Mobilizing for Techno-Economic War, Part 2: Slowing China’s Advance

Summary

Boosting U.S. competitiveness in national power industries is necessary, but not sufficient to avoid losing to China. America also must take measures to slow the PRC’s progress toward global dominance. This report provides more than 100 actionable recommendations for the administration and Congress. Western allies should take many of the same steps.

Key Takeaways

• Absent serious policy change in the West, the People’s Republic of China will dominate most of the advanced industries that underpin national power in the 21st century, leaving the United States and its allies weaker and more vulnerable.
• While policies to support U.S. national power industries are critical, they are not enough. America and its allies also must work to limit Chinese firms’ success.
• Policy should focus on five things: limiting Chinese knowledge acquisition, limiting Chinese imports, reducing the impact of Chinese innovation mercantilism, limiting financing for Chinese firms, and contesting Chinese firms in third-party markets.
• Some of the needed policy changes are fairly straightforward, but others will require bold, out-of-the-box thinking that questions the long-established consensus—such as sharing government intelligence on foreign commercial actors with U.S. companies.
• While these recommendations are specific to the United States, Western allies also should adopt them to avoid losing their national power industries to China.

Introduction

National power is the ability of a country to prevent other countries from taking actions against its core interests and the ability of the nation to impose its will on others. Traditionally, national power was largely determined by military power. In the 21st century, globally integrated economy, a key enabler of national power, has become relative strength in industries that enable leverage over adversaries and limit their leverage over us. These are “national economic power industries,” such as semiconductors, machine tools, AI, and aerospace.

As the Information Technology and Innovation Foundation (ITIF) wrote in November 2024, the People’s Republic of China (PRC) is focused on gaining global dominance in an array of national economic power industries. 1 And competition in these industries is mostly win-lose, wherein China’s gains come with U.S. (and allied) losses. This means that unless the United States and allies are stronger than China in these industries and have more techno-economic leverage over the PRC than it has over us, then U.S. power vis-à-vis China will decline even more, with transformative consequences for the global balance of power. This means that the United States, and key allies, need to implement national economic power industry strategies to strengthen and make these industries more resilient. Other reports in this ITIF series will articulate these policy proposals.

While strong domestic policy