Digital Globalization and China-US Strategic Competition

Wang Dong is Professor at the School of International Studies and Executive Director of the Institute for Global Cooperation and Understanding, Peking University; Gao Dan is a post-doctoral fellow at the School of International Studies, Peking University.The article was originally published inContemporary American Review, Issue 2, 2022.

In March 2021, the new Biden administration proposed the American Jobs Plan to rebuild US infrastructure and create more American jobs.Notably, the plan juxtaposed China and climate change as the“great challenges of our time.”It claimed that given China’s“aggressive”investment in research & development (R&D), the US must adjust its strategic focus and build better infrastructures, including the digital infrastructure, to outcompete China.1“FACT SHEET: The American Jobs Plan,”The White House, March 31, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan.Apparently,“China”and“technology”have become the keywords in the US national strategy, and the US objective is to win over China in the technology competition.Laura Tyson, former Chair of the White House Council of Economic Advisors, posited that based on many indicators, the Western-led globalization driven by trade is in retreat, while the new wave of globalization driven by digital technologies is increasingly led by China and other emerging economies.2Susan Lund and Laura Tyson,“Globalization Is Not in Retreat,”Foreign Affairs, Vol.97, May/June 2018, https://www.foreignaffairs.com/articles/world/2018-04-16/globalization-not-retreat.In 2021, the global digital economy bucked the sluggish economic trend and posted continuous growth, thanks to improving digital infrastructure and increasing global digital information flow.The US and China are the two key drivers of digital globalization, with the former enjoying the early-mover advantage, and the latter acquiring significant digital capabilities in its catchup process.What the US identifies as a competitive relationship with China will particularly play out amid digital globalization.

The Concept, Features and Implications of Digital Globalization

Human civilization has gone through agricultural, industrial, and information revolutions and is now moving to a more advanced phase driven by a digital technology revolution.The advancement in digital technology has not only influenced the development trajectory of countries but also affected the competition and interaction among them.Digital technology advancement is most evident in the economic sphere when society moved from information technology in the Third Industrial Revolution to digital technology in the Fourth Industrial Revolution.The digital economy is rapidly growing thanks to breakthroughs and integration in the mobile network, big data, cloud computing, the Internet of Things, and artificial intelligence.In this process, more and more enterprises have started investing in the R&D of digital products,and the digital transition of traditional industries has sped up.Data flows have also expedited the emergence of global digital supply chains.The digital economy is a product of digital globalization and its most visible manifestation.

Digital globalization is a special form of globalization and will be one of its key evolution in the future.It is driven by digital platforms and information networks enabled by budding new digital technologies.Digital globalization enhances cross-border flows of information and the goods,services and capital movement empowered by digitalization.The integration of economic and social life in the digitalized world facilitates the global exchange of ideas and cultures.3Liu Xinghua,“Digital Globalization and Global Digital Community,”Social Sciences Abroad, No.5,2021, pp.151-157.

Digital globalization has brought about a series of changes in areas such as how business is conducted across borders, how people participate in economic activities and how economic benefits are distributed.With the growth of data and information flows, global economic and financial activities through digital platforms have experienced a surge.4Daniele Schilirò,“Towards Digital Globalization and the Covid-19 Challenge,”International Journal of Business Management and Economic Research, Vol.11, No.2, 2020, pp.1710-1716.In the era of“neo-globalization”that features digitalization and regionalization, the digital economy plays a critical role in international trade development.5Elena G.Popkova,“International Trade in the Era of Neo-Globalization: Disintegration vs.Digital Partnership,”Research in Economic Anthropology, Vo.42, March 2022, pp.7-13.

The digital economy creates value when raw data is transformed into useful information through digital technological innovations.6“Digital Economic Report 2019: Value Creation and Capture Implications for Developing Countries,”United Nations Conference on Trade and Development, 2019, p.16.An important feature of the current round of digital globalization is the rapid digitalization of the international economy that changes the composition of players in globalization and pertinent international economic rules.7Zhai Kun,“Strategic Competition amid Digital Globalization and China’s Response,”People’s Tribune,No.17, 2021, pp.86-88.Digital globalization also deepens globalization as increasing data and information flow defines the new age.8Nambisan Satish and Luo Yadong,“Toward a Loose Coupling View of Digital Globalization,”Journal of International Business Studies, Vol.52, Issue 8, pp.1646-1663.Technology and data have served as an economic input factor that changes people’s production and consumption patterns and creates an independent domain of technology and the industrial chain.9W.Brian Arthur,The Nature of Technology: What It Is and How It Evolves, trans.by Cao Dongming and Wang Jian, Zhejiang People’s Publishing House, 2018.Digital globalization also gives enterprises a digital edge, featuring new O(open resources), L (linkage) and I (Integration) advantages that are different from the old OLI (ownership, location and internalization) advantages that traditional investment enjoys.10Luo Yadong,“New OLI Advantages in Digital Globalization,”International Business Review, Vol.30,Issue 2, April 202, pp.101-105.

Features of digital globalization

Traditionally, globalization refers to the internationalization of economic activities or a phenomenon where the capital, goods, services, labor and information go beyond domestic markets and flow across the national border.It is a dynamic process of constant development and evolution.11David Held et al., Global Transformations: Politics, Economics, and Culture, trans.by Yang Xuedong,Social Sciences Academic Press (China), 2001.

