Tech Titans at War: The US-China Innovation Race with Jimmy Goodrich

>> Elizabeth Economy: Welcome to China Considered, a podcast that brings fresh insights and informed discussion to one of the most consequential issues of our time, how China is changing and changing the world. I'm Liz Economy, Hargrove, Senior Fellow and Co-Director of the US-China and the World Program at the Hoover Institution at Stanford University.

Today I'm joined by Jimmy Goodrich, Senior Advisor for Technology Analysis to the RAND Corporation and a leading expert on the global semiconductor industry. Welcome, Jimmy.

>> Jimmy Goodrich: Thanks Liz, it's a pleasure to be here, it's really exciting.

>> Elizabeth Economy: Great, so the US has declared China its greatest long term strategic competitor.

And there's probably no issue in that competition that's received more attention than technology. But I think that it's hard for people outside the small group of experts like yourself to understand exactly what this technology competition is all about. Is it about national security or economic competitiveness? Does it include every technology or just those somehow tied to national security?

How do you organize your thinking on this technology competition? Do you have a framework that you find to be particularly helpful?

>> Jimmy Goodrich: Well, thanks, Liz. And as you know, on this question you can ask a hundred different people and they give you 100 different answers, but I'll offer my thoughts for what I think are some of the important ways you can think about the US-China Tech Competition.

I mean, clearly it matters for national security, it matters for economic well being, it matters for national pride. Who's gonna lead the next generation in technologies that are gonna shape our lives, change economies and improve home and health, and also secure national security. Particularly for these general purpose technologies like artificial intelligence, robotics, fusion, they have huge impact to both the economy and our everyday lives, but also to national security.

And as tensions between the US and China have increased, I think there's been a more acute understanding amongst policymakers that in the 21st century, we're talking about competition in these frontier technologies. Who can attract the best talent, create the best companies, who can diffuse that into their economy, who can rapidly integrate these innovations into their military better than the next country?

That's really what this is about. China is now the second largest economy in the world. They have tremendous depth in terms of their ability to innovate. China has been able to create some of the world's most leading companies, scientific laboratories. I think the story of China 20 years ago stealing and replicating technology is really the story of yesterday.

We're looking at a China that is fundamentally changed, leading a lot of the indicators in basic science and chemistry and applied materials science in semiconductor related research and development in many areas. Basic R&D for AI, aerospace, other areas. So we have to think about China now as not just a country that is a copycat innovator, but an original innovator increasingly so.

>> Elizabeth Economy: Yeah, so is there a way to think about or a set of metrics that kind of you use for who's winning and who's losing, or do you think that's even helpful at all? I remember reading a paper by ASPI, the Australian Strategic Policy Institute that came out I think last year where they said that China was leading in 37 out of 44 sort of crucial technologies based on sort of the level of original and quality research that was being done in those areas.

I mean, is that a metric that we should be thinking about or is that win, lose sort of framing the wrong one?

>> Jimmy Goodrich: Well, I mean, there's a lot of different ways to look at it, but in general you can think about tech power as a measure of your creativity, your level of innovation, your economic productivity, and also adoption of the technology.

It's one thing to create it, but if you don't diffuse it and adopt it across your economy. We've seen that happen for example, where in the US the Department of Energy funded a lot of the original research for the battery technology and solar cell technology that's used today, but China led in scaling up of that technology.

And it's brought the cost down where it's now the dominant producer of these items, even though they didn't invent the original technology. So it matters that you can both create technology but also diffusion adopt it. I think getting both of those right. In fact, there is a professor at George Washington University, Jeffrey Ding, who recently wrote a book about how diffusion of technology is really important.

I recommend it. And he looked at everything from the electricity to the automobile and more. Thinking about AI in terms of national power, is it who creates or who diffuses it? I think the answer is both. So you really need to look holistically at both the macro and micro level.

At the macro level, it's thinking about R&D intensity. How much of your government expenditure are you reinvesting back into research development as a percentage of GDP? How much talent are you producing on an annual basis? What's the quality of it? Is it PhD, is it applied? Is it basic?

