Executive summary

A Second Cold War has emerged. Following the recent advancements by the US in Artificial Intelligence, it seems that China is racing to get ahead in the sector. In policy and industrial disputes, the US and China appear to be deadlocked in a technology war. This brief will uncover the history, implications and political future of an AI conflict between the two major world powers.

Overview

Artificial Intelligence (AI) has emerged in the recent decade as the new frontier of technology, with applications ranging from healthcare to agriculture to military and defense technologies. History has proven that countries that successfully embrace emerging technologies emerge as political powerhouses on the global stage. Therefore, AI-related tensions between US and China may predict over who will be triumphant on the political stage. With growing concerns over Chinese interference in the US presidential election, AI safety is not an issue to be ignored. 

With the rise of AI comes the consequent necessity for AI safety and security. As of June 18th 2024, China and the US have held talks over AI risks in Geneva - the historical and present-day center for diplomacy - hoping to reach a consensus on how to proceed with AI development safely.  

A key tension between these two countries is TikTok, due to its ownership by the Chinese company ByteDance. Recent years have seen company and government-wide bans of TikTok in the USA with concerns that China has a role in monitoring TikTok, thus compromising the security of American citizens. AI plays a key role - specifically, there are concerns that Beijing has allowed the spread of generative AI content on TikTok that could influence election campaigns and spread misinformation in the US.

This Tech War with China can be truly “won” by one country showing superiority in AI. In fact, AI was listed as China’s number one technology priority in their 5-year economic plan from 2021-2026. Many media outlets have even begun calling the AI tech war between the US and China a second Cold War. For example, Lethal Autonomous Weapons, powered by AI, is currently fueled by US-manufactured chips, putting pressure on China to develop an AI-tech revolution. Regardless of which country is able to successfully come out on top, it is indisputable that AI will hold countries’ foreign and domestic policies on its leash. 

History

During the rise of this “cold war”, both China and the United States were forced to reevaluate how AI in their respective countries should be regulated and controlled by federal policy to protect citizens from the potential privacy infringements of artificial intelligence. The desire for both nations to be a global superpower is critical when it comes to matters of homeland defense. This same hunger for superiority has been previously established by world leaders through other technological races such as the space race between the Soviet Union and the United States during the mid-late 1900s. 

The United States started off strong. A large number of the biggest worldwide companies and universities, such as Google, Microsoft, MIT, and Stanford promoted innovation and encouraged students to get involved in AI research. Silicon Valley in California also became a major contributor to AI development and transformed into an epicenter of AI growth, hosting the headquarters of many fortune 500 companies including Apple, Meta, Adobe, and more. However, China was a major competitor and didn’t lag far behind in the technology race. In fact, the nation had an immediate advantage due to its vast population, which provided readily accessible information that developers could use to train intelligence algorithms. Additionally, China does not face as stringent environmental regulations, making AI development more economically friendly, and therefore ultimately accelerating rates of evolution and innovation. The Chinese government had already implemented various progressive plans to become the reigning global AI leader by 2030 by investing in many startups and putting a sizable expenditure in education platforms. These developments encouraged many young adults to enter AI development sectors, leading to greater growth of innovation.

Although the race began peacefully and mutually, tensions have risen in recent years. A plethora of accusations of intellectual property theft and national security threats began to come to the attention of United States citizens. As the Federal Bureau of Investigation made remarks on China’s attempt to allegedly steal technology and information from US citizens to further their AI development and research. On the other side of the same coin, China accused the US of striving to suppress China’s successes to prevent them from becoming the global technology superpower. 

These conflicts led to hostility between the two nations, with both the US and China raising restrictions on each other’s companies, such as TikTok. Another recent restriction was the selling and distribution of many advanced artificial intelligence chips to China, which the United States government believes may be used to procure and manufacture advanced weapons systems, thus potentially compromising the safety of United States citizens. 

Background

Semiconductors, or “computer chips” are a vital component of all modern technology. They are able to pack an incredible amount of computing power into a compact form factor, which enables the advancement of technology across various industries. The semiconductor industry and its supply chain increasingly rivals the oil and gas industries in terms of their importance to international relations as having reliable and affordable access to semiconductors can shape a country’s economic and military power. 