Globalization has been viewed from an economic or political perspective for a long time.Economically, globalization is the expansion of economic activities on a global scale, with mobility and a flat structure as its major characteristics.12Wang Dong and Cao Dejun, Re-Globalization: When China Meets the World Again, Social Sciences Academic Press (China), 2018, p.42.The global integration of production, circulation and consumption leads to the economic interconnection that flattens the world.Politically, globalization is considered the worldwide diffusion of political activities that runs against the inherently local nature of politics and has caused a polarized and fragmented world.13Ibid., p.43.

Since 2008, globalization has entered a period of“re-globalization.”14Ibid., p.55.Driven by new generation digital technologies represented by artificial intelligence, 5G, big data and cloud computing, this period accelerates digital adoption more than ever before, resulting in a new form of globalization,namely digital globalization.The era of digital globalization is characterized by digitalized economic and political activities and has the features of being mobile, flat, polarized, and fragmented.Specifically, digital technologies are penetrating political, security, economic, social, and cultural domains,increasingly connecting the virtual and real worlds and facilitating more rapid, in-depth, extensive, and direct development of globalization.As a result, more and more countries and people are getting involved in digital globalization.However, at the same time, the digital divide remains.Due to the differences between countries, regions, industries, enterprises, societies and individuals regarding digital technology awareness, application, and innovation capabilities, the gap between rich and poor will likely widen,making the world more economically polarized.

The notable characteristic of the digital globalization era is the faster,more in-depth and more extensive flow of data.They enable many smallto medium-sized enterprises (SMEs) to become transnational, facilitating their operations across national borders.What is transmitted is no longer limited to monetary transactions but mostly free information and services that knowledge-intensive industries offer the public.The direction of data flow is also transitioning: instead of traditionally one-way transmission from developed to developing countries, data is now interchanged between developed and emerging economies.

While data becomes more common and information is more transparent in the era of digital globalization, the structure of interest distribution and how different stakeholders reap benefits and interact with each other have also witnessed changes.The access barrier to globalization is lowering at all levels.15Wang Shiyu,“Digital Economy Drives Third Globalization,”Economy, No.6, 2020, pp.36-37.Unlike conventional infrastructure such as roads,railways, airports and harbors, building the new digital infrastructure faces much less social scrutiny and is easier to set up.This is why digital globalization has more extensive geographical coverage and a broader array of participants.The more convenient and efficient interplay of supply and demand in the digital era has rapidly integrated those marginalized regions in the traditional globalization age.Developing countries with more urgent needs of resources, education and industrial development are easier to fuse in digital globalization.Data are also diffusing faster globally in smaller granules, demonstrating the advancement of digital globalization.

While digital globalization brings a faster, more in-depth, extensive and inclusive world, it is worth noting that the negative impact that it may bring about will be more destructive.Existing rules of international governance are increasingly unable to effectively manage affairs in the era of digital globalization, with cyber-attacks, cyber violence and cyber espionage becoming more frequent.The potential perils of digital globalization will undermine global governance mechanisms and the rules-based international order if left unattended.One need only look to the Russia-Ukraine conflict for the latest example.Soon after its eruption in early 2022, the international hacktivist group Anonymous declared a“cyber war”against Russia.The Ukrainian government was also said to have launched an“IT Army”to conduct cyber operations against Russia.The presence of cyber warfare in the current Russia-Ukraine conflict demonstrates the potential of digital technologies to influence the trajectory of conventional war.

Notable negative impacts have ensued from the economic benefits of rapid globalization since the beginning of the 21st century.Philip Jennings,former Secretary-General of UNI Global Union, warned early in 2000 that the digital economy would widen the wealth gap.16Philip Jennings,“Digital Age Globalisation Has Caused Disillusionment,”Financial Times, January 27, 2000.Digital globalization has fundamentally changed how people live their daily lives and companies do business.From e-commerce to the expanding Internet of Things, more and more SMEs are involved in international competition through an online global market.While digital globalization has created new winners, the deepening“digital gap”has exacerbated the wealth disparity and demonstrated the ubiquitous nature of data resources and their potentially aggressive character.Anyone controlling the resources“could eventually reshape not only the world’s economic and political future but also the future of life itself.”17Yuval Noah Harari,“Who Will Win the Race for AI?”Foreign Policy, No.231, Winter 2019, pp.52-54.

Implications of digital globalization

Digital globalization has enhanced creativity and productivity through the ever-evolving digital technologies, bringing producers and consumers closer together.The omnipresence of digitalization has blurred national boundaries, and the thriving digital economy is enhancing overall social welfare and facilitating high-quality development.However, digital globalization also has its downside.It can decimate some traditional industries and widen the digital gap.In addition, international competition will be more intense.Despite its importance to national development and well-recognized benefits, digital globalization’s challenges and downsides are equally significant and complex.

Digital globalization has pried open national borders.The digitalization of government operations and facilitation of people-to-people exchange has increasingly blurred the boundaries of all countries regardless of their size and power.Building digital governments opens more grassroots political participation channels and increases the variables affecting a nation’s formulation of foreign policy.The country must look for an optimal solution that balances the interests of multiple stakeholders.