Is the work that they're doing oriented towards the needs of the economy or the scientists in the country? What kind of firm level startup created activity do you have. For example, we know that China looks at all these metrics cuz you can look back to early speeches from Xi Jinping in 2013/14 where he said, China's losing the race.

We're behind in terms of advanced science and technology, we need to catch up in talent and patents and papers and other different indicators. But more recently, Xi actually said, hey, at this meeting in Shandong, if you recall earlier this year where he kind of signaled some recognition that the economy was not doing very well.

He gathered some experts of domestic economists. One of the things he asked is why don't we have as many unicorn startups in China like we used to? So we know that the Chinese government is actually quite acutely aware of a lot of these metrics and following them very closely.

If you look at the 20th party congress, there was a huge section on science technology and the Plenum document that lists very proudly all the accomplishments they've made and exactly how many of those metrics that I mentioned. That's exactly how if you look to science technology organizations in the US, the National Academies, National Science Foundation, ITIF they're also assessing in many of these.

The thing though is you can take the exact same metrics and sometimes come to different conclusions. I think that's where it's important to then look beyond what's going on at the macro level and look at case studies. I think that's really important because the macro picture doesn't give you honestly the full sweep of what's happening on the ground in China.

And that's when you have to look at individual firms, go out, visit China, meet with the factory managers, the folks working on an R&D. Talk to researchers around the world that are engaging with their Chinese counterparts and really have a bottom up assessment as opposed to a top-down as to the level of innovative activity in different sectors.

And it varies between ship building, EVs, cars, robotics, semiconductors, foundational versus advanced ships. You can write a different story for almost every sector in China. As a analyst who does research on China's science technology space, why it's so fun and so interesting is that there's such a wide variety of facts on the ground.

Ground that, you know, either impress you or leave you thinking, wow, they're not doing as well as they would have liked in this space.

>> Elizabeth Economy: So, I mean, that was terrific, and I wanna come back to a couple of those case studies to get your sense because of what's taking place on the ground in China.

Because you are, I think really one of the people who has spent the most time certainly in the semiconductor space, but I think also increasingly in AI. The most time thinking and engaging on the ground in China to understand what's really taking place. But let me just take one step before that and ask you, do you think the United States and China approach this competition in the same way?

I mean, you've laid out, you know, a number of different really important metrics that we should be thinking about. But does the United States tend to stress sort of one approach and does China stress a different approach? Do we understand the tech competition in the same way? Do we frame it in the same way?

>> Jimmy Goodrich: I think sometimes it's very different, however, I'd say the US approach is becoming more oriented towards a national competitiveness agenda than it used to be. If you go back maybe ten years, it was our basic research is conducted in universities, corporations tapped into it if they want to or not.

We didn't have industrial policy to attract chip making or battery or solar panel manufacturing in the United States. But fast forward now, the US is doing a lot of that. On the flip side, if you go into China, there's always been a five year plan, an industrial policy, someone in the halls of Beijing drinking tea and thinking they need to achieve this target or that metric.

But, frankly, you can go out, talk to some of the companies who don't even recognize they're part of a plan. They're just trying to make profit because this is an attractive industry. And frankly, some policy signaling has meant they can probably get more investment in capital and subsidies because of that.

But I would say that the Chinese approach is, the way I look at it is the government sets the goalpost, it identifies long range targets, but it doesn't give an intentionally a lot of guidance of how to get there. It says, we wanna create a world leading semiconductor industry by 2030.

That was the target in their integrated Circuits plan in 2014 or by 2025 they want to achieve X amount of innovation increase in whatever sector you name it, robotics and so on. And then they really leave it to the provinces, to the mayors, the governors, to the CEOs of local government financing vehicles who often dole out a lot of the cash to these companies, to those state owned enterprise bosses, the entrepreneurs to figure out how to get there.

And then you kind of open up the spigots, funding comes out. There's a tremendous amount of waste, but that's kind of by design really. Thinking about China's government efforts at developing their science technology, I think of it as a venture capital state. I'm not the first to coin that term.

