A Tech Cold War Looms

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This week Britain's minister, Boris Johnson is expected to reverse a decision. He made in January to allow the Chinese telecom giant hallway to build part of the country's five gene at work. The British public deserve to have access to the best possible. Now if people oppose one brand or not. To tell us what's the alternative. Britain has come under enormous pressure from its biggest America which sees while way as a security threat. It's not the only Chinese firm that America views with suspicion. Last week Secretary of State Mike. Pompeo told Fox. News the government was considering banning the social media. APP TIKTOK. Owned by the Chinese firm by dense. We're certainly looking at it I. Don't want to get in front of the president, but it's something we're looking at. What would you recommend that people download that APP on their phones tonight tomorrow anytime. currently Boley if you want your private information in the hands of the Chinese Communist Party. and American firms are caught to the geopolitical tensions between the world's two biggest economies. Google Microsoft and twitter all said they would stop cooperating with Hong Kong's authorities for the time being because of a sweeping new security law there imposed by Beijing. It all adds up to what's being called. A new Cold War fought on a digital battleground. For the last three or four years, people have talked about the tech. Cold War. Patrick Fouls is the economists business affairs editor. This strange thing is it's been hard to see evidence of much damage on the ground, and in fact, the companies like apple and Hallway in China. It's really been a golden era in some ways with record sales and profits over the last couple. Couple of years was become clear however in the last few weeks. Is The tech cold? War is really beginning to bite. And why is that? Why is that split becoming so much more certain now? Well I think what you can do is look at it at two speeds. The world of software and the Internet was never particularly linked up in the first place so. Chinese consumers can't use most American Internet companies and vice versa, and what we're seeing, there is the final tentacles are beginning to unwind really very quickly, and that's that's example. The TIKTOK BAN THE REFUSAL US tech companies to play ball with the new Chinese law in Hong Kong so that. World really splitting quickly. The thing that's taking more time is the heart where supply chains which are much much more rigid structures is many many hundreds of billions of dollars of equipment in the grand huge numbers of people being employed, and it's really very hard to untangle those quickly, but that does not seem to be happening as well partly, because of the American actions against Hallway, but also because China seems to be deciding okay, we're GONNA have to go alone here which means we're going to have to really ramp up investment, and so, how how prepared are the country's respective? Tech Industries to to make that split complete. Will in the wall, the softwares already in effect pretty much happened in the world of hauled where the answer is, people are beginning to get plans up and running so smick this Chinese semiconductor company not take that seriously in the past by its Western and Asian competitors, but now it's really raising very big box the ideas to supersize the production capacity and sophistication of semiconductors in China. That's a process that's underway. Similarly Wall Way in China is scrambling around to find alternative sources for the key components that it purchases from the West particularly American companies and over the next I think eighteen months will see a sense of whether that's possible. The one thing to make clear is there are some companies. Companies here which are just left in very uncomfortable positions. Apple in China makes over one hundred million dollars a day there on the simply no easy way for it to pick sides in. You know it depends on the US Amazon China similarly. TSMC, which is the huge Taiwanese semiconductor company that really dominates the industry to some degree. It depends on Chinese customers and American ones, and for those companies that are caught in the middle. There really is no simple answer to this, but if the big picture here is that each country has to build up its own set of software and hardware champions, that sounds expensive redundant I mean. How easy will it be for these countries to make those parallel systems? Well I think you can look at it in two ways. One is sort of finances of it almost an and just that you're going to have to duplicate. Supply chains to some degree and I think that could easily cost. Hundreds of billions of dollars to do is not impossible, and arguably within the scale of the overall economy is a super tolerable inefficiency. I think the other call St-, which is much harder to get to grips with is just the risk of this process spiraling out of control. And to give you two ways in which could happen, it could easily for example move from the world of tech to the world of finance with western Chinese banks subject to sudden private. BANS FREEZES OF ACTIVITY. A night could be much more destabilizing because the financial system is very sensitive to changes like that the other risk is just that this becomes the thin end of the wedge, and sooner or later we find out that suddenly American calls or Chinese toys, or a growing list of things deem to be of strategic importance I and instead of this really being an argument bat security, it just becomes an indiscriminate path of protectionism, the house, a huge economic cost, but on technology end of things that is inherently a global business. How do you think other countries are going to deal with this split as it happened? Well the assumption I think of many American policy makers is the world's default is to use Silicon Valley and one of the things that will happen is that assumption is tested a pretty painful way? It's clear that some very close American allies. Japan Australia possibly Burton will. Ultimately vast choose go with America, but I think we'll see. First of all. China's tech industry now has a very big sphere of influence that includes a lot of Asia where people will continue to use Chinese tech, and secondly that some big economies India's the obvious one may take a third off, and you know be equally hostile, friendly to America and shine. And really seek to play both sides off while developing their own indigenous capacity, so the end of the day. You're heading towards a world where America. Controls most of the world's technology, and then there's this Galapagos of China with its own systems. I think instead your heading to world, which is very fractured with the bulk of the world's population living in countries that use both systems and probably mistrust both to some degree. So. Is it sensible to ask who's likely to win the technical door? I. Think will see both superpowers do probably just find because they are huge. Sophisticated markets and the real losers will be the node countries that are sort of stuck between the two places like Taiwan Hall Sibley Career, where really it's impossible for them to pick sides, and where the own technology industry as a result is going to face a very difficult Erie. Patrick thank you very much time. Jason thanks for having me.

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