Meanwhile, with the wider application of digital technologies and digital media, people’s ways of communication will be more diversified with multiple approaches and levels available.As the exchange of information and ideas goes beyond national boundaries, there is even an opinion that the state border has become outdated in the digital era in an open and interconnected world.The speedy information flow and technological innovation across domains usher people into a digital life where“digital cosmopolitanism”puts forward a more digitalized interpretation of their cultural identities and belonging.At the same time, the widening digital gap is also posing a real challenge that calls for a more urgent response, as different regions, which are often defined by national borders, are still unable to access and use data resources in a balanced and equal manner.The disparity between countries’digital capabilities risks being amplified in digital globalization.

Technology promotes national economic growth and maintains state security and stability.Driven by digital technology, digital globalization connects different productive factors of the economy, from infrastructure to enterprises, facilitating high-quality development driven by innovations.The growth model is people-centric and rules-based; it operates along globally open market economic principles and is driven by enterprises.In an ideal scenario, digital globalization would contribute to a more equitable utilization of capital, cutting the influence of the small number of conglomerates with excess capital on the global political landscape and distributing economic benefits more equitably to more people.Enterprises in the era of digital globalization are no longer merely carriers of globalization or passive actors on the international power chessboard.Still, they will also serve as an integrator of factors, an explorer of markets, and a promoter of innovation.By continuously upgrading their products and services through technological innovations and overcoming the market-size limits of domestic markets, enterprises can take advantage of the digital platform and tap the bigger global user base to expand their markets, thus building a solid digital foundation for high-quality development.

Digital globalization has now permeated all areas of our modern society;however, we have yet to fully grasp its implications for our society and life.Despite its supposed inclusive nature, the benefits of digital globalization have not been equally distributed.Those countries on the margin of global industrial and value chains often find it difficult to keep pace with digital globalization.The widening digital gap is likely to exacerbate global wealth polarization.Under digital globalization, revolutionary technological innovations have coined new economic formats such as sharing economy,internet traffic economy, industrial internet economy, and precision agriculture.These new economic phenomena will rewrite people’s working,education and health habits while promoting industrial upgrades and business model innovation.The digital economy is more than a simple addition of“digits”to the real economy; it has created a new economy in which many aspects of the real economy are being changed.A good case in point is the replacement of conventional trade by digital trade in many areas.It has also repositioned different economies in global geopolitical, economic and industrial landscapes.Such qualitative changes and reorganization will pose a major challenge to global digital governance.

The COVID-19 pandemic has accelerated global digital development as many human and business activities were forced to move online due to lockdown and isolation requirements.During the pandemic, online education, telemedicine, and working from home have become a regular part of life.At the same time, the digital economy represented by e-commerce has gained further momentum and facilitated global economic recovery.As of October 2021, there were 4.8 billion internet users and 5.27 billion mobile users worldwide, accounting for 61% and 67% of the global population,respectively.In 2020 alone, 117 million people newly joined the global mobile network.18Simon Kemp,“A Decade in Digital,”DataReportal, November 29, 2021, https://datareportal.com/reports/a-decade-in-digital.Also in 2020, the global internet bandwidth increased by 35%, the largest growth rate since 2013.The United Nations Conference on Trade and Development (UNCTAD) predicts monthly global data traffic will surge from 230 exabytes in 2020 to 780 exabytes by 2026.19“Overview of Digital Economy Report 2021,”UNCTAD, September 29, 2021, p.1, https://unctad.org/system/files/official-document/der2021_overview_en_0.pdf.

Digital globalization is still nascent and far from its maturity growth limit.Its future trajectory depends on the policies of national governments,the prospect of relevant industries, the mindset of enterprises, and users’demand globally.As the immediate product of digital globalization, the digital economy will leave a digital footprint on all industries and companies.

In a nutshell, the digital economy incorporates both digital industrialization and industrial digitalization.The former is the industrialization of digital technologies, which means the domestic upgrade and global expansion of digital-related sectors, including information communications, the internet and 5G.The industrialization of digital technologies has boosted the construction of digital infrastructure, supported the operation of high-tech companies, accelerated digital hardware manufacturing and software development, and stimulated the R&D of end products in the communications industry.The latter refers to the digital transition of traditional industries, which helps them achieve quantitative expansion and increased efficiency.Integrating digital technologies, including big data, cloud computing and artificial intelligence, enables traditional industries to undergo revolutionary changes and redefine their global layout.

Under the thriving digital economy, enterprises invest more in digital elements, releasing the erstwhile untapped potential of their technological,financial and human resources, thus reducing their transaction costs and improving their competitiveness.At the national level, the digital economy is bound to play a key role in economic development; in particular, digital industrialization and industrial digitalization will serve as the dual engine for developing the digital economy.For the international community, stateto-state exchange witnessed a new form of hybrid diplomacy under the pandemic in which online and offline communication are integrated and mutually reinforcing.Geopolitics and digital technology will jointly shape the future landscape of international relations.20Corneliu Bjola and Ilan Manor,“The Rise of Hybrid Diplomacy: From Digital Adaptation to Digital Adoption,”International Affairs, Vol.98, Issue 2, March 2022.

