the RAND Corporation and a leading expert on the global semiconductor industry.
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Welcome, Jimmy.
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>> Jimmy Goodrich: Thanks Liz, it's a pleasure to be here, it's really exciting.
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>> Elizabeth Economy: Great, so
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the US has declared China its greatest long term strategic competitor.
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And there's probably no issue in that competition that's received more attention
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than technology.
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But I think that it's hard for people outside the small group of experts like
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yourself to understand exactly what this technology competition is all about.
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Is it about national security or economic competitiveness?
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Does it include every technology or just those somehow tied to national security?
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How do you organize your thinking on this technology competition?
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Do you have a framework that you find to be particularly helpful?
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>> Jimmy Goodrich: Well, thanks, Liz.
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And as you know, on this question you can ask a hundred different people and
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they give you 100 different answers, but I'll offer my thoughts for what I think
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are some of the important ways you can think about the US-China Tech Competition.
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I mean, clearly it matters for national security, it matters for
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economic well being, it matters for national pride.
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Who's gonna lead the next generation in technologies that
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are gonna shape our lives, change economies and
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improve home and health, and also secure national security.
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Particularly for these general purpose technologies like artificial intelligence,
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robotics, fusion, they have huge impact to both the economy and
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our everyday lives, but also to national security.
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And as tensions between the US and China have increased, I think there's been
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a more acute understanding amongst policymakers that in the 21st century,
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we're talking about competition in these frontier technologies.
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Who can attract the best talent, create the best companies,
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who can diffuse that into their economy, who can rapidly integrate these
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innovations into their military better than the next country?
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That's really what this is about.
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China is now the second largest economy in the world.
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They have tremendous depth in terms of their ability to innovate.
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China has been able to create some of the world's most leading companies,
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scientific laboratories.
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I think the story of China 20 years ago stealing and
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replicating technology is really the story of yesterday.
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We're looking at a China that is fundamentally changed,
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leading a lot of the indicators in basic science and chemistry and applied
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materials science in semiconductor related research and development in many areas.
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Basic R&D for AI, aerospace, other areas.
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So we have to think about China now as not just a country that is
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a copycat innovator, but an original innovator increasingly so.
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>> Elizabeth Economy: Yeah, so is there a way to think about or
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a set of metrics that kind of you use for who's winning and
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who's losing, or do you think that's even helpful at all?
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I remember reading a paper by ASPI,
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the Australian Strategic Policy Institute that came out I think
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last year where they said that China was leading in 37 out of 44
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sort of crucial technologies based on sort of the level of original and
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quality research that was being done in those areas.
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I mean, is that a metric that we should be thinking about or is that win,
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lose sort of framing the wrong one?
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>> Jimmy Goodrich: Well, I mean, there's a lot of different ways to look at it, but
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in general you can think about tech power as a measure of your creativity,
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your level of innovation, your economic productivity, and
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also adoption of the technology.
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It's one thing to create it, but if you don't diffuse it and
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adopt it across your economy.
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We've seen that happen for example, where in the US the Department of Energy funded
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a lot of the original research for the battery technology and solar cell
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technology that's used today, but China led in scaling up of that technology.
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And it's brought the cost down where it's now the dominant producer of these items,
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even though they didn't invent the original technology.
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So it matters that you can both create technology but also diffusion adopt it.
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I think getting both of those right.
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In fact, there is a professor at George Washington University, Jeffrey Ding, who
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recently wrote a book about how diffusion of technology is really important.
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I recommend it.
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And he looked at everything from the electricity to the automobile and more.
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Thinking about AI in terms of national power, is it who creates or
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who diffuses it?
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I think the answer is both.
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So you really need to look holistically at both the macro and micro level.
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At the macro level, it's thinking about R&D intensity.
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How much of your government expenditure are you reinvesting back into research
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development as a percentage of GDP?
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How much talent are you producing on an annual basis?
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What's the quality of it?
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Is it PhD, is it applied?
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Is it basic?
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Is the work that they're doing oriented towards the needs of the economy or
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the scientists in the country?
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What kind of firm level startup created activity do you have.
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For example, we know that China looks at all these metrics cuz you can look back to
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early speeches from Xi Jinping in 2013/14 where he said, China's losing the race.
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We're behind in terms of advanced science and technology,
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we need to catch up in talent and patents and papers and other different indicators.
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But more recently, Xi actually said, hey,
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at this meeting in Shandong, if you recall earlier this year where he
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kind of signaled some recognition that the economy was not doing very well.
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He gathered some experts of domestic economists.
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One of the things he asked is why don't we have as many unicorn startups in
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China like we used to?
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So we know that the Chinese government is actually quite acutely aware of a lot
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of these metrics and following them very closely.