Others have used that where they've got a portfolio of bets in the semiconductor space, for example, they might fund two or three companies to produce the same thing. Or in super competing, there's always been sort of managed competition of four or five players, but they'll pick the best out of the pack for their ultimate deployment of the technology.

Much like a venture capital investors thinking, they've got 20 investments, two or three out of the 10 might win and that's enough for them because it's the end, not the means that they got to. And if the end is for a VC return on investment or for China for moving up the ladder and creating jobs, then all the means that they got there were justified.

Can they sustain that in sort of a more constrained budget environment with a slowing economy is one of the big questions out there amongst the China policy community. So for the US, we're kind of moving more in that direction. And again as I mentioned, we're much more laissez faire.

Industrial policy was a taboo word in Washington. But now with Chip's Act, Inflation Reduction Act, possibly more investments for things like shipbuilding and a new Congress and administration, we're moving a little bit in that direction. Not as intensively as China is. I think China's much more top-down mobilization but also bottom up at the same time and very flexible where I think also one of the biggest differences is that there's more tolerance for failure ironically in the Chinese political system than there is in the US political system.

Because a lot of this industrial policy is so new. There's a real fear that say with the Biden administration they'll make a wrong investment decision, lead to a cylindrical like bankruptcy that could weaken the political consensus around these type of things. Whereas in China they've had so many failures but so many different successes, I think there's a higher tolerance for those failures in their system.

>> Elizabeth Economy: Yeah, although I think arguably there's a high tolerance for failure in the venture field in the US economy.

>> Jimmy Goodrich: Yes.

>> Elizabeth Economy: Maybe not in terms of the political system engagement with it, but I think it's one of the strengths of all the Silicon Valley, Silicon Valley, etc, that in fact there is that tolerance for companies rising and falling and exiting and new ones springing up all the time.

>> Jimmy Goodrich: I think that's one of our greatest assets is the healthy venture capital, private equity financial community that helps create a lot of these startups, invests in companies that just have a small idea in their garage. China's struggling, if you've read a lot of the reports over the last two years, VC funding has really, particularly private backed VC funding has really been in a drought in China.

Now the government stepped in and become the predominant LP to a lot of these venture capital startups, VC funds in China. But that means, though the government has more say, they're more focused on job creation, is a new factory gonna be built in my district versus, five, ten year returns and is this widget going to be successfully developed on the market?

That's the orientation of the US system. But the Chinese system, when you've got the government as a shareholder, obviously is going to have a different set of metrics. On the flip side, that might mean that some areas that the sort of quick return VC community is not interested in hard tech, maybe more prone to investment in China.

>> Elizabeth Economy: Right, and that's why we have the Chips and Science Act in good part, I think. Let me just ask you quickly though to that point about the private venture capital drying up and the government stepping in, why is it? I mean, I know that certainly Western venture capital has dried up for a variety of reasons tied to sort of changing political circumstances in the relationship, increased tensions.

And so I think greater concerns about US money being used to support technologies in China that could undermine our national security. But why is the Chinese private venture money drying up in China?

>> Jimmy Goodrich: I think there's a couple of reasons, one, of course, is the pandemic and then the drag on the economy that that's had since then.

And so, and on top of that, a lot of the really active funders of tech in China got their money from the Internet economy, from the E commerce boom. With the Internet crackdown, the government conducted over the last couple of years, that's really spooked a lot of the investors.

It's fizzled a lot of investment activity, and it's also reduced a lot of their holdings. So there's just less money, there's not as much confidence. And now, people that would have been investing in Widget startups, fusion technology, AI, they might be opening up a bookshop in Thailand now instead of investing in a lot of these new startups.

It's not to say there's a complete drought, there's still companies out there. You've got Lee Kai Fu and Zinovation and others that are invested in the economy. But I think it's a confidence issue, it's also just a single fact. With a slowing economy, there's going to be less capital.

And that's where the government has tried to step in and fill some of that void. It's interesting, it's again, I guess it's all roads lead back to sea sometimes. And he mentioned unicorns. 30 days later, the State Council had a guidance document on, my gosh, we need to get venture capital funding revved up again.

And just what they need another government document to tell them what to do.