Strategic, Technological, and Digital Competition between China and the US

Inter-state competition is a perennial theme of international relations history.However, strategic competition occurs at a higher level and bears more of a macroscopic and purposive nature.21Wu Xinbo,“On Sino-U.S.Strategic Competition,”World Economics and Politics, No.5, 2020, pp.130-159.On the China-US strategic competition, there have been extensive discussions among academic and policy-making communities, and there is a consensus that the bilateral competition focuses on the three aspects of leadership, influence, and comprehensive power in the security and economic domains as well as international institutions and global governance.Traditionally, major-power strategic competition evolves around interests, ideas, and institutions.Benign strategic competition is conducive to innovation and social well-being and helps create a favorable external environment for national development.In contrast, an adversarial strategic competition runs the risk of escalating into conflicts and confrontations, hurting the interests of both sides.

China-US relations have been in a downward spiral over the past few years.The US has abandoned the engagement policy it had maintained for more than four decades and instead adopted an approach of comprehensive strategic competition.22Wang Dong,“Reluctant Rival: Beijing’s Approach to U.S.-China Competition,”Global Asia, Vol.16,No.4, December 2021, pp.8-13.The Trump administration’s National Security Strategy released in 2017 declared the advent of a new era featuring majorpower competition, with a revisionist China intent on“shaping a world antithetical to US values and interests”being America’s strategic rival.23“A New National Security Strategy for a New Era,”The White House, December 18, 2017, https://trumpwhitehouse.archives.gov/articles/new-national-security-strategy-new-era/.The Trump administration launched a trade war against China, sanctioned Chinese high-tech companies, including Huawei and ZTE, moved to pursue comprehensive economic decoupling from China, and made frequent ungrounded accusations against China on issues related to Xinjiang and the origin of the COVID-19 pandemic.These moves severely undermined the foundation of China-US relations and pushed the two countries toward the edge of a new cold war.

Soon after Biden took office, his Secretary of State Antony Blinken set the tone for US foreign policy in a speech in March 2021.Eight priorities were proposed by Blinken, in one of which China was singled out as the only country“with the economic, diplomatic, military, and technological power”to pose an overall challenge to the US.From this, Blinken announced a China policy of being“competitive when it should be, collaborative when it can be, and adversarial when it must be.”24“A Foreign Policy for the American People,”US Department of State, March 3, 2021, https://www.state.gov/a-foreign-policy-for-the-american-people/.The position was echoed by Kurt Campbell, Biden’s Coordinator for Indo-Pacific Affairs on the National Security Council, when he pointed out in January 2022 that the dominant paradigm of US-China relations should be defined by competition.25“Carnegie Connects: A Conversation with Kurt Campbell,”Carnegie Endowment for International Peace, January 6, 2022, https://carnegieendowment.org/2022/01/06/carnegie-connects-conversation-withkurt-campbell-event-7784.The Biden administration has inherited Trump’s China policy and identified strategic competition as its overarching pillar in the three approaches of competition, confrontation, and collaboration in handling the China challenge.While indicating no interest to open conflict with China or change China’s system, Biden is committed to shaping an international environment with like-minded allies and partners to consolidate America’s global leadership and rein in China’s development.

China-US competition in science and technology

In digital globalization, science and technology (S&T) have inevitably become a major arena of China-US competition.Bilateral relations in the S&T area have fluctuated with the United States’strategic positioning against China.The Agreement on Cooperation in Science and Technology in 1979 was among the first inter-governmental deals signed after the two countries established diplomatic ties.The US was the world’s scientific and technological superpower then, while China had just launched reform and opening up, starting to develop its scientific and technological capabilities under new circumstances.From then on, the bilateral S&T cooperation gradually expanded to energy, environment, and nuclear energy.The China-US Joint Committee on Science and Technology Cooperation was set up, and the China-US Forum on Science and Technology Policy was held.From the joint initiation of a constructive strategic partnership oriented toward the 21st century in 1997 to the proposal by then Deputy State Secretary Robert Zoellick of welcoming China as a“responsible stakeholder”in the international system in 2005, China-US S&T cooperation grew steadily, even though the US did not relax its technology export control on China.In 2007, the US announced new high-tech export control measures to tighten technology flow to China.During this period, the United States’S&T policy toward China was characterized by strategic hedging,26Wang Dong,“Hedging Behavior in International Relations: Example of Asia-Pacific Countries,”World Economics and Politics, No.10, 2018, pp.21-49.and the performance of overall bilateral relations had a major influence on the bilateral S&T cooperation, which stayed constructive until 2016 without interruption.

