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As China settles in for trade war, leader Xi emphasizes ‘self reliance’

A electronic display panel shows video footage of Chinese President Xi Jinping near the Central Business District in Beijing in May 2018. (Andy Wong/AP)

BEIJING — China must accelerate the development of new-generation artificial intelligence as a “strategic issue,” President Xi Jinping told top Communist Party officials this past week, in his latest exhortation to give China control of new technologies and lessen its dependence on the United States.

This comes just days after the United States imposed restrictions on technology exports to a state-backed Chinese semiconductor maker, and just months after a proposed American ban on a telecommunications company that would have caused its certain death.

These aggressive actions from the Trump administration, part of a broader trade war between the world’s two biggest economies, have led Xi to call — with increasing urgency — for China to become “self-reliant.”

“AI is a vital driving force for a new round of technological revolution and industrial transformation,” Xi told a Politburo “group study” session Wednesday that included discussions on artificial intelligence, according to the state-run Xinhua News Agency.

China must “control” artificial intelligence and make sure it is “securely kept in our own hands,” he was quoted as saying.

With no end in sight in the increasingly rancorous trade war, Xi has been emphasizing the need for China to be able to stand on its own two feet, especially when it comes to the kinds of technologies it needs to propel its economy forward. 

“Self-reliance” is the starting point for the struggle of the Chinese nation, Xi said late last month in Guangdong, part of a four-day trip across China’s south, where he made stops at an electrical appliance maker and an e-commerce industrial park.

A month earlier, in the north, he had urged China to “stick with the path of self-reliance amid rising unilateralism and protectionism” in the world.

The use of “self-reliance” recalls a phrase Mao Zedong invoked during the economic collapse of the 1960s but that in more recent decades has been associated with isolationist North Korea and its contention that it can fend for itself.

But Xi — who has been stoking nationalism and has positioned himself to rule China indefinitely — has invoked the phrase as a rallying cry against President Trump’s tariff-driven trade war. China, he is repeatedly saying, needs to do everything on its own.

“Xi is using ‘self-reliance,’ inherited from Mao’s political ideology, to solve the economic problems triggered by the trade war with the U.S.,” said Qiao Mu, a dissident Chinese academic who is now an independent analyst based in Washington.

Crossed wires: Why the U.S. and China are struggling to reach a trade deal

As he tries to redress the trade imbalance with China, Trump has been unleashing a barrage of economic and legal weapons against Beijing.

He has already imposed 10 percent tariffs on $250 billion worth of Chinese imports to the United States and has pledged to increase the duties to 25 percent in January if Beijing has not capitulated. He has threatened to tax the remaining $267 billion in Chinese imports to the United States if Beijing attempts to punish the American heartland in response.

Beijing’s tools are relatively limited, given that it buys so much less from the United States than it sells, but it has slapped tariffs on key agricultural imports, such as soy beans and pork.

Trump has also told American companies such as Apple to move their manufacturing lines from China back to the United States — however improbable that is. 

The standoff has led to increasing talk in Washington of “decoupling” the American economy from China — a clumsy word, analysts say, that is tantamount to “deglobalization.”

And that has injected new momentum into Xi’s efforts.

“I think this is what Xi wanted to do anyway,” said Bill Bishop, publisher of the Sinocism China Newsletter. “But Trump is encouraging Xi to appeal to his old-school roots, and self-reliance is a part of that.”

The concerted promotion of self-reliance began with the Commerce Department’s announcement in April that it would ban Chinese telecommunications company ZTE from doing business with U.S. companies. This was punishment for violating sanctions by selling products to Iran and North Korea and then lying about its practices to federal investigators.

After talking to Xi — those were more collegial days — Trump intervened to grant ZTE a reprieve.

But the whole incident, which could have destroyed the Chinese company, served as a warning to Beijing that its core technologies were extremely vulnerable to America’s political winds.

The warning was renewed this week when the Commerce Department slapped restrictions on exports to Fujian Jinhua Integrated Circuit Company, a Chinese chipmaker that it accused of threatening American national security.

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“Trade frictions with the U.S., and particularly the near-collapse of ZTE, has reinforced Chinese leaders’ instinct for technological autarky,” said Yanmei Xie of Gavekal Dragonomics, an economic research firm.

She noted that China’s Made In China 2025 plan, the state-led industrial policy that is central to the trade tensions, has technological self-reliance as a chief objective.

“Hence the irony: China’s bent on technological self-reliance has inflamed trade tensions, and trade tensions have hardened China’s determination for self-reliance,” Xie said.

Indeed, for all the talk to self-reliance, Chinese agents are accused of stealing key industrial technology from American companies, especially in the aerospace industry. Earlier this this week, the Justice Department indicted 10 Chinese people it alleged were stealing aircraft technology secrets from American companies.

China thinks the trade war isn’t really about trade

Xi’s calls for self-reliance come amid celebrations for the dramatic “reform and opening” movement led by Deng Xiaoping exactly 40 years ago, a change that unleashed China’s economic power.

Xi, during his trip across the south last week, visited many of the areas that were pilot zones for Deng’s opening and reform, and pledged to continue propelling the economy forward for a new stage in China’s development.

The confluence of talk about self-reliance and new efforts to generate reverence for Xi is no coincidence. Qiao, the dissident academic, says Xi is trying to strengthen his power at a time of slowing economic growth.

This will continue next week, when Xi will deliver the speech at the opening of huge import expo to be held in Shanghai, part of its efforts to promote investment in China. American business leaders like Bill Gates and companies including Honeywell will be there, but the Trump administration has declined to send any officials.

Many outside experts are skeptical about Xi’s economic vision and his pledges to continue “reform and opening,” noting his recent promotion of state-owned enterprises. Some even call Xi’s vision “neo-Soviet.”

“This is part of a broad structural shift in the U.S.-China relationship,” said Bishop, who doubts the two leaders will achieve any breakthroughs when they meet next month. “Even if Xi and Trump can reach a cease-fire at the G-20, they’re just playing for time rather than returning to a normal trajectory.”

Yang Liu contributed to this report.

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