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If you look at the 20th party congress, there was a huge section on science
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technology and the Plenum document that lists very proudly all the accomplishments
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they've made and exactly how many of those metrics that I mentioned.
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That's exactly how if you look to science technology organizations in the US,
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the National Academies, National Science Foundation,
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ITIF they're also assessing in many of these.
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The thing though is you can take the exact same metrics and
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sometimes come to different conclusions.
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I think that's where it's important to then look beyond what's going on at
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the macro level and look at case studies.
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I think that's really important because the macro picture doesn't give you
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honestly the full sweep of what's happening on the ground in China.
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And that's when you have to look at individual firms, go out, visit China,
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meet with the factory managers, the folks working on an R&D.
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Talk to researchers around the world that are engaging with their Chinese
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counterparts and really have a bottom up assessment as opposed to a top-down as to
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the level of innovative activity in different sectors.
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And it varies between ship building, EVs, cars, robotics, semiconductors,
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foundational versus advanced ships.
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You can write a different story for almost every sector in China.
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As a analyst who does research on China's science technology space,
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why it's so fun and so interesting is that there's
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such a wide variety of facts on the ground.
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Ground that, you know, either impress you or leave you thinking, wow,
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they're not doing as well as they would have liked in this space.
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>> Elizabeth Economy: So, I mean, that was terrific, and
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I wanna come back to a couple of those case studies to get your sense because of
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what's taking place on the ground in China.
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Because you are, I think really one of the people who has spent the most time
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certainly in the semiconductor space, but I think also increasingly in AI.
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The most time thinking and
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engaging on the ground in China to understand what's really taking place.
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But let me just take one step before that and ask you,
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do you think the United States and China approach this competition in the same way?
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I mean, you've laid out, you know,
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a number of different really important metrics that we should be thinking about.
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But does the United States tend to stress sort of one approach and
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does China stress a different approach?
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Do we understand the tech competition in the same way?
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Do we frame it in the same way?
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>> Jimmy Goodrich: I think sometimes it's very different, however,
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I'd say the US approach is becoming more oriented towards
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a national competitiveness agenda than it used to be.
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If you go back maybe ten years, it was our basic research is conducted
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in universities, corporations tapped into it if they want to or not.
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We didn't have industrial policy to attract chip making or battery or
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solar panel manufacturing in the United States.
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But fast forward now, the US is doing a lot of that.
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On the flip side, if you go into China, there's always been a five year plan,
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an industrial policy, someone in the halls of Beijing drinking tea and
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thinking they need to achieve this target or that metric.
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But, frankly, you can go out,
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talk to some of the companies who don't even recognize they're part of a plan.
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They're just trying to make profit because this is an attractive industry.
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And frankly, some policy signaling has meant they can probably get more
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investment in capital and subsidies because of that.
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But I would say that the Chinese approach is, the way I look at it is
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the government sets the goalpost, it identifies long range targets, but
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it doesn't give an intentionally a lot of guidance of how to get there.
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It says, we wanna create a world leading semiconductor industry by 2030.
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That was the target in their integrated Circuits plan in 2014 or
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by 2025 they want to achieve X amount of innovation
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increase in whatever sector you name it, robotics and so on.
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And then they really leave it to the provinces, to the mayors, the governors,
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to the CEOs of local government financing vehicles who often dole out a lot
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of the cash to these companies, to those state owned enterprise bosses,
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the entrepreneurs to figure out how to get there.
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And then you kind of open up the spigots, funding comes out.
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There's a tremendous amount of waste, but that's kind of by design really.
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Thinking about China's government efforts at developing their science technology,
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I think of it as a venture capital state.
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I'm not the first to coin that term.
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Others have used that where they've got a portfolio of bets in the semiconductor
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space, for example, they might fund two or three companies to produce the same thing.
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Or in super competing, there's always been sort of managed competition of four or
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five players, but they'll pick the best out of the pack for
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their ultimate deployment of the technology.
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Much like a venture capital investors thinking, they've got 20 investments,
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two or three out of the 10 might win and that's enough for
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them because it's the end, not the means that they got to.
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And if the end is for a VC return on investment or for China for moving up
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the ladder and creating jobs, then all the means that they got there were justified.
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Can they sustain that in sort of a more constrained budget environment with
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a slowing economy is one of the big questions out there amongst the China
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policy community.
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So for the US, we're kind of moving more in that direction.
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And again as I mentioned, we're much more laissez faire.
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Industrial policy was a taboo word in Washington.
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But now with Chip's Act, Inflation Reduction Act,
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possibly more investments for things like shipbuilding and a new Congress and
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administration, we're moving a little bit in that direction.
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Not as intensively as China is.