Underpinned by its expanding scientific and technological capabilities,China has become the world’s second-largest economy and scientific power.In the semiconductor field, China’s share of global chip consumption had grown from less than 20% in the early 2000s to more than 60% in 2019.27Steve Blank,“The Chip Wars of the 21st Century,”War on the Rocks, June 11, 2020, https://warontherocks.com/2020/06/the-chip-wars-of-the-21st-century/.In the area of quantum information technology with quantum computing, quantum communication and quantum sensing as the core technologies, the number of patent applications submitted by Chinese companies surpassed that of their US peers in 2018, accounting for 52% of the global total.28Elsa B.Kania,“China’s Quantum Future,”Foreign Affairs, September/October 2018, https://www.foreignaffairs.com/articles/china/2018-09-26/chinas-quantum-future.There is worry within the chip industry that shutting out the Chinese with export control measures would force them to strive toward technology sovereignty, and in 15 years they would be able to achieve chip independence.29Laurens Cerulus,“Chipmaker CEO Says Washington’s Anti-China Tech Blockade Is a Bad Idea,”Politico, April 23, 2021, https://www.politico.eu/article/europe-tech-sovereignty-china-peter-wenninkasml/.There is also the observation that while China has been a learner and a follower of modern information science, it has the potential to become one of the key players in quantum technology.30Amit Katwala,“Why China’s Perfectly Placed to Be Quantum Computing’s Superpower,”Wired,November 14, 2018, https://www.wired.co.uk/article/quantum-computing-china-us.Not willing to concede technology leadership to China, the US has added tougher measures against China, driving the S&T competition between the two sides to an openly confrontational stage.

After the US strategic reversal of its perception of China as reflected in Trump’s 2017 National Security Strategy, the US Justice Department and the Federal Bureau of Investigation launched the so-called“China Initiative”in 2018.The initiative targets American scholars involved in S&T cooperation with China, most of whom are of Chinese origin, to create a chilling effect and scare many Chinese-American scientists from working on joint research projects.

Despite their serious disagreement on many other issues, Republicans and Democrats have a high degree of consensus on China policy.Trump’s policy of S&T decoupling from China has been inherited and expanded since Biden took office.On the one hand, the Biden administration works with allies to consolidate America’s dominance in critical S&T and promotes US technology standards and rules-making.While promoting digital reforms under the World Trade Organization (WTO) and other multilateral frameworks, the US advances the building of an alliance of technology,advertises the American model of digital trade, and significantly increases the government’s budget in R&D.On the other hand, it has been setting obstacles to the flow of data, technology, capital, talent, and other market input factors between the S&T communities of China and the US.The Biden administration adopted“selective decoupling”against China, suppressed China’s scientific development, and blocked critical technologies flow to China.These moves have increased tensions between the two countries.

China-US digital competition

Digital competitiveness is becoming a new part of national competitiveness, cutting across different levels of enterprises, industries, and states.Digital globalization amplifies the role of digital competitiveness,and the US stands at the global forefront today.The US got its preeminent position through funding from the government, expansion of research institutes and nurturing scientists that started in the early days of its independence to the Second World War.The wealth accrued from the Second Industrial Revolution also played a role in enabling the US to build a scientific and technological innovation system driven mainly by universities and industrial research laboratories.During the period, relevant government support was mainly concentrated in agriculture and other areas of great concern to national development, social clamor, and uplifting people’s livelihood.31Sally Gregory Koblstedt, The Formation of the American Scientific Community: The American Association for the Advancement of Science 1840-1860, Urbana: University of Illinois Press, 1976.

The Second World War permanently changed the United States’R&D system and its scientific and technological policy.32Harvey Brooks,“The Evolution of U.S.Science Policy,”in Bruce L.R.Smith and Claude E.Barfield,eds., Technology, R&D, and the Economy, Washington D.C.: The Brookings Institution, 1996, pp.15-48.In the post-war era, the US established a system for modern scientific and technological innovation and gradually occupied the global top spot.Thanks to its breakthroughs in computers, semiconductors and communications technology, the US played a leading role in the IT revolution and was deemed at the core of information globalization.In response to the Soviet Union’s launch of the world’s first artificial satellite, the US set up the National Aeronautics and Space Administration (NASA).It was amid the economic and technological competition with Japan that the US built a complete supporting system for S&T development comprised of the government, universities and enterprises.33Don Krasher Price,“Government and Science: A Troubled, Critical Relationship and What Can Be Done about It,”Public Administration Review, Vol.68, Issue 1, 2008, pp.5-8.

The growth of the US into an S&T superpower can be attributed not only to its endowment advantages but also to other favorable factors.The pursuit of academic freedom and scientific spirit, the improvement of a multi-channel and diversified investment mechanism, the persistence of a culture that encourages S&T innovation, and the integral collaboration between enterprises, universities and research institutes are all important contributors to America’s supremacy in global digital competition.34Fan Chunliang,“Construct World Leading S&T Innovation System: U.S.Road to World’s Scientific and Technological Power,”Bulletin of Chinese Academy of Sciences, No.5, 2018, pp.509-519.In 2020,the size of the US digital economy reached US$13.6 trillion, accounting for 66% of the country’s GDP and ranking first in the world.35China Academy of Information and Communications Technology, White Paper on China’s Digital Economy Development, 2021, p.5.Apple, Amazon,Google, and Facebook are all globally dominant digital platforms based in the US.Due to its dominance in 4G technologies and the US tech giants’pivotal position in the global technological landscape, the US still holds considerable advantages in 5G R&D and application, chip design, cloud infrastructure and other critical technologies.

