For more than four years, Chinese President Xi Jinping has been giving speeches and going on inspection tours throughout China delivering an important message—China needs to become less reliant on key technologies imported from abroad. At a meeting in 2020, Xi implored researchers to work towards breakthroughs in ‘choke point’ or ‘stranglehold’ technologies. These are important technological domains that China can’t readily produce domestically. They are often referred to, especially in Chinese official media, as ‘controlled by others’.

After the imposition of export controls on Chinese corporate champions such as Huawei and the globally coordinated sanctions on Russia after its invasion of the Ukraine, China’s leadership is worried. China could be cut off from more imports. Chokepoint technologies make China vulnerable.

At the time of Xi’s 2020 speech, the government was well into a process of sifting through China’s vast set of labs, centres, institutes and companies to assess which ones were conducting work that would help the country steer through this increasingly unpredictable geopolitical environment.

Five years ago, the Chinese government decided to consolidate a group of engineering labs and centres that help companies develop new products from research done at various research institutions, often universities. These institutions, called national engineering research centres or NERCs, have now been reorganised to meet the challenge of technology self-reliance. Earlier this year, the Chinese government announced a new list of 191 NERCs that were selected from 131 national-level engineering centres and 217 national-level engineering laboratories. Almost half didn’t make the cut.

One centre that made the new list is the National Engineering Research Center for Electronic Design Automation. The centre is not as well known as the company it is attached to. Empyrean Technology has recently emerged to challenge foreign, primarily American, global leaders in software needed to design computer chips. The company has backing from a Chinese state-owned company and received central government funds aimed at transforming new technologies into commercial products. If things go according to Empyrean’s plans, by 2025, it will have ‘fully substituted’ foreign makers and by 2030 will sit alongside Cadence and Synopsys as a global market leader. Whether it will reach these goals is another story.

This centre and its host company do work that corresponds to an area that has been identified as a choke point elsewhere. In a report published by the Center for Security and Emerging Technology, Ben Murphy synthesises 35 articles first published by the Chinese state-run newspaper Science and Technology Daily in 2018 that identify specific sets of technologies as chokepoint technologies. These 35 technologies are often referenced by heads of Chinese research organisations, Chinese innovation experts and industry insiders in China as a way to explain how their work is guided.

Centres like those affiliated with Empyrean are now governed by an updated set of rules that add a special focus on stabilising supply chains and addressing ‘bottlenecks’. A new set of pilot guidelines for evaluating NERCs asks centre leaders to submit a 2,000-Chinese-character narrative describing how their work contributes to the development of chokepoint technologies.

Inspired by research organisations such as the Argonne National Lab in the US and the Helmholtz Association in Germany, Chinese leaders published plans in 2017 in which they described the need to establish three types of ‘national science and technology innovation bases’. The categories are ‘scientific and engineering research’; ‘technological innovation and the transformation of achievements’; and supporting efforts that provide the conditions for success for the first two bases.

NERCs fall into the second category—achievement transformation or technology transfer. National and state key labs are meant to focus on the first category. They are expected to conduct research of a more fundamental nature ‘aiming at international frontiers’ while bearing in mind ‘national strategic goals’. The National Science and Technology Resource Sharing Service Platform, for instance, conducts work in the third category. This includes things like data sharing and storing experimental materials.

NERCs are mandated to serve as a ‘bridge between industry development and technological and scientific innovation’. The reorganisation of NERCs aims to ‘firmly implement the innovation-driven development strategy, serving economic and social development, [and] supporting the research and development of key core technologies’. The innovation-driven development strategy is a signature policy promulgated in 2016 aimed at strengthening China’s industry through innovation. By evaluating engineering centres based on their contribution to breaking ’chokeholds’, the Chinese government includes supply-chain security as a feature of this larger industrial upgrading effort.

It is at places like NERCs where we would expect the development of technologies on their way to market readiness. Earlier this year, Chinese official media reported that the National Engineering Research Center for Communication Software and Application-Specific Integrated Circuit Design had developed a domestic version of a RapidIO interconnect. Interconnects or switch chips play an important role in the transfer of data in wireless and avionics applications. RapidIO is an open-standard architecture from the late 1990s whose development has been dominated by non-Chinese companies such as Texas Instruments and Ericsson. This NERC’s chip is being touted as a challenge to their dominance.

In addition to supporting civilian industrial development, NERCs also play a role in dual-use technologies. In his book Innovate to dominate: the rise of the Chinese techno-security state, Tai Ming Cheung identifies 11 NERCs (from the group prior to reorganisation in 2021–22) as being based within entities with ties to China’s military–industrial complex. Several were included in the new sequence. For example, the NERC that developed the RapidIO prototype is hosted at the China Electronics Technology Group Corporation No. 54 Institute. This institute sits on a US entity list.

The work of NERCs directly challenges the so-called dependency myth that continues to hold currency in public debates. This myth says that most Western countries are dependent on China because of Chinese imports of critical manufacturing inputs and raw materials. However, China is just as acutely aware of its own dependencies, especially in certain high-tech areas. More importantly, China’s leaders are reorganising parts of its innovation system to alleviate its dependencies.