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I think China's much more top-down mobilization but
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also bottom up at the same time and very flexible where I think also one of
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the biggest differences is that there's more tolerance for failure ironically
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in the Chinese political system than there is in the US political system.
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Because a lot of this industrial policy is so new.
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There's a real fear that say with the Biden administration they'll make
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a wrong investment decision, lead to a cylindrical like bankruptcy that could
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weaken the political consensus around these type of things.
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Whereas in China they've had so many failures but so many different successes,
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I think there's a higher tolerance for those failures in their system.
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>> Elizabeth Economy: Yeah, although I think arguably there's a high
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tolerance for failure in the venture field in the US economy.
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>> Jimmy Goodrich: Yes.
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>> Elizabeth Economy: Maybe not in terms of the political system engagement with
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it, but I think it's one of the strengths of all the Silicon Valley,
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Silicon Valley, etc, that in fact there is that tolerance for
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companies rising and falling and exiting and new ones springing up all the time.
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>> Jimmy Goodrich: I think that's one of our greatest assets is the healthy venture
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capital, private equity financial community that helps create a lot of these
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startups, invests in companies that just have a small idea in their garage.
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China's struggling, if you've read a lot of the reports over the last two years,
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VC funding has really,
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particularly private backed VC funding has really been in a drought in China.
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Now the government stepped in and become the predominant LP to a lot of these
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venture capital startups, VC funds in China.
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But that means, though the government has more say, they're more focused on job
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creation, is a new factory gonna be built in my district versus, five, ten
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year returns and is this widget going to be successfully developed on the market?
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That's the orientation of the US system.
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But the Chinese system, when you've got the government as a shareholder,
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obviously is going to have a different set of metrics.
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On the flip side, that might mean that some areas that the sort
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of quick return VC community is not interested in hard tech,
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maybe more prone to investment in China.
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>> Elizabeth Economy: Right, and
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that's why we have the Chips and Science Act in good part, I think.
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Let me just ask you quickly though to that point about the private
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venture capital drying up and the government stepping in, why is it?
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I mean, I know that certainly Western venture capital has dried up for
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a variety of reasons tied to sort of changing
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political circumstances in the relationship, increased tensions.
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And so I think greater concerns about US money being used to support
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technologies in China that could undermine our national security.
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But why is the Chinese private venture money drying up in China?
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>> Jimmy Goodrich: I think there's a couple of reasons, one, of course,
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is the pandemic and then the drag on the economy that that's had since then.
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And so, and on top of that, a lot of the really active funders of tech in China got
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their money from the Internet economy, from the E commerce boom.
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With the Internet crackdown, the government conducted over the last couple
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of years, that's really spooked a lot of the investors.
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It's fizzled a lot of investment activity, and
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it's also reduced a lot of their holdings.
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So there's just less money, there's not as much confidence.
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And now, people that would have been investing in Widget startups,
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fusion technology, AI, they might be opening up a bookshop
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in Thailand now instead of investing in a lot of these new startups.
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It's not to say there's a complete drought,
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there's still companies out there.
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You've got Lee Kai Fu and Zinovation and others that are invested in the economy.
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But I think it's a confidence issue, it's also just a single fact.
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With a slowing economy, there's going to be less capital.
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And that's where the government has tried to step in and fill some of that void.
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It's interesting, it's again, I guess it's all roads lead back to sea sometimes.
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And he mentioned unicorns.
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30 days later, the State Council had a guidance document on, my gosh,
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we need to get venture capital funding revved up again.
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And just what they need another government document to tell them what to do.
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>> Elizabeth Economy: Right, so you mentioned sort of the industrial policies,
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something that the United States, I mean,
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the United States has had industrial policies in the past, but clearly,
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China's been sort of the king of industrial policy.
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And now the United States with chips and science and
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Inflation Reduction Act has sort of elements of that.
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Are there any other things you think that China should learn?
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Sorry, that the United States should learn from the Chinese model?
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I personally think back to just Chinese persistence, and
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I've just been reading Eva Do's new book on Huawei.
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>> Jimmy Goodrich: Huawei.
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>> Elizabeth Economy: Right, and she mentions that the Chinese government had
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invested a billion Yuan in 1996 in semiconductor industry.
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And here we are today.
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There's still, now it's hundreds of billions of dollars that China's putting
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into the semiconductor industry.
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But nonetheless, you mentioned batteries and EVs, and they persist.
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Whereas sometimes the United States, as I think you were suggesting,
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we develop the technology, but then we don't continue.
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President Carter was putting solar panels on the West Wing of the White House in
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1979, and then President Reagan came in and ended the renewable energy program.
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And so one of the downsides of our democracy and flips in government.
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But what else do you think the United States might take away
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from the China model?
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>> Jimmy Goodrich: Well, I think that's really important.
