U.S senate pass law designed to slow down Chinese influence in technology

A recent BBC article reports that lawmakers within the U.S senate have recently passed a resolution designed to slow down China’s influence over technological research and technology.

China has rapidly industrialised since the nations economic reforms and due to this industrialisation and growth, China’s population and workers are seeing increasing living standards as wages are rising due to the nations ability to provide skilled labour.

The skills of the Chinese labour force have been expanding and improving as the industrialisation process has led to the Chinese government saw an increase in revenue due to rising taxation, especially from sources such as corporation tax as firms set up in China as the nation has been one of the biggest recipients of FDI.

This rising government budget has helped the Chinese government to improve expenditure on sources such as education which has attributed towards improving the skillsets of the Chinese labour force thus allowing the nation to have an increasing supply of highly skilled labour.

Consequently, as more Chinese workers work within technologically proficient fields, where the supply of skilled labour is more scarce in comparison to lower-skilled fields, their wages rise meaning that through this development China can achieve growth whilst avoiding the middle-income trap.

So, the Chinese development of technological proficiency and research is simply a natural step of development for the nation as China’s increasing wages mean the economy will transition from an investment and manufacturing-led economy to one which specialises in trade in services as these higher wages will likely increase consumption within the Chinese economy.

The combined factors of this fast development have enabled China to become a big competitor in the field of international competition.

Because of this, the U.S government feels threatened as China’s technological proficiency may pose a threat to the U.S’ control over the technology sector as senators may fear the prospect of the U.S’ booming technological sector, silicon valley, moving to China.

Although it is unlikely that this industry will completely leave, due to capital being expensive to move, it is not entirely impossible that some of these companies may migrate their HQ’s to cash in on emerging consumer markets, especially if the Chinese government offer attractive deals regarding enterprise zones or other tax breaks.

However, despite U.S speculation, a Chinese Beijing official stated that this attitude made China seem like a bigger competitor than they are.

The U.S bill being signed is a rare occurrence as it must be passed by the House of Representatives, which is a rare point of the agreement by both the Republican and Democratic party.

Nevertheless, the bill is designed to improve the U.S’ current technology sector by authorising around $250bn (£176bn) for funding of the technology research, manufacturing and semiconductor development.

At the same time, the bill will offer financial aid for robot makers and chipmakers as there is currently a shortage of computer chips worldwide, the BBC reports.

The bill also includes new terms of trades which include protectionist policies as the purchase of drones manufactured and sold by Chinese state enterprises will also be blocked under the new legislation.

These financial incentives and protectionist policies will hopefully boost the U.S’ technology sector, helping the nation outpace the rate at which the Chinese are developing their technological sector, wherever these decisions will be successful, is up for debate.

Technologically based service sectors typically require a massive amount of highly skilled labour, meaning that China may have the advantage in this department due to the nations massive population size.

Consequently, it may be that in the next few years, China will have an absolute advantage over America when it comes to producing technological services, but, if America can develop a comparative advantage over China before China’s population can upskill the result may be one favoured towards the Americans.


Written by Hubert Kucharski

Research compiled by Jonas Theaker

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