President Biden’s tenure has been one marked with a “small yard, high fence” foreign policy approach to China. Put simply, this is the idea that a few critical technologies relevant to American national security should be kept out of the hands of the Chinese government. Taken at face value, this move is part of a larger American initiative to reduce economic reliance on China, while still attempting to maintain cordial relations and a semblance of stability.
The reality, however, is more complex. In the short run, the obvious implication of “small yard, high fence” regulations is that they will hamper the development of Chinese AI capabilities and reduce the country’s potential to compete with America. Yet, adopting a long-term lens reveals that this move could instead force China to build the infrastructure for high-end technological production sooner than they otherwise would have.
Despite recent real estate-related challenges, the Chinese government and its economic planners have already proven adept strategists. For instance, it was in large part due to government-driven subsidies that Tesla was dethroned by Chinese automotive manufacturer BYD. Similar investments in solar panel technology have made Chinese suppliers the market leaders in this sector as well. On top of this, the country’s recent market disruptions may, as it did in the aftermath of The Great Recession, create “survival of the fittest” conditions, where companies that capably withstand economic challenges emerge with confidence of the strength of their balance sheets.
In this context, Chinese government officials are not interested in being a spectator to the technological innovations currently taking place. For instance, China Daily reports that “China’s investment in artificial intelligence (AI)…[will] reach $38.1 billion in 2027, accounting for about 9 percent of the world’s total.” This will have major implications: analysis from leading consultancy firm McKinsey & Company indicates that China’s economy could see an AI-induced boost of up to $600 billion. This is in part because the country is well-placed to harness the power of AI, with Harvard Business Review noting that “China’s global share of research papers in the field of AI has vaulted from 4.26% (1,086) in 1997 to 27.68% in 2017 (37,343), surpassing any other country in the world, including the US — a position it continues to hold. China also consistently files more AI patents than any other country.” In short: China is by no means a novice in AI technology. It has both the financial and intellectual potential to lead the artificial intelligence revolution.
Nonetheless, the consensus view remains that China’s AI capabilities trail that of the US. A recent article in The New York Times, for example, argues that “even as the country races to build generative A.I., Chinese companies are relying almost entirely on underlying systems from the United States.” Rather than leaning into the Chinese dependency, though, President Biden has taken a short-sighted approach by implementing strict trade controls on AI-related resources.
Chinese policymakers are unlikely to respond by passively accepting second place. On the contrary, they will continue to pour more and more money in an effort to compete with the United States. Biden’s “small yard, high fence” policies may therefore delay Chinese progress temporarily, but ultimately, this approach will likely result in China developing a stronger domestic AI infrastructure. As a result, the United States would relinquish most of its influence over the direction of Chinese AI development: in essence, Beijing would no longer be as reliant on American resources and thus would have less incentive to cooperate with the US.
It follows, then, that from a long-term strategic standpoint, Biden’s “small yard, high fence” approach is flawed. While it will act as an effective stopgap and slow down Chinese AI development, it will also lay the groundwork for the underlying AI infrastructure to be built domestically. The knock-on implication is that Chinese AI systems will be less dependent on America, and thus the White House would have less economic and diplomatic negotiating power.
Moving forward, the next presidential administration—whether led by Trump or Biden—would do well to re-consider the complicated implications of a trade-control-driven AI strategy. Failure to do so could result in an unnecessary disentanglement of interests between China and the US, with damaging consequences down the line.