>> Elizabeth Economy: Right, so you mentioned sort of the industrial policies, something that the United States, I mean, the United States has had industrial policies in the past, but clearly, China's been sort of the king of industrial policy.

And now the United States with chips and science and Inflation Reduction Act has sort of elements of that. Are there any other things you think that China should learn? Sorry, that the United States should learn from the Chinese model? I personally think back to just Chinese persistence, and I've just been reading Eva Do's new book on Huawei.

>> Jimmy Goodrich: Huawei.

>> Elizabeth Economy: Right, and she mentions that the Chinese government had invested a billion Yuan in 1996 in semiconductor industry. And here we are today. There's still, now it's hundreds of billions of dollars that China's putting into the semiconductor industry. But nonetheless, you mentioned batteries and EVs, and they persist.

Whereas sometimes the United States, as I think you were suggesting, we develop the technology, but then we don't continue. President Carter was putting solar panels on the West Wing of the White House in 1979, and then President Reagan came in and ended the renewable energy program. And so one of the downsides of our democracy and flips in government.

But what else do you think the United States might take away from the China model?

>> Jimmy Goodrich: Well, I think that's really important. Just look at other East Asian economies that have done very well in innovation industrial policy. Take Taiwan and the semiconductor miracle, Taiwan Semiconductor Manufacturing Corporation, which today produces around 90% of all the world's most advanced chips, the smallest chips.

They started out as a Joint venture between the Taiwanese government, 48.5% owned by the Taiwanese government. For over two decades, the Taiwanese government sat there as a patient shareholder buffering them from market forces. They gave 20 years of tax credits to those that purchased the equipment to build out their factories.

And no surprise, at their early stage of inception when they really weren't able to on their own make profit, the government buffered that and persisted. When the going gets tough, for example we're seeing Intel struggle in the market, you have to keep going, you can't just walk away as soon as it gets a little dicey.

I think the other important takeaway that China doesn't do well, that we should not replicate is China doesn't know how to exit their investments. The Taiwanese government, as soon as they saw TSMC become successful, also in Korea, when the Korean government had its heavy chemicals initiative in the 1970s, then in the 1980s they built up their semiconductor plans.

The government of both Korea and Taiwan, as soon as they saw Samsung, LG, TSMC become successful, they reduced their investments, they reduced the government policy cuz they realized that it worked and they don't need to create these companies dependence on them for their financial success. I think the other thing we can learn from China of what not to do is not to create companies where the government has overriding control.

That's one thing that's remarkable about China is that if you look at all the industrial policy success of different East Asian developmental states. Most of the actors who implement the industrial policy are private entrepreneurs running privately held companies, Samsung, LG, Sony, TSMC. Whereas in China, vast majority of the government dollars are not going to Tencent and Alibaba, they're going to China Resources Corporation, and Tsinghua Unigroup, and AVIC and the China Minerals Energy Extraction Corporation Limited, etc, everyone under the central government's SAC group.

That's starting to change a little bit. What's interesting is over the last five or six years, particularly as US-China tech tensions have escalated, what China's been talking about is I think learning from those past mistakes, something called whole of nation, new type of innovation. And this means mobilizing the state, but instead of just these old line state ministries and SOEs bringing in the private companies and work together.

And Huawei is actually the best example of that, back to the fantastic book that Eva wrote. Huawei is now the sort of vanguard of that new model where Huawei is partnering with state-owned enterprises like SMIC or Research Institutes like the China Academy of Sciences to work together to take private market orientation, business process, R&D, management skills and the good tech coming out of the labs and push forward.

Is this a sign they've learned entirely? I think this might be a one off but it's interesting that they're experimenting with the model that has worked for other countries. So I would hope that for our industrial policy, we're not gonna create state-owned enterprises, the government's not gonna have an overriding share that.

They've got an exit strategy, and then we can make our industrial policy as market based and oriented as possible.

>> Elizabeth Economy: Yeah, I mean, I do think that that's built into the design as it is, right? Because we're kind of government capital at about 39 billion and private capital at 10 times that.