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Just look at other East Asian economies that have done very well in innovation
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industrial policy.
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Take Taiwan and the semiconductor miracle,
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Taiwan Semiconductor Manufacturing Corporation, which today produces around
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90% of all the world's most advanced chips, the smallest chips.
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They started out as a Joint venture between the Taiwanese government,
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48.5% owned by the Taiwanese government.
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For over two decades, the Taiwanese government sat there as
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a patient shareholder buffering them from market forces.
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They gave 20 years of tax credits to those that purchased the equipment to build
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out their factories.
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And no surprise, at their early stage of inception when they really weren't
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able to on their own make profit, the government buffered that and persisted.
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When the going gets tough, for example we're seeing Intel struggle in the market,
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you have to keep going,
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you can't just walk away as soon as it gets a little dicey.
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I think the other important takeaway that China doesn't do well, that we
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should not replicate is China doesn't know how to exit their investments.
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The Taiwanese government, as soon as they saw TSMC become successful, also in Korea,
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when the Korean government had its heavy chemicals initiative in the 1970s,
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then in the 1980s they built up their semiconductor plans.
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The government of both Korea and Taiwan, as soon as they saw Samsung,
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LG, TSMC become successful, they reduced their investments, they reduced
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the government policy cuz they realized that it worked and they don't need to
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create these companies dependence on them for their financial success.
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I think the other thing we can learn from China of what not to do is don't
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create companies where the government has overriding control.
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That's one thing that's remarkable about China is that if you look at all
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the industrial policy success of different East Asian developmental states.
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Most of the actors who implement the industrial policy are private
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entrepreneurs running privately held companies, Samsung, LG, Sony, TSMC.
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Whereas in China,
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vast majority of the government dollars are not going to Tencent and Alibaba,
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they're going to China Resources Corporation, and Tsinghua Unigroup,
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and AVIC and the China Minerals Energy Extraction Corporation Limited,
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etc, everyone under the central government's SAC group.
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That's starting to change a little bit.
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What's interesting is over the last five or six years,
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particularly as US-China tech tensions have escalated,
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what China's been talking about is I think learning from those past mistakes,
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something called whole of nation, new type of innovation.
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And this means mobilizing the state, but instead of just these old line state
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ministries and SOEs bringing in the private companies and work together.
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And Huawei is actually the best example of that,
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back to the fantastic book that Eva wrote.
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Huawei is now the sort of vanguard of that new model where Huawei is partnering
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with state-owned enterprises like SMIC or
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Research Institutes like the China Academy of Sciences to work together
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to take private market orientation, business process, R&D,
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management skills and the good tech coming out of the labs and push forward.
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Is this a sign they've learned entirely?
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I think this might be a one off but it's interesting that they're experimenting
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with the model that has worked for other countries.
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So I would hope that for our industrial policy, we're not gonna create
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state-owned enterprises, the government's not gonna have an overriding share that.
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They've got an exit strategy, and
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then we can make our industrial policy as market based and oriented as possible.
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>> Elizabeth Economy: Yeah, I mean,
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I do think that that's built into the design as it is, right?
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Because we're kind of government capital at about 39 billion and
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private capital at 10 times that.
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So I think that's the direction in which we're moving.
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But I also think that you're warning about when the going gets tough,
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the tough get going but not like going out the door, but stick with it,
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I think is really important and hopefully all these programs
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are gonna weather the transition, the political transition.
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>> Jimmy Goodrich: I think there's a bipartisan consensus around rebuilding our
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manufacturing base.
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I think the Republican Party preference is tax
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policy to get there instead of fiscal subsidies.
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But remember the Chips and Science Acts includes a tax credit that's probably
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actually exceeding the total amount at the end of all of this of the subsidies.
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>> Elizabeth Economy: Yeah. >> Jimmy Goodrich: 39 billion.
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>> Elizabeth Economy: Right, you're right.
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>> Jimmy Goodrich: Tax credit is 25%, it's like twice that size.
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>> Elizabeth Economy: Yep, yep, yep.
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But Inflation Reduction Act I think relies more on incentives and tax credits and
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things like that.
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So that was less bipartisan.
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>> Jimmy Goodrich: So there's something in there for everybody I would hope.
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>> Elizabeth Economy: Yeah, and now I think a number of Representatives,
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members of Congress, even Republican ones have come to embrace the IRA and
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the advantages that they've seen for their districts.
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>> Jimmy Goodrich: I see the jobs being created and the job creation, it's real.
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I think the part of the challenge of the last four years
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is that a lot of these investments are huge, they take time.
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It's hard to see the immediate results but you know,
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at the end of the day it'll benefit the country.
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So at the end of the day that's great.
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>> Elizabeth Economy: Right, so you mentioned Lee Kaifu, and
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he has been a really important player in China.