As the world's top semiconductor consumer and the fifth largest semiconductor manufacturer in the world, China has repeatedly showcased their aim to become an artificial intelligence superpower — which the US does not take kindly to. In 2020, China’s top semiconductor manufacturer, SMIC (Semiconductor Manufacturing International Corporation), along with other Chinese tech giant companies were placed on the US trade blacklist, formally called the Entity List. This sanction had cut off the SMIC from key foreign technology that would aid in the advancements of their chip technology and equipment. In October of 2022, the US continued to tighten restrictions that would prevent the sale of artificial intelligence chips and semiconductor tools to China. In response, major US chip makers have faced restrictions on chip sales and exports to China.

These sanctions however have only slowed but not stopped the advancements of Chinese manufacturers. In 2023, the SMIC was able to generate and mass produce a Huawei processing chip that could be a contender to Apple’s cutting edge 3-nanometer chip. With expectations that SMIC and Huawei plan to improve their chip technology in the near future, it raises questions about the impact US policy and sanctions have had on China’s technological advancements. Notwithstanding, the SMIC and other Chinese chip makers have had to depend on old chipmaking technology in order to produce increasingly complex and advanced new-age chips which has led to an increase in production costs and subsequently pricing.

Lastly, regardless of the outcome of the November 2024 US elections, the bipartisan consensus on China suggests that current relations will remain consistent.

Policy Problem

The increasingly strife relationship between the United States and China has led to the emergence of significant challenges for a multitude of stakeholders in various regions across the globe as they grapple with the geopolitical and economic implications resulting from escalated tensions between these two technological giants. Measures taken by successive U.S. administrations, such as legislation that could lead to the ban of TikTok, export controls that restrict China’s access to advanced sensitive technologies that potentially have security and military applications, and imposition of various tariffs and sanctions on Chinese products, have all sparked intense debate among experts and stakeholders on the rationale and advantages of such defensive measures by the United States. While these actions have led to some benefits for the nation, including increased spending on semiconductors, batteries, and STEM education, they have also sparked a range of issues, including increased costs for consumers, disruption of global supply chains, and economic uncertainty.

Amidst these defensive measures, environmental cooperation between the two nations has dwindled as they prioritize gaining a geopolitical edge over the other, with American lawmakers suggesting a potential slow down of the transition to clean energy technology, rather than collaborating together on innovative, environmentally-friendly technologies. While it is crucial to maintain national security, insufficient cooperation on climate change mitigation and renewable energy between these nations can lead to a particularly negative impact on ecosystems worldwide, as the effects of fossil fuel emissions are not restricted to a single nation but rather have a global impact. 

Furthermore, the dominance of China as the world’s largest exporter of solar panels, with their producers “mak[ing]up at least 80 percent of every step in the solar panel manufacturing process”, can help them significantly influence global pricing, supply availability, and technological advancements in the renewable energy sector. This highlights the urgent need for strategic engagement between the U.S, China, and other nations to ensure sustainable and equitable access to renewable energy resources worldwide. Through better-regulated and responsible collaboration on environmental issues, including renewable energy technologies, global carbon pricing, and marine pollution, both nations can set a stronger foundation for more cohesive engagement and cooperation in other trade-related topics and issues, such as standards for emerging technologies like AI, intellectual property rights, and WTO obligations. Ultimately, stricter and clearer boundaries need to be set on geopolitical competition to foster more space for collaborative discourse and dialogue, ensuring that such rivalry does not threaten the future of the resilience of global ecosystems and economies.

Policy Options

The escalating technological competition between the United States and China, often referred to as the "AI Tech War," has significant implications for national security, economic stability, and global influence. As artificial intelligence becomes increasingly integrated into various sectors, from defense to healthcare, the rivalry intensifies. This issue is further complicated by the impending US election, which may shift policy directions, and the relentless pace of technological advancements that outstrip regulatory frameworks. Addressing this multifaceted challenge requires a strategic approach that balances innovation with security, promotes international cooperation, and safeguards democratic values. The following are some potential comprehensive solutions to the domestic and geopolitical challenges we are facing. 