China is a latecomer in the digital domain, but it is rapidly catching up and has laid a solid foundation for its digital economy.The government has put up targeted policies to build a digital governance system, its innovation in emerging technologies and core industries has accelerated, and its end market for digital consumption is constantly expanding.According to

China Internet Development Report 2021published by the China Academy of Cyberspace, in 2020, China’s digital economy reached39“The Unicorn Report: Visualizing the Increasingly Crowded Billion-Dollar Company Club,”CB Insights, September 23, 2021, https://www.cbinsights.com/research/unicorn-club-global-trendsinfographic/..2 trillion yuan,accounting for38Graham Allison et al.,“The Great Tech Rivalry: China vs the U.S.,”December 2021, https://www.belfercenter.org/sites/default/files/GreatTechRivalry_ChinavsUS_211207.pdf..6% of GDP.At a high growth rate of 9.7%, the digital economy has been a key driver of the country’s economic development.36Chinese Academy of Cyberspace, China Internet Development Report 2021, 2021.Besides a thriving digital economy, China’s S&T innovation capabilities have also witnessed significant progress.The country’s Global Innovation Index(GII) ranking, published by the World Intellectual Property Organization,rose from 35th in 2013 to 12th in 2021.37World Intellectual Property Organization,“Global Innovation Index Report 2021,”2021, https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2021.pdf.China’s digital enterprises also serve as robust innovation engines, playing a more globally leading role.In 2015, only two of the world’s 20 most valuable internet companies were Chinese; in 2021, this figure had increased to seven.38As of September 2021, 19% of the world’s unicorn companies valued at more than $1 billion were Chinese.39The huge domestic market for digital consumption has underpinned the building of a digital China, with the prevalence of online payment in the country increasing from 25% in 2013 to 86.4% in 2020.40China Internet Network Information Center, The 48th Statistical Report on China’s Internet Development, http://www.cnnic.net.cn/NMediaFile/old_attach/P020210915523670981527.pdf.

By taking advantage of their early-mover and latecomer advantages well,respectively, the United States and China have become the world’s two major digital powers leading the process of digital globalization.The US has taken China as its biggest rival in the digital domain and launched an aggressive and systematic digital competition against China.

On the one hand, it is increasing investment in digital technologies to enhance its digital competitiveness and consolidate its leadership in this arena.The United States Innovation and Competition Act of 2021, which passed the Senate in June 2021 and whose modified derivative version would later become law in 2022 as the CHIPS and Science Act, covers the“alliance of technology,”5G, cybersecurity, artificial intelligence, and many other issues.By investing more than $200 billion in American S&T research, the act aims to compete with China in the digital space.

On the other hand, the US is urging its allies and partners in Europe and the Indo-Pacific to build a“digital alliance”that implements targeted and comprehensive blockade against Chinese tech enterprises.In digital globalization, the United States’ultimate goal in its digital competition with China is to preserve its hegemony in digital trade, digital technologies, and related values.With the narrowing of the two sides’technological gap and digital competitiveness, the digital competition is bound to be more intense and become a major part of bilateral strategic competition.

China-US Strategic Competition amid Digital Globalization

Since the 2008 global financial crisis, the US has witnessed a relative decline in its hegemonic status.With notable racial tensions, a widening wealth gap, and a social divide on many issues at home, its comprehensive national power and global leadership have relatively faded.Meanwhile, China’s overall strength and international influence are rising.In the context of digital globalization, it is the common concern of the two countries and a core issue in their strategic competition to ensure stability of national development and sustainability of economic growth.Digital globalization has expanded the boundary of their strategic competition, centering around the three aspects of digital elements, digital ideas and digital governance.

Digital elements

Digital infrastructure, digital talents, and digital enterprises constitute the backbone of a country’s digital economy.Their healthy development is indispensable for a country to sustain its leadership position in the global digital economy.Digital infrastructure, or infrastructure in the digitalized space, includes communications infrastructure (represented by 5G, the Internet of Things, and industrial internet), new technologies infrastructure(artificial intelligence, cloud computing, and blockchain), and computing infrastructure (data centres, edge computing and intelligent computing).41Li Ming and Long Xiaoyan,“The Mode, Dilemma and Countermeasures of Digital Infrastructure Investment and Financing in China during the Period of the 14th Five Year Plan,”Contemporary Economic Management, No.6, 2021, pp.90-97.Digital infrastructure is the foundation of the digital economy, which has now become a new driver of national economy in the era of digital globalization.Serving digital infrastructure provides the platform to facilitate the innovative transition of market players, underpin digital industrialization and industrial digitalization, and support the high-quality and sustainable development of digital and the broader economy.Given its relevance to economic development, competition over digital infrastructure is expected to be the most intense area of China-US strategic competition.

The Biden administration has prioritized infrastructure rebuilding in the US development strategy.The US and other G7 countries, at their 2021 summit,launched the Build Back Better World (B3W) initiative and claimed that it is“a values-driven, high-standard, and transparent infrastructure partnership”42“FACT SHEET: President Biden and G7 Leaders Launch Build Back Better World (B3W)Partnership,”The White House, June 12, 2021, https://www.whitehouse.gov/briefing-room/statementsreleases/2021/06/12/fact-sheet-president-biden-and-g7-leaders-launch-build-back-better-world-b3wpartnership/.that sets the US on course to compete with and finally outcompete China and other major economies in the 21st century.The Biden administration has invested in conventional and digital infrastructure in the hope of reaping“historic”socio-economic benefits.Apart from actively investing in domestic digital infrastructure, the Biden administration is also organizing an alliance of technology partners to claim the global high ground of digital infrastructure construction.In response to China’s launch of new infrastructure development in 2018 and its deployment of digital infrastructure projects to address the pandemic’s economic impacts in 2020, the US has further invested in its digital infrastructure building and initiated intense competition with China, especially in areas like 5G communications and submarine cable.