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I remember back in 2018, he wrote the book on AI Superpowers.
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He said, basically, China eventually was gonna win the AI race,
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in large part, because it was the Saudi Arabia of data.
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[LAUGH] Because it was investing more money, had great entrepreneurs,
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had huge engineering class, huge Internet companies.
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And he also said that the American approach is more about like academic
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research, whereas China is going to value the use of AI in manufacturing.
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And I think this brings us back to some of the first points that you
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were making about needing to have the full cycle, right?
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So do you think that this is the way that AI is playing out?
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I mean, the AI competition is playing out,
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that the United States is maybe overly weighted on the academic research and
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not enough on the deployment throughout the economy.
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And whereas China's already moving into deployment but
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maybe isn't quite leading in the research.
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How do you see this playing out?
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>> Jimmy Goodrich: Yeah, I remember reading that book at the time and
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it's a great book.
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And Kai-Fu is obviously one of the most knowledgeable people around
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China's tech ecosystem, has great insight and expertise on the topic.
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But did get one prediction right,
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that the US was gonna lead in the hardware, and they still are.
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Whether it's in advanced node chips or the semiconductor production equipment,
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the US and the allies still lead.
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And he had sort of predicted that was gonna be an area where the US is gonna
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have a strength.
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I think in data, it didn't quite turn out to be the way we thought it would.
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China is a population of over a billion, but
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the rest of the world is four times that.
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So at the end of the day, actually I think we had to look bigger.
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When you look at Google or Meta or OpenAI, they've got the world's data
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available to them, whereas China has data that's created within,
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sort of inside the walled garden of the Chinese Internet.
25:59
It's useful within China, but it's not as useful outside of China.
26:04
In addition, I think of Chinese AI development as basically two waves.
26:09
The first wave really, when Kai-Fu wrote that book,
26:13
was all about facial recognition and neural networks.
26:17
And that was really the first wave of AI, and China exploded.
26:23
They took off, they lead that technology because they had a huge market led by
26:28
the government, fueled by demand for surveillance and security cameras.
26:32
>> Elizabeth Economy: Exactly.
26:33
>> Jimmy Goodrich: Every Chinese startup in that era, SenseTime, Megvii, they
26:38
were almost entirely focused on police public safety surveillance applications.
26:45
Or if you go to the street corner in China now, there's 20 different cameras from 20
26:50
different agencies that are hooked up to 20 different systems.
26:53
And that's really what drove that first wave of AI development in China.
26:57
The second AI wave, which is happening now,
27:01
is taking fundamental breakthroughs in research around
27:05
transformer models and large language models and
27:10
using prediction to figure out how your phraseology is going to work.
27:16
If I say boom, then what's the likelihood of the next 20 words and
27:19
the models can predict that for you?
27:22
The US has created that whole technology, is still leading, but
27:26
China is very close behind.
27:28
And we're seeing today that some of the Chinese companies,
27:33
like DeepSeek, StepFun, Kai-Fu's company, 0AI,
27:38
are quite innovative on these kind of rankings of who has the best models.
27:44
Chinese companies are holding their own weight.
27:46
I think one of the big questions is with the export controls that do constrain
27:52
China's access to the chips, which you need to fuel these AI systems,
27:57
is that gap going to get bigger over time or not?
28:01
That's an open question that a lot of people are trying to figure out
28:04
the answer to.
28:05
>> Elizabeth Economy: Yeah, so you've spent some time figuring that out.
28:08
What do you think?
28:10
>> Jimmy Goodrich: I think it takes time for these controls to have an impact.
28:15
China is able to stockpile, purchase a lot of things.
28:18
They're able to, unfortunately, they were getting access to things like TSMC.
28:23
They've been able to smuggle a bunch of chips in.
28:26
Your rules are only as good as the ones you enforce.
28:30
And I think we've learned over time that 200 page
28:34
regulations are great if they're enforced.
28:38
And that's an area where I think that's been lacking over the last couple of
28:42
administrations.
28:43
But it's very difficult.
28:45
I mean, these are huge, deep global supply chains.
28:47
They span multiple countries and jurisdictions,
28:51
arcane rules that require teams of lawyers to understand, this is not easy stuff.
28:59
I think it's a work in progress.
29:02
The export controls and whether or not they're gonna deliver the sort of results
29:07
that whether the China hawks say they will or those that criticize them won't,
29:12
I don't think we really have an answer one way or the other yet.
29:17
It's too early.
29:17
Remember, the Biden administration's big package was just two years ago.
29:22
And so that's not even really a full technology cycle.
29:28
For example, the semiconductor industry, it takes two or
29:30
three years to design a new chip.
29:32
So we're still at the very early innings of this and we'll see over time.