Strengthening Domestic AI Capabilities: To bolster the United States' position in the AI Tech War, it is crucial to increase funding for AI research and development, emphasizing public-private partnerships and educational initiatives. Significant federal grants and incentives should be allocated to AI startups, academic institutions, and established tech companies to foster innovation. Additionally, developing comprehensive AI education programs at all levels, from K-12 to higher education, is essential for cultivating a skilled workforce. Collaboration between government agencies, private sector companies, and academic institutions can accelerate AI innovation and deployment. This approach not only enhances national security by reducing dependency on foreign technology but also bolsters economic growth through the creation of high-tech jobs and industries, ensuring that the U.S. remains a global leader in AI technology.

Implementing Strategic Export Controls and Trade Policies: Tightening export controls on sensitive AI technologies and components is imperative to protect U.S. national security interests. Stricter regulations should be enforced on the export of AI-related technologies to countries posing national security risks, such as China. Concurrently, engaging in bilateral and multilateral negotiations to establish trade agreements that address intellectual property theft, enforce fair trade practices, and encourage technology sharing among allies is essential. Utilizing sanctions against entities that violate trade agreements and offering incentives for countries that adhere to agreed standards can further promote fair competition and protect intellectual property. While this approach may provoke retaliatory measures and disrupt global supply chains, it is necessary for safeguarding critical AI technologies and strengthening alliances with like-minded nations.

Promoting International AI Governance and Ethical Standards: Leading the establishment of international frameworks and agreements governing the ethical development and use of AI technologies is vital for ensuring responsible AI advancements. Collaborating with international bodies such as the United Nations to develop and adopt global standards for AI ethics and governance can foster global cooperation and trust. Promoting the creation and adherence to ethical guidelines that address issues such as privacy, bias, transparency, and accountability in AI systems is essential. Establishing mechanisms for monitoring compliance and addressing violations, including international oversight bodies and reporting systems, can ensure that AI technologies are developed and used responsibly. Despite challenges in achieving consensus among diverse international stakeholders, this approach sets a positive precedent for other emerging technologies and ensures that technological innovation aligns with human rights and democratic values.

Conclusions

The U.S. recently implemented several export control restrictions aimed at limiting China's access to cutting-edge AI chips produced using American components. China holds a clear problem regarding these limitations.

The Chinese Ministry of Commerce told “Global Times” that the abuse by the U.S. has inflicted China with the new restrictions that will burden the relationship between the countries’ businesses. The most recent set of regulations was not well received by the Chinese Ministry of Foreign Affairs either. A spokesman for the Chinese Foreign Ministry, Lin Jian, believes “the US should immediately correct its wrongdoings and stop its illegal unilateral sanctions and long-arm jurisdiction against Chinese companies.”

‍China, meanwhile, is reportedly moving to replace American processors in government computers with Chinese chips, thereby blocking the use of American CPUs (Central Processing Units). China is reported to have "issued guidelines to phase out domestic chips for government computers in favor of American processors from the likes of AMD and Intel." 

Many Western businesses see these restrictions as a threat to the evolution of business and trade advancements with China. However, the U.S. worries that China's aspirations to employ sophisticated AI are addressed in detail in the updated guidelines. According to the updated regulations published in October 2023, US national security is concerned about advanced AI capabilities because they can advance military decision making, planning, and logistics. The threat of China’s AI capabilities have pressed a reaction from the U.S. government, explaining the revisitation of recently implemented restrictions by the Biden administration. 

With the longstanding rivalry China and the U.S. have, there is a slim chance that the U.S.  would dismantle these restrictions. has caused much controversy surrounding technological and business communities in both the U.S. and China. Furthermore, these restrictions can pose damage to a chance of a healthy alliance between these two countries. Though business, trade, and technological interests may protest and point out the economic absurdity of these expanding limits, political interests take precedence over these worries. As we look towards the future of the relationship between two of the most powerful nations in the world, it is imperative to understand that these updated restrictions have strained their relations on a political, trade, and business level. 

Acknowledgment

The Institute for Youth in Policy wishes to acknowledge Eli Solomon, Anagha Nagesh, Nolan Ezzet and other contributors for developing and maintaining the Policy Department within the Institute.

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