Besides developing digital infrastructure, the grooming of digital talents and the success of digital enterprises also play a key role in the outcome of digital competition.The United States’ability to attract digital talents from other countries is important to American competitiveness in digital globalization.The US path to becoming the world’s No.1 S&T power and its hegemony in the global economic landscape can be attributed largely to its talent attraction policy.However, China’s digital development in recent years has raised concern from the American side.The US National Security Commission on Artificial Intelligence pointed out in a report that“China possesses the might, talent,and ambition to surpass the United States as the world’s leader in AI in the next decade.”43“Final Report: National Security Commission on Artificial Intelligence,”NSCAI, March 1, 2021,https://www.nscai.gov/2021-final-report.Another report from the Belfer Center for Science and International Affairs of Harvard University also noted that China’s advantages in the long-term competition lie in its huge population base of 1.4 billion that creates the largest domestic market in the world and its higher education institutions that produce competitive talents.44Graham Allison et al.,“The Great Tech Rivalry: China vs the U.S.”China graduates four times as many college students with science, technology, engineering, and mathematics (STEM) degrees and is on track to graduate twice as many STEM PhDs by 2025.45Remco Zwetsloot et al.,“China Is Fast Outpacing U.S.STEM PhD Growth,”Center for Security and Emerging Technologies, Georgetown University, August 2021, https://cset.georgetown.edu/publication/china-is-fast-outpacing-u-s-stem-phd-growth/.

In the digital globalization age, strengthening the competitiveness of digital enterprises, accelerating the application of digital technologies in business operations, and promoting deeper integration between digital and real economies is the path to achieving high-quality development.Digital enterprises are set to lay the foundation for national digital development and are necessary for countries to succeed in international digital competition.

According to Professor Michael Porter of Harvard Business School, corporate competitiveness is manifested in the ability to outrun competitors and gain a competitive advantage.46Michael E.Porter, Competitive Advantage of Nations, Huaxia Publishing House, 2002.For digital enterprises, competitiveness is more than about winning competitive advantages, but also reflects a country’s progress in digital technologies and the ability to upgrade its industries digitally.Both China and the US possess competitive digital enterprises.They are the major engine of digital globalization, and their competition is intensifying.Such competition will not only be limited to the technological race between digital enterprises of the two countries but may also bring about government intervention in the market.

A typical example is listing multiple Chinese companies and institutions on the“Entity List”by the Bureau of Industry and Security under the US Commerce Department.The Chinese entities affected are mostly involved in emerging technologies such as artificial intelligence, quantum information,and biotechnology.The affected enterprises have since been unable to conduct normal trade activities within the US and often around the world.

Digital ideas

In digital globalization, the values and concepts underlying the approach to enhancing national development and handling international relations constitute a country’s digital ideas.In its strategic competition with China, the Biden administration has attached great importance to strengthening alliances and partnerships and consolidating America’s global discourse power.Focusing on joint action with allies differentiates Biden’s China strategy from his predecessor’s.The Biden administration aims to build an alliance of techno-democracies based on the dual consensus on democratic values and shared economic benefits to address the alleged techno-autocracy and isolate those so-called“techno-authoritarian states.”The alliance of techno-democracies, aimed at developing and safeguarding reliable critical supply chains and technological infrastructure with likeminded democratic allies and partners, will add to the Biden administration’s toolbox for implementing its China strategy and become an optimal instrument in the S&T competition with China.Currently, the US mainly relies on the Indo-Pacific Economic Framework, the US-EU Trade and Technology Council, and the B3W initiative to promote its favored digital ideas in the Asia-Pacific, Europe and other regions.The so-called“global digital framework”the US is building with its allies is a contracted and biased version of digital globalization devoid of a real commitment to globalization.

In contrast, the digital ideas and visions upheld by China are multilateral, democratic, and transparent.47“The Outline of the 14th Five-Year Plan for Economic and Social Development and Long-Range Objectives through the Year 2035 of the People’s Republic of China,”http://www.gov.cn/xinwen/2021-03/13/content_5592681.htm.The Chinese approach emphasizes inclusive participation, extensive consultation, joint contribution,and mutually beneficial outcomes.In 2015, Chinese President Xi Jinping announced the building of“Digital China”at the second World Internet Conference.Focusing on socio-economic development,“Digital China”responds to the need to pool the innovative capabilities of digital technologies to facilitate the grand national rejuvenation strategy.At the same time,“Digital China”provides a Chinese solution for global digital governance aimed at building a fair, open, and healthy digital environment.

In its Outline of the 14th Five-Year Plan for Economic and Social Development unveiled in March 2021, China proposed building a community with a shared future in cyberspace.With the United Nations as the major channel to realize the vision, the community, underpinned by international rules in digital and cyberspace that adhere to principles enshrined in the UN Charter, is committed to building fairer and better infrastructure in cyberspace and improving the mechanisms for the governance of resources therein.The digital ideas that China promotes call for joint efforts of the international community to fully exploit the beneficial effects of digital technologies, enabling people of all countries to share the benefits of digital development and enjoy the dividends of the digital era.