29:36
There's one thing however,
29:38
is that there's no doubt that China's fully committed to localizing as
29:43
much as fast as they can in every area that we're trying to constrain the PRC in.
29:48
And so it's a big question of small yard, high fence strategy,
29:53
have the most delicate narrow controls as possible.
29:58
You also send a signal to China at the same time to double down and
30:01
build out its injuries industry as fast as possible.
30:05
Do you use all that leverage now, later, when?
30:08
It's a complicated question.
30:10
>> Elizabeth Economy: Yeah, I mean, and
30:11
recognizing of course that China was already committed to indigenization,
30:16
what I think the controls have done is to accelerate the process, right?
30:21
To force them to move faster, to invest more.
30:25
>> Jimmy Goodrich: Yeah, in every area that we're talking about today with
30:27
semiconductor equipment, materials, software, AI chips, memory chips,
30:32
China was investing in every single one of those before that.
30:35
They've certainly increased the intensity and the scope of the investment.
30:40
Was that because of export controls or just a breakdown in US-China relations?
30:45
Who started it all?
30:46
I mean, that's a hard question to answer.
30:50
>> Elizabeth Economy: Right, right.
30:51
And well, I guess we'll, we'll give it a couple of years, but I would never want
30:56
to see certainly the export controls be thought of as the one arrow in our quiver.
31:02
>> Jimmy Goodrich: Silver bullet, yeah.
31:03
>> Elizabeth Economy: Funding the science part, for example,
31:06
of the Chips and Science Act, I think should also be an essential part of
31:11
our competitive strategy when it comes to semiconductors.
31:15
>> Jimmy Goodrich: There's a lot of focus on semiconductors,
31:20
on TikTok, on batteries, you name it.
31:24
Those are all applied technologies where we are going to win.
31:29
And sort of the future of the next wave of innovation is gonna be leveraging
31:34
our amazing university and national lab infrastructure to invest in
31:38
the basic science that then we can apply and commercialize.
31:42
Whether it's in fusion technology, next generation chemistry,
31:47
or bioengineering that's gonna be useful for life sciences.
31:52
What's interesting is that China is really almost at a breakout stage
31:57
of investment in basic science.
31:59
And it's something that really is not covered well,
32:02
The Economist did a piece about six months ago on China's basic science rise.
32:07
It's really now a science superpower, they're building 20 new national labs and
32:12
scientific facilities across the country.
32:15
And everything from experimental fusion reactors to deep earth
32:19
exploration platforms, mining colonies on the moon,
32:23
deep space probes, everything you can think of.
32:27
It's like Xi Jinping has a fascination with journey to the center
32:31
of the Earth and every other sci-fi book, in fact,
32:35
I think at one point they were on his bookshelf.
32:39
But it's interesting, I recently spoke to somebody,
32:42
senior individual in the Chinese science system, and they said, we're not gonna
32:47
catch up anytime soon in these sort of applied technologies of today.
32:51
But when it comes to the next wave of technologies and high energy physics and
32:55
quantum, they're much more confident that these big investments they're making five,
32:59
ten years down the road are gonna pay off.
33:01
Much like the big investments the US made into its science infrastructure in
33:06
the 1940s during World War II, and then on through the Cold War paid off with GPS,
33:12
the internet, the semiconductor, you name it.
33:15
Those were all big government investments that had spillover effects, and
33:19
I think China's watched that model, they think it's gonna work for them.
33:23
Again, I come back to the big question of like, well,
33:26
is that funding gonna be around forever and can they sustain it,
33:29
particularly if the economy continues to shrink the way it is?
33:32
>> Elizabeth Economy: Right, but I think we've also seen that despite the economy
33:36
slowing significantly, that this remains a priority for Xi Jinping.
33:40
And so, I think we should not take our foot off the gas pedal in
33:45
anticipation that somehow they're gonna start to retrench.
33:50
>> Jimmy Goodrich: Yeah, I should have answered my own question there and
33:53
saying I don't think it will, I agree with you.
33:56
>> Elizabeth Economy: That's fine, I mean, [LAUGH].
33:58
>> Jimmy Goodrich: 0%, you could still take 30% of all that economic output and
34:03
dedicate it to science, technology, investment.
34:07
Just look at Japan, the zero growth economy of the last several decades,
34:11
they've added all sorts of new infrastructure.
34:14
They're still world leading power, you don't have to be growing at 10%
34:19
per quarter to have a huge dent on global development.
34:22
>> Elizabeth Economy: Let's send that message to the new Congress,
34:25
I think it's an important one for them to hear.
34:27
So let me ask one last question, a slightly different area,
34:32
and that's on our science and technology cooperation with China,
34:38
because there's still a large area of cooperative work that is going on.