So I think that's the direction in which we're moving. But I also think that you're warning about when the going gets tough, the tough get going but not like going out the door, but stick with it, I think is really important and hopefully all these programs are gonna weather the transition, the political transition.

>> Jimmy Goodrich: I think there's a bipartisan consensus around rebuilding our manufacturing base. I think the Republican Party preference is tax policy to get there instead of fiscal subsidies. But remember the Chips and Science Acts includes a tax credit that's probably actually exceeding the total amount at the end of all of this of the subsidies.

>> Elizabeth Economy: Yeah.

>> Jimmy Goodrich: 39 billion.

>> Elizabeth Economy: Right, you're right.

>> Jimmy Goodrich: Tax credit is 25%, it's like twice that size.

>> Elizabeth Economy: Yep, yep, yep. But Inflation Reduction Act I think relies more on incentives and tax credits and things like that. So that was less bipartisan.

>> Jimmy Goodrich: So there's something in there for everybody I would hope.

>> Elizabeth Economy: Yeah, and now I think a number of Representatives, members of Congress, even Republican ones have come to embrace the IRA and the advantages that they've seen for their districts.

>> Jimmy Goodrich: I see the jobs being created and the job creation, it's real. I think the part of the challenge of the last four years is that a lot of these investments are huge, they take time. It's hard to see the immediate results but you know, at the end of the day it'll benefit the country. So at the end of the day that's great.

>> Elizabeth Economy: Right, so you mentioned Lee Kaifu, and he has been a really important player in China. I remember back in 2018, he wrote the book on AI Superpowers.

He said, basically, China eventually was gonna win the AI race, in large part, because it was the Saudi Arabia of data. Because it was investing more money, had great entrepreneurs, had huge engineering class, huge Internet companies. And he also said that the American approach is more about like academic research, whereas China is going to value the use of AI in manufacturing.

And I think this brings us back to some of the first points that you were making about needing to have the full cycle, right? So do you think that this is the way that AI is playing out? I mean, the AI competition is playing out, that the United States is maybe overly weighted on the academic research and not enough on the deployment throughout the economy.

And whereas China's already moving into deployment but maybe isn't quite leading in the research. How do you see this playing out?

>> Jimmy Goodrich: Yeah, I remember reading that book at the time and it's a great book. And Kai-Fu is obviously one of the most knowledgeable people around China's tech ecosystem, has great insight and expertise on the topic.

But did get one prediction right, that the US was gonna lead in the hardware, and they still are. Whether it's in advanced node chips or the semiconductor production equipment, the US and the allies still lead. And he had sort of predicted that was gonna be an area where the US is gonna have a strength.

I think in data, it didn't quite turn out to be the way we thought it would. China is a population of over a billion, but the rest of the world is four times that. So at the end of the day, actually I think we had to look bigger.

When you look at Google or Meta or OpenAI, they've got the world's data available to them, whereas China has data that's created within, sort of inside the walled garden of the Chinese Internet. It's useful within China, but it's not as useful outside of China. In addition, I think of Chinese AI development as basically two waves.

The first wave really, when Kai-Fu wrote that book, was all about facial recognition and neural networks. And that was really the first wave of AI, and China exploded. They took off, they lead that technology because they had a huge market led by the government, fueled by demand for surveillance and security cameras.

>> Elizabeth Economy: Exactly.

>> Jimmy Goodrich: Every Chinese startup in that era, SenseTime, Megvii, they were almost entirely focused on police public safety surveillance applications. Or if you go to the street corner in China now, there's 20 different cameras from 20 different agencies that are hooked up to 20 different systems. And that's really what drove that first wave of AI development in China.

The second AI wave, which is happening now, is taking fundamental breakthroughs in research around transformer models and large language models and using prediction to figure out how your phraseology is going to work. If I say boom, then what's the likelihood of the next 20 words and the models can predict that for you?

The US has created that whole technology, is still leading, but China is very close behind. And we're seeing today that some of the Chinese companies, like DeepSeek, StepFun, Kai-Fu's company, 0AI, are quite innovative on these kind of rankings of who has the best models. Chinese companies are holding their own weight.

