China, Technology, and the New U.S. Industrial Policy
In the 2000s, from China’s entry into the WTO in 2001 to 2016, San Francisco Bay Area companies were at the heart of an expanding technological web linking the United States with China through trade but particularly through investment. China at that time was the core of a global model of offshore production targeting worldwide markets. As its economy and capacity to innovate grew, inbound investment shifted to include production for Chinese markets. Bay Area companies increased their investment in R&D and venture investment from the region flowed to Chinese startups. Returning the favor, in the mid-2000s large Chinese companies such as Tencent, Baidu and Alibaba established technology offices in the region and Chinese venture firms opened Bay Area offices to invest in local startups – often with the goal of bringing their technologies or production back to China. The accelerating deterioration of US-China relations that visibly began in 2016 has dramatically altered this pattern, though key elements of partnership remain. This report takes a look at these relationships and potential new ones between the U.S. and China, although it may be less than promising.