Policymakers, especially in the United States, Europe and East Asia, should be aware that these larger systematic efforts are underway and take stock of their dependencies on China as well as China’s dependencies on them.

The US Senate’s approval of the pathbreaking United States Innovation and Competition Act on 8 June marked a new beginning in the simmering ‘tech war’ between America and China. The bipartisan support given to the bill clearly reflects the growing anxiety among US policymakers about the rapid rise of China’s innovation capabilities and the prospect of losing American competitiveness in the years ahead. Beijing is fast closing the gap in several established technologies and aggressively pursuing self-reliance in various new and emerging technologies.

Amid Beijing’s massive state-sponsored ‘indigenous innovation’ drive, the bill marks the return of an ‘interventionist’ industrial strategy aimed at overhauling the US manufacturing enterprise and sustaining America’s competitive advantages. It commits US policymakers to revive and reshore manufacturing and spend about US$200 billion on research and development and innovation over the next five years. In principle, the bill provides a roadmap for American industries to lead innovation in future technologies and signals America’s leadership resolve to be in the innovation race for the long haul.

China’s phenomenal rise in the global trade and technology arenas over the past two decades has coincided with a decline in America’s domestic manufacturing capacity. Riding high on the wave of economic globalisation, China has not only built strong domestic production and innovation capabilities with significant external technological input, but also displayed dynamism in growing along the value chains. In emerging sectors such as cleantech, artificial intelligence, smart manufacturing and fintech, China’s increasing innovation leadership has directly challenged the longstanding primacy of Euro-Atlantic firms.

What’s more worrisome for global businesses, however, is the potential for Beijing’s ambitious Made in China 2025 policies to overturn the very free-market principles that fuelled China’s rapid economic rise and to undermine their primacy through illicit means. China’s state-led market economy model—together with Beijing’s coercive trade and technology-acquisition practices, such as theft of intellectual property, cyberespionage and arm-twisting of international firms to part with cutting-edge technologies in return for market access—has stirred much anxiety among governments and business leaders across the Western world.

Threatened by the reported loss of valuable American intellectual property, as pointed out in various US Trade Representative investigations, in 2019 the Trump administration slapped a slew of tariffs on Chinese goods that marked the beginning of a full-blown trade spat between China and the US. Although the two powers attempted to reach a breakthrough by signing the so-called phase 1 trade agreement in January 2020, the thaw didn’t last long. Washington soon upped the ante against Beijing by restricting exports of critical technologies like semiconductor chips to China.

Given China’s longstanding import dependence on the US for the supply of semiconductors, the export ban significantly affected firms across the world. It forced them to delay the supply of finished goods and diversify their supply chains. As a handful of American allies currently dominate semiconductor production, US policymakers have sought to use export restrictions to reduce China’s competitiveness in manufacturing and its ability to invest in R&D and innovation in future technologies.

While the full impact of the semiconductor export ban on China remains to be seen, it’s worth noting that strategies like export restrictions don’t bode well for America’s overall trade and economic advantages. Such export-control measures have, at best, a short-term impact. And American industries, too, are likely to suffer a loss of market access, and of the accompanying scale advantages, by moving away from China. The US administration’s export ban on semiconductors is already hurting American firms as much as their Chinese counterparts. The decline in revenues due to loss of access to Chinese markets is likely to impair the ability of American firms to invest in cutting-edge R&D and innovation.

To stay ahead in the innovation race with China, the US will need to double down on indigenous R&D and revamp its industrial strategy so that it serves America’s interests in the long run. The US Innovation and Competition Act in this context marks a response to the perceived threat from Beijing’s Made in China 2025 plan. The bill aims to significantly increase funding for industry-relevant R&D, manufacturing and reshoring of key industries. Its successful implementation would go a long way towards sustaining the US’s competitiveness in existing technologies such as semiconductors as well as in various emerging technologies.

The US industrial policy agenda, however, is likely to increase trade frictions at the global level. Nowhere will such frictions be more intense than in multilateral institutions such as the World Trade Organization and its appellate bodies. Although the Trump administration’s decision to distance itself from the WTO and its dispute-settlement body has proved to be deeply problematic, the WTO’s future, for now, hangs in the balance as the US doles out subsidies to domestic companies and seeks to carve out new supply lines.

The Biden administration faces a difficult road in convincing its allies in Europe of the need for reforming and strengthening the WTO and forcing China to abide by the rules of global free trade. Similarly, the US faces no easy choices in dealing with the problem of cyberespionage. Safeguarding American intellectual property will require Washington to strengthen its cyber deterrence against Beijing and provide better protection of its critical infrastructure. As the bill undergoes modifications and amendments during the congressional approval process, lawmakers must consider adding provisions relating to cybersecurity R&D and innovation.