I think one of the big questions is with the export controls that do constrain China's access to the chips, which you need to fuel these AI systems, is that gap going to get bigger over time or not? That's an open question that a lot of people are trying to figure out the answer to.

>> Elizabeth Economy: Yeah, so you've spent some time figuring that out. What do you think?

>> Jimmy Goodrich: I think it takes time for these controls to have an impact. China is able to stockpile, purchase a lot of things. They're able to, unfortunately, they were getting access to things like TSMC. They've been able to smuggle a bunch of chips in.

Your rules are only as good as the ones you enforce. And I think we've learned over time that 200 page regulations are great if they're enforced. And that's an area where I think that's been lacking over the last couple of administrations. But it's very difficult. I mean, these are huge, deep global supply chains.

They span multiple countries and jurisdictions, arcane rules that require teams of lawyers to understand, this is not easy stuff. I think it's a work in progress. The export controls and whether or not they're gonna deliver the sort of results that whether the China hawks say they will or those that criticize them won't, I don't think we really have an answer one way or the other yet.

It's too early. Remember, the Biden administration's big package was just two years ago. And so that's not even really a full technology cycle. For example, the semiconductor industry, it takes two or three years to design a new chip. So we're still at the very early innings of this and we'll see over time.

There's one thing however, is that there's no doubt that China's fully committed to localizing as much as fast as they can in every area that we're trying to constrain the PRC in. And so it's a big question of small yard, high fence strategy, have the most delicate narrow controls as possible.

You also send a signal to China at the same time to double down and build out its injuries industry as fast as possible. Do you use all that leverage now, later, when? It's a complicated question.

>> Elizabeth Economy: Yeah, I mean, and recognizing of course that China was already committed to indigenization, what I think the controls have done is to accelerate the process, right?

To force them to move faster, to invest more.

>> Jimmy Goodrich: Yeah, in every area that we're talking about today with semiconductor equipment, materials, software, AI chips, memory chips, China was investing in every single one of those before that. They've certainly increased the intensity and the scope of the investment.

Was that because of export controls or just a breakdown in US-China relations? Who started it all? I mean, that's a hard question to answer.

>> Elizabeth Economy: Right, right. And well, I guess we'll, we'll give it a couple of years, but I would never want to see certainly the export controls be thought of as the one arrow in our quiver.

>> Jimmy Goodrich: Silver bullet, yeah.

>> Elizabeth Economy: Funding the science part, for example, of the Chips and Science Act, I think should also be an essential part of our competitive strategy when it comes to semiconductors.

>> Jimmy Goodrich: There's a lot of focus on semiconductors, on TikTok, on batteries, you name it. Those are all applied technologies where we are going to win.

And sort of the future of the next wave of innovation is gonna be leveraging our amazing university and national lab infrastructure to invest in the basic science that then we can apply and commercialize. Whether it's in fusion technology, next generation chemistry, or bioengineering that's gonna be useful for life sciences.

What's interesting is that China is really almost at a breakout stage of investment in basic science. And it's something that really is not covered well, The Economist did a piece about six months ago on China's basic science rise. It's really now a science superpower, they're building 20 new national labs and scientific facilities across the country.

And everything from experimental fusion reactors to deep earth exploration platforms, mining colonies on the moon, deep space probes, everything you can think of. It's like Xi Jinping has a fascination with journey to the center of the Earth and every other sci-fi book, in fact, I think at one point they were on his bookshelf.

But it's interesting, I recently spoke to somebody, senior individual in the Chinese science system, and they said, we're not gonna catch up anytime soon in these sort of applied technologies of today. But when it comes to the next wave of technologies and high energy physics and quantum, they're much more confident that these big investments they're making five, ten years down the road are gonna pay off.

Much like the big investments the US made into its science infrastructure in the 1940s during World War II, and then on through the Cold War paid off with GPS, the internet, the semiconductor, you name it. Those were all big government investments that had spillover effects, and I think China's watched that model, they think it's gonna work for them.

Again, I come back to the big question of like, well, is that funding gonna be around forever and can they sustain it, particularly if the economy continues to shrink the way it is?