Digital governance

Beliefs are the foundation of visions, and governance is the real-life implementation of visions.The basic attributes of cyberspace pose serious challenges in regulating the behaviors in the digital space, to the extent that ambiguities exist as to which behaviors violate rules.An ungoverned digital order poses significant risks“with grim implications not just for cyberspace itself but also for economies, geopolitics, democratic societies, and basic questions of war and peace.”48Joseph Nye,“The End of Cyber-Anarchy? How to Build a New Digital Order?”Foreign Affairs,Vol.101, January/February 2022, https://www.foreignaffairs.com/articles/russian-federation/2021-12-14/end-cyber-anarchy.

A case in point is cross-border data flow and taxation.While the WTO has established the rule of origin in levying tariffs on goods or services, the absence of a clear-cut definition of the commercial attributes and origin of data has caused a lack of regulating mechanisms for cross-border data flow and taxation.As a result, existing international institutions and rules cannot effectively manage the application and transmission of data.

Moreover, just like the trade barriers facing globalization, there are also obstacles to digital globalization, such as data localization requirements,internet censorship, limits and conflicts in the digital content market, data privacy and protection rules, and disruptions to the free flow of data.These barriers have affected data utilization efficiency and stifled its potential value.Therefore, it is urgent to overcome the data barriers, ensure effective management of data transmission, and improve the digital governance system.

The US positions on digital governance have mostly been reflected in the US-Mexico-Canada Agreement (USMCA).Chapter 19 of the USMCA mainly deals with the digital economy, especially the rules of digital trade,stipulating zero customs duties on data transmission and accord national and most-favored-nation treatment to digital products.Chapter 18 of the USMCA stipulates that a supplier of public telecommunications services shall not be prevented from choosing the technologies it wishes to use to supply its services.Chapter 15 of the agreement regulates the applicability of conventional trade rules in digital trade.Besides, the US has been working with like-minded partners in the EU and the Indo-Pacific region to formulate collective digital governance rules.

An example is the Digital Connectivity and Cybersecurity Partnership launched in 2018, which emphasizes expanding secure internet access and developing more digital infrastructure in emerging markets.In general, the digital agreements proposed by the US are underpinned by the American interpretation of multilateralism and security and implicitly target China in terms of digital infrastructure building and digital governance improvement.China is excluded in the US efforts to“regionalize”or“collectivize”its digital governance rules.

Given the non-competitive nature of data per se, China has proposed a vision for the digital era.The New Generation Artificial Intelligence Ethics Specifications that China released in September 2021 integrates ethics into the entire life cycle of artificial intelligence to facilitate the healthy development of the promising AI sector.With concrete actions,China is actively engaging in global digital governance and advancing the building of a digital community with a shared future, which responds to the fundamental questions of“for what, for whom, and by whom”the community is built as well as the dos and don’ts in community building.49Zheng Lei,“Digital Governance:‘Filling in the Blank’and‘Leaving Blank,’”Frontiers, No.23, 2021,pp.106-112.

As the international geopolitical environment gets more complicated,data security has also become an issue of increasing concern, which is likely to magnify the differences and even cause conflicts between China and the US regarding digital awareness, concepts and objectives.Moreover, in the context of digital globalization, the China-US competition over digital governance is expected to catalyze a mindset that will go far beyond the two countries and have profound implications for building a more secure,inclusive and sustainable global digital governance architecture globally and regionally.

Conclusion

As a new form of globalization, digital globalization bears the basic characteristics of globalization but also possesses its unique features.From an economic and political perspective, digital globalization is mobile,flat, polarized, and fragmented.Meanwhile, concurrent with the rapid development and extensive coverage of digital globalization is the notable destructive and revolutionary changes it brings.Fast information flows and technological innovation across domains make countries more closely connected and blur national boundaries.While the prevalence of digital elements in different areas of the socio-economic landscape is conducive to high-quality development, digital globalization has also intensified international competition in this emerging arena, and the digital gap remains a severe global challenge.Digital development plays a more important role in the rise of great powers and is a reliable instrument for them to balance external forces.A country that produces a large amount of data and uses the data to promote innovation is going to enjoy a tremendous growth tailwind.In the context of digital globalization, a country’s national security, social stability, economic prosperity, and geopolitical position will be determined greatly by its access to and utilization of data and its digital governance capabilities.

In the era of digital globalization, the interaction between China and the United States has evolved from the earlier one-way US transmission of know-how and development model to China to the current mutual shaping.The bilateral competition is now at a critical stage.The digital economy is a pillar of the modern Chinese economy and a cornerstone of the Digital China strategy to build the country into a cyber power.It is the major driving force for Chinese leadership in digital globalization.China-US strategic competition in the digital space is most prominent in the three aspects of digital elements, digital ideas, and digital governance.Despite its inevitability, bilateral strategic competition is still able to avoid degenerating into a destructive and zero-sum state without a bottom line.As the world’s two major countries, China and the US must forge ahead together and ensure their competition is constructive, positive, and based on rules.