34:44
I think that many people would argue certainly in the US scientific community
34:48
should be going on.
34:49
A lot of synergy among scientists across the Pacific,
34:54
the US has let the science and technology cooperation
34:59
agreement that had been in place for 45 years lapse.
35:04
It missed its formal renewal deadline, is that a mistake,
35:09
or are we at a point where we really should just be hunkering down and
35:15
battening down the hatches and closing off our research universities?
35:21
How do you see that dynamic in terms of the cooperation versus the competition?
35:28
>> Jimmy Goodrich: Well, I mean it's interesting.
35:30
>> Elizabeth Economy: Element of it, because so
35:33
we've benefited here in the United States to such a significant
35:37
extent from that free flow of talent coming from China.
35:42
I mean, many, many, of our top researchers today hail originally from China and
35:49
from other countries, but how do you think about that?
35:53
>> Jimmy Goodrich: Well, I think with anything, there's benefits and
35:56
trade-offs and there's no doubt that science is global.
35:59
And if you talk to any scientist in their domain,
36:01
whether it's physics, chemistry or semiconductors.
36:04
What they're doing requires global partnership because no one country
36:09
has a monopoly on good ideas and people,
36:12
it's just fundamental rule of humanity and idea creation.
36:16
In fact, I think it's our greatest strength is that if you look at
36:19
the research labs and the innovation in China.
36:22
Despite a lot of efforts, they're not recruiting as many and
36:26
as good as global talent that they would like into their research labs.
36:30
Now, you read every day about this scientist and that scientist that's going
36:34
back to China, but the overall trend is that if you're a top scientist,
36:39
you wanna work in a Western university.
36:41
Or Japanese or South Korean because you're gonna have more freedom,
36:45
you're gonna have less bureaucracy probably, and frankly,
36:48
you can create a startup, usually a lot easier.
36:51
On the other hand though,
36:53
I think we were a bit naive in some areas where there was joint collaboration on
36:58
super competing technology that went straight into nuclear weapons simulation.
37:03
Or working with the Chinese Academy of Engineering Physics,
37:07
which is their nuclear weapons lab on things that will benefit their nuclear
37:12
modernization program.
37:14
Or Bill Gates wanted to do small modular nuclear reactor technology in
37:18
a partnership with the Chinese National Nuclear Corporation,
37:21
which is working to develop SMNRs for their nuclear submarine program.
37:25
So there's areas when there's a clear dual use application should be just more
37:30
mindful.
37:31
I think a lot of it just stems from education working with the research
37:35
community to ensure they're aware of the risks,
37:38
to ensure that research integrity is really important.
37:41
That if you're a university researcher,
37:44
you're disclosing where your funding's coming from and
37:47
that's not something that applies to just researchers engaged with China.
37:52
It's any researcher working with universities around the world,
37:56
I think MIT has actually done a great job.
37:58
They put together a task force,
38:00
they looked at how can they help improve research integrity and security and
38:05
get the buy in from their research staff and professors.
38:09
Because it helps them in their work get more funding and have more credibility
38:14
if they are perceived as living up to a really important code of conduct.
38:19
And I'm seeing more universities kind of go that direction, it doesn't have to be,
38:24
and it should not be targeting one group over the other,
38:27
frankly, it's a global conversation.
38:30
So, I still think we should maintain as robust as links as we can,
38:34
recognizing that we should put guardrails on technology
38:39
engagement where there's gonna be a clear military application.
38:44
And also frankly,
38:45
it benefits us from knowing what the state of the research is in China.
38:49
If we're all drawbridge is closed and behind our own walled garden,
38:54
we're not gonna know what they're doing.
38:57
And in some areas, particularly for
38:59
strategic applications that could put us at a disadvantage, likewise that means
39:03
we'll have to let China know a little bit about what we're doing.
39:07
But frankly, a lot of the research is published anyways.
39:11
>> Elizabeth Economy: [LAUGH] >> Jimmy Goodrich: So
39:11
particularly when it comes to basic research,
39:15
I think there's a good way that we can balance things.
39:19
I think we're heading down that path whether or
39:21
not the next four years, it's gonna go in a different direction we don't know yet.
39:26
>> Elizabeth Economy: Yeah, okay, so now we're into our quick little lightning
39:31
round of questions, so give me your must-read book or article on China.
39:38
>> Jimmy Goodrich: Well, I was gonna say Eva Doe's new book on Huawei,
39:41
that's a good one.
39:42
>> Elizabeth Economy: Okay, [LAUGH] that's fine.
39:43
>> Jimmy Goodrich: Of course, any book from Liz Economy, I recommend.
39:47
>> Elizabeth Economy: Not necessary.