>> Elizabeth Economy: Right, but I think we've also seen that despite the economy slowing significantly, that this remains a priority for Xi Jinping.

And so, I think we should not take our foot off the gas pedal in anticipation that somehow they're gonna start to retrench.

>> Jimmy Goodrich: Yeah, I should have answered my own question there and saying I don't think it will, I agree with you.

>> Elizabeth Economy: That's fine, I mean.

>> Jimmy Goodrich: 0%, you could still take 30% of all that economic output and dedicate it to science, technology, investment.

Just look at Japan, the zero growth economy of the last several decades, they've added all sorts of new infrastructure. They're still world leading power, you don't have to be growing at 10% per quarter to have a huge dent on global development.

>> Elizabeth Economy: Let's send that message to the new Congress, I think it's an important one for them to hear.

So let me ask one last question, a slightly different area, and that's on our science and technology cooperation with China, because there's still a large area of cooperative work that is going on. I think that many people would argue certainly in the US scientific community should be going on.

A lot of synergy among scientists across the Pacific, the US has let the science and technology cooperation agreement that had been in place for 45 years lapse. It missed its formal renewal deadline, is that a mistake, or are we at a point where we really should just be hunkering down and battening down the hatches and closing off our research universities?

How do you see that dynamic in terms of the cooperation versus the competition?

>> Jimmy Goodrich: Well, I mean it's interesting.

>> Elizabeth Economy: Element of it, because so we've benefited here in the United States to such a significant extent from that free flow of talent coming from China. I mean, many, many, of our top researchers today hail originally from China and from other countries, but how do you think about that?

>> Jimmy Goodrich: Well, I think with anything, there's benefits and trade-offs and there's no doubt that science is global. And if you talk to any scientist in their domain, whether it's physics, chemistry or semiconductors. What they're doing requires global partnership because no one country has a monopoly on good ideas and people, it's just fundamental rule of humanity and idea creation.

In fact, I think it's our greatest strength is that if you look at the research labs and the innovation in China. Despite a lot of efforts, they're not recruiting as many and as good as global talent that they would like into their research labs. Now, you read every day about this scientist and that scientist that's going back to China, but the overall trend is that if you're a top scientist, you wanna work in a Western university.

Or Japanese or South Korean because you're gonna have more freedom, you're gonna have less bureaucracy probably, and frankly, you can create a startup, usually a lot easier. On the other hand though, I think we were a bit naive in some areas where there was joint collaboration on super competing technology that went straight into nuclear weapons simulation.

Or working with the Chinese Academy of Engineering Physics, which is their nuclear weapons lab on things that will benefit their nuclear modernization program. Or Bill Gates wanted to do small modular nuclear reactor technology in a partnership with the Chinese National Nuclear Corporation, which is working to develop SMNRs for their nuclear submarine program.

So there's areas when there's a clear dual use application should be just more mindful. I think a lot of it just stems from education working with the research community to ensure they're aware of the risks, to ensure that research integrity is really important. That if you're a university researcher, you're disclosing where your funding's coming from and that's not something that applies to just researchers engaged with China.

It's any researcher working with universities around the world, I think MIT has actually done a great job. They put together a task force, they looked at how can they help improve research integrity and security and get the buy in from their research staff and professors. Because it helps them in their work get more funding and have more credibility if they are perceived as living up to a really important code of conduct.

And I'm seeing more universities kind of go that direction, it doesn't have to be, and it should not be targeting one group over the other, frankly, it's a global conversation. So, I still think we should maintain as robust as links as we can, recognizing that we should put guardrails on technology engagement where there's gonna be a clear military application.

And also frankly, it benefits us from knowing what the state of the research is in China. If we're all drawbridge is closed and behind our own walled garden, we're not gonna know what they're doing. And in some areas, particularly for strategic applications that could put us at a disadvantage, likewise that means we'll have to let China know a little bit about what we're doing.

But frankly, a lot of the research is published anyways.

>> Jimmy Goodrich: So particularly when it comes to basic research, I think there's a good way that we can balance things. I think we're heading down that path whether or not the next four years, it's gonna go in a different direction we don't know yet.