In its bid to stay competitive vis-à-vis China, Washington confronts the challenge of creating a global innovation order that is rules-based and safeguards the interests of both developed and developing countries. While strengthening its national R&D and innovation capacities and sustaining its competitive advantages, the US can forge alliances with like-minded countries such as India and contribute to building production and innovation capacities in a large swathe of the global south.

As a counter to rapacious debt-trap schemes like Beijing’s Belt and Road Initiative, Washington can lead the way in global industrial development, especially in many middle- and low-income countries, and pull them out of Chinese dependence. Forging an international economic order that is equitable, inclusive and environmentally sustainable will ultimately be critical for the wellbeing of human civilisation.

Australia uses satellites to support national defence, economic, and scientific activities, but isn’t a ‘space power’ that can provide independent space systems for national needs. The Department of Industry, Innovation and Scientific Research’s 2015 ‘State of Space Report’ and Australian Satellite Utilisation Policy limits Australia to providing ground infrastructure, and establishing regulatory frameworks to use other states’ satellites and foreign commercial space capabilities. The 2016 Defence White Paper and Integrated Investment Program goes a bit further, and suggests ‘potential investment in space-based sensors’ for the mid-2020s to the late-2030s but the language is vague, and funding for such a capability is proverbial ‘low-hanging fruit’.

A 2015 review of Australian Space activities shows that Australia is a consumer of the end product. There’s little or no involvement in satellite construction or integration, and Australia doesn’t provide launch services (see table on p. 58 of the review). There’s nothing inherently wrong with that approach. Yet the times are changing. The private sector of space is growing by leaps and bounds, with innovative young companies bursting with new ideas and bold visions that increasingly challenge technological dominance of national space programs. Technologies are changing with the times, with ‘Space 2.0’ emphasizing smaller, more capable satellites produced cheaply through innovation in manufacturing, then replaced more rapidly in a manner akin to software evolution from Silicon Valley IT start-ups. In this approach, Cubesats can be built for a fraction of the cost of traditional high-end satellites, launched in swarms, and networked to provide useful space support for defence or other national civil or scientific endeavours. Andrew Davies has explored the benefits of an Australian surveillance capability, suggesting ‘Australia could develop an indigenous satellite capability to augment data collected by allied or commercial satellites’. In the seven years since Davies assessed the case for four satellites, each costing around AUD$600 million, the transformation implicit in Space 2.0 suggests Australia could instead build swarms of networked cubesats and integrate them with the Triton UAS, to facilitate a broad-area maritime surveillance capability at a lower cost.

Advances in satellite technologies are being matched by advances in launch systems, most notably re-usable space launch capabilities (here, here, here and here). These will potentially drive down the cost of accessing space for a broader range of customers and could herald a transformational ‘step-change’ in accessing space, with SpaceX suggesting up to a 50% price reduction on a fully expendable launch. The challenge will be managing cost and complexity of refurbishment for recovered boosters, addressing fuel to payload cost ratio, and also sustaining a high enough launch rate to make the economics of reusable rockets work. Future Australian space policy could assess the benefits of providing a southern hemisphere site—close to the equator—for launch and recovery of those vehicles as part of an international partnership, and in doing so, lay the basis for a local space launch capability.

If government values innovation, it should review current policy settings on space, and consider future steps. This could suggest two clear potential paths forward on space, and a third that’s implied. Firstly, government can maintain the current approach that emphasises comparative advantage and avoids risk. To borrow a term from cosmology, this is a ‘steady-state’ future—more of the same with little or no government investment into promoting an expanding commercial space sector in Australia. In that model Australia decides what product it needs and continues to consume what’s provided to it, it negotiates access and establishes the ‘ground segment’ to manage the data.

Alternatively government might support a ‘big bang’ strategy that actively develops an Australian commercial space sector. This process has already taken a step forward with a decision to review (and here) the 1998 Space Activities Act to ensure that innovation and investment isn’t stifled through outdated regulation. It seems sensible that whatever path Australia chooses, clearing up and discarding excess regulation is a good step.

A ‘steady state’ approach minimises risk and cost, but doesn’t necessarily encourage a lucrative commercial space sector within Australia, and risks Australia falling further behind in a booming global market. Conversely ‘Big bang’ is riskier because Australia must compete with that global space market, but is more in line with government policies to promote innovation, and the opposition’s commitment to science and technology. If we’re to compete, it’s important to do so with haste, or be at permanent disadvantage with regional competitors.

But private industry should not merely wait for government to take the lead. That opens a third option. The real advances, epitomised when SpaceX successfully lands a Falcon 9 booster after launching a satellite, is when private industry takes the lead. Government can choose simply to step back and let the market drive our space program.

The time has come for Australia to embrace new thinking on space. More of the same is a safe bet, but frankly, is not that inspiring. In a recent co-authored article with Brett Biddington that considers our future in Space, Astrobiology Professor Malcolm Walter sums up the importance of inspiration, innovation and vision:

‘In Australia, pragmatism seems often to override vision, to our detriment. Seeking to inspire might seem like an intangible pursuit, but it is also a powerful agent for change. It nurtures education that generates innovation that builds an economy. None of this just happens.’