39:48
>> Jimmy Goodrich: The new book on Xi Jinping Thought from Steve Tang and
39:51
others is a good one.
39:52
I have not read blocking out a few of the others, but anyway,
39:56
those are the couple of the ones I recommend.
39:59
The article, I go back to the Economist article on basic science on China.
40:05
I think it was a good tip of the iceberg primer of, and something that people don't
40:09
think about a lot is the innovation, the labs, the basic research.
40:13
And thinking more about China as a science superpower, as a science imitator,
40:17
I think is an important concept.
40:19
>> Elizabeth Economy: I also think, frankly,
40:21
your article on Fortress economy is a great one.
40:25
Tell me where you published it.
40:26
I read it in draft form.
40:27
So where was it published?
40:29
>> Jimmy Goodrich: I published it at University of California, San Diego,
40:32
their Institute of Global Conflict and Cooperation.
40:35
>> Elizabeth Economy: That's a terrific article for understanding the direction,
40:39
sort of overall direction, of Xi Jinping's thinking about security and economy.
40:44
I think nothing is [INAUDIBLE].
40:46
>> Jimmy Goodrich: I recently read Xi Jinping's thought on science and
40:48
technology innovation.
40:49
I'd recommend that one.
40:50
Really, if you're gonna try and understand how he's thinking about this.
40:55
Well, it's all written down for you in a abridged version, and
40:58
it's available on Amazon.
41:00
>> Elizabeth Economy: [LAUGH] There you go.
41:01
For those who are not faint of heart.
41:03
Okay, what's one thing that you wish the Biden administration had done
41:08
differently with regard to China policy?
41:11
>> Jimmy Goodrich: I drive back a little bit to what I mentioned earlier is having
41:15
better implementation of the export control rules.
41:19
I think, is an area that they could have done a little bit better,
41:23
could have improved upon.
41:25
If you're gonna commit to using all this political capital to expend with allies
41:30
and industry, spend months drafting a rule,
41:32
you have to be committed to actually implementing it.
41:36
And I think that's an area where, hopefully over the next administration or
41:40
two, there'll be some improvement.
41:42
>> Elizabeth Economy: Yeah,
41:43
what China issue do you think we don't know enough about?
41:47
I think you probably answered this, but
41:49
just in case you want to toss out something.
41:51
>> Jimmy Goodrich: I go back to the basic science area.
41:52
I think it's really hot and interesting.
41:56
I meet a lot of PhD students, master's students,
41:59
young kids starting their career in think tanks, and
42:03
they're all interested in semiconductors and AI, AIA, all the time.
42:08
But you know what,
42:09
there's 20 other domains of technology that are really important.
42:12
There's very few people worldwide who think about Chinese science technology,
42:18
basic science technology policy.
42:20
In fact, I think there's only one full-time program in the world,
42:24
which is the Max Planck Institute of Science has a two-year study program
42:29
on Chinese basic science, and that's about it.
42:32
And Marix and UCSD, they've co funded a few projects.
42:35
But I can count the number of people who do this in one or two hands.
42:41
So I really do hope that the China community spends more time thinking about
42:45
not just the technologies of today, but basic science and
42:49
the technologies of tomorrow.
42:51
And there's so much going on in China in this space.
42:54
There's a new national commission, there's a lot more party ideology.
42:58
What does that mean for the future of science?
43:01
Who's decoupling faster than whom in basic science?
43:04
In many areas, you might come to the conclusion China is.
43:07
>> Elizabeth Economy: Well, sounds to me like you have your hands full with a very,
43:11
very large research agenda.
43:13
And I hope you can recruit some more people who are like you,
43:17
really outstanding researchers to do this kind of work, because I agree with you.
43:24
I think it's incredibly important not only to understand sort of
43:29
where China is today in terms of its technology, but
43:32
what it's doing to position itself, for the next decade and beyond.
43:38
So, Jimmy, let me say huge thank you to you for joining me in this conversation.
43:44
It's been terrific, and I really appreciate your taking the time.
43:49
>> Jimmy Goodrich: Thanks, Liz.
43:50
It's always a pleasure.
43:51
It's just been a fun chat.
43:54
>> Elizabeth Economy: So if you enjoyed this podcast and
43:56
want to hear more reasoned discourse and debate on China,
43:59
I encourage you to subscribe to China Considered via The Hoover Institution,
44:03
YouTube channel or podcast platform of your choice.
44:06
In the next episode, I'll be speaking with senior director for
44:09
the Atlantic Council's Global China Hub, who until this past summer,
44:13
helped lead the State Department's work on reducing US economic dependence on China,
44:17
Melanie Hart.
44:18
And I will talk about her work and
44:20
the broader efforts in the US government to develop more resilient and
44:23
diversified supply chains across core technologies and commodities.
44:27
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