>> Elizabeth Economy: Yeah, okay, so now we're into our quick little lightning round of questions, so give me your must-read book or article on China.

>> Jimmy Goodrich: Well, I was gonna say Eva Doe's new book on Huawei, that's a good one.

>> Elizabeth Economy: Okay, that's fine.

>> Jimmy Goodrich: Of course, any book from Liz Economy, I recommend.

>> Elizabeth Economy: Not necessary.

>> Jimmy Goodrich: The new book on Xi Jinping Thought from Steve Tang and others is a good one. I have not read blocking out a few of the others, but anyway, those are the couple of the ones I recommend. The article, I go back to the Economist article on basic science on China.

I think it was a good tip of the iceberg primer of, and something that people don't think about a lot is the innovation, the labs, the basic research. And thinking more about China as a science superpower, as a science imitator, I think is an important concept.

>> Elizabeth Economy: I also think, frankly, your article on Fortress economy is a great one.

Tell me where you published it. I read it in draft form. So where was it published?

>> Jimmy Goodrich: I published it at University of California, San Diego, their Institute of Global Conflict and Cooperation.

>> Elizabeth Economy: That's a terrific article for understanding the direction, sort of overall direction, of Xi Jinping's thinking about security and economy. I think nothing is.

>> Jimmy Goodrich: I recently read Xi Jinping's thought on science and technology innovation. I'd recommend that one. Really, if you're gonna try and understand how he's thinking about this. Well, it's all written down for you in a abridged version, and it's available on Amazon.

>> Elizabeth Economy: There you go.

For those who are not faint of heart. Okay, what's one thing that you wish the Biden administration had done differently with regard to China policy?

>> Jimmy Goodrich: I drive back a little bit to what I mentioned earlier is having better implementation of the export control rules. I think, is an area that they could have done a little bit better, could have improved upon.

If you're gonna commit to using all this political capital to expend with allies and industry, spend months drafting a rule, you have to be committed to actually implementing it. And I think that's an area where, hopefully over the next administration or two, there'll be some improvement.

>> Elizabeth Economy: Yeah, what China issue do you think we don't know enough about?

I think you probably answered this, but just in case you want to toss out something.

>> Jimmy Goodrich: I go back to the basic science area. I think it's really hot and interesting. I meet a lot of PhD students, master's students, young kids starting their career in think tanks, and they're all interested in semiconductors and AI, AIA, all the time.

But you know what, there's 20 other domains of technology that are really important. There's very few people worldwide who think about Chinese science technology, basic science technology policy. In fact, I think there's only one full-time program in the world, which is the Max Planck Institute of Science has a two-year study program on Chinese basic science, and that's about it.

And Marix and UCSD, they've co funded a few projects. But I can count the number of people who do this in one or two hands. So I really do hope that the China community spends more time thinking about not just the technologies of today, but basic science and the technologies of tomorrow.

And there's so much going on in China in this space. There's a new national commission, there's a lot more party ideology. What does that mean for the future of science? Who's decoupling faster than whom in basic science? In many areas, you might come to the conclusion China is.

>> Elizabeth Economy: Well, sounds to me like you have your hands full with a very, very large research agenda. And I hope you can recruit some more people who are like you, really outstanding researchers to do this kind of work, because I agree with you. I think it's incredibly important not only to understand sort of where China is today in terms of its technology, but what it's doing to position itself, for the next decade and beyond.

So, Jimmy, let me say huge thank you to you for joining me in this conversation. It's been terrific, and I really appreciate your taking the time.

>> Jimmy Goodrich: Thanks, Liz. It's always a pleasure. It's just been a fun chat.

>> Elizabeth Economy: So if you enjoyed this podcast and want to hear more reasoned discourse and debate on China, I encourage you to subscribe to China Considered via The Hoover Institution, YouTube channel or podcast platform of your choice.

In the next episode, I'll be speaking with senior director for the Atlantic Council's Global China Hub, who until this past summer, helped lead the State Department's work on reducing US economic dependence on China, Melanie Hart. And I will talk about her work and the broader efforts in the US government to develop more resilient and diversified supply chains across core technologies and commodities.