Tianjin Saisjang's "nanoknife" may be a form of precision surgery, but it points to a broader trend reshaping China's economic relations with the rest of the world.
Made by a little-known Chinese company, it is designed to treat prostate cancer without invasive surgery. Tianjin Saisyang has been given the official title of “small giant” in 2020, which means it qualifies for preferential treatment in exchange for helping China climb the technology ladder.
According to the company's CEO, who declined to be named, this Chinese version of the cutting-edge treatment is part of an effort to reduce the need for imported medical technologies. The government "demands that local hospitals, where possible, replace foreign medical equipment with domestic ones," says this director. "It's a blessing for us".
Xi Jinping gave a speech this month about the urgent need for breakthroughs in domestic technology to outpace the West and strengthen national security. The experience of Tianjin Saisang is one small example of the scale of the Chinese leader's ambitions.
Under Xi - who is almost certain to secure another term next month - China is seeking to become a self-sufficient techno-superpower that will no longer rely so heavily on the West.
Such changes represent a clear challenge for many multinational companies, some of which derive a huge part of their global growth from the Chinese market
The main goal, analysts say, is to build a "fortress China" - to reconstruct the world's second largest economy so that it can run on internal energy and, if necessary, withstand military conflict. While many in the US want to "decouple" their economy from China, Beijing wants to become less dependent on the West, especially on its technology.
That strategy has several components, and if it is successful, it will take several years to be implemented, analysts say. In technology, the aim is to encourage domestic innovation and localize strategic aspects of the supply chain. In energy, the goal is to encourage the use of renewable energy sources and reduce reliance on offshore oil and gas. In the area of nutrition, the path to greater self-reliance includes the revitalization of the local seed industry. In finance, it is imperative to counter the potential weaponization of the US dollar.
Such changes represent a clear challenge for many multinational companies, some of which derive a huge part of their global growth from the Chinese market.
China's initiative towards self-sufficiency has been developing for several years, but was accelerated after the Russian invasion of Ukraine and Western sanctions against Moscow.
Chen Zhiwu, a finance professor at the University of Hong Kong, said China's leaders understand that military conflict may be "difficult to avoid" if Beijing wants to reunify Taiwan with the mainland.
"Comprehensive economic sanctions against Russia after the invasion of Ukraine only hastened China's path to independence in technology, finance, food and energy," added Chen. "Self-sufficiency as a phrase has again become current in party publications".
Steve Cang, a professor at SOAS University of London, warns that building a "Fortress China" does not mean Beijing will close itself off from the outside world. For the largest trading power of the world economy and one of the largest recipients of foreign direct investment, such a direction would represent economic self-harm.
"Instead, Xi is building a series of mobile fortresses or outposts to advance China's place in the world," Cang says. "They primarily want to make China an innovative powerhouse with technologies that others will look to, making them dependent on China."
Big risk with technology
Many of the changes being signaled as China prepares for the 20th National Congress of the Chinese Communist Party in mid-October have been hinted at or in the works for some time. But the party congress seems likely to accelerate the pace of several such events.
Xi's remarks this month while chairing a meeting of the Central Commission for Comprehensive Deepening Reform, one of the party bodies it uses to govern China, laid out a clear vision for the technology.
The development of "core technologies" was not something that could be left to the free market, but had to be led by the Chinese government. "It is necessary to strengthen the centralized and unified leadership... Central Committee and establish an authoritative decision-making command system (for technology), Xi said.
How much importance Xi attaches to this program is shown by the fact that, apparently, he is ready to fill the new Central Committee, which consists of about 200 top officials in China, with technocrats, not career bureaucrats, said Damien Ma, director general of the Makro Institute. Polo based in USA.
Those tech-savvy officials will be responsible for overseeing what amounts to massive gambling. China is pouring unprecedented resources into fostering technological independence, particularly in strategic industries such as semiconductors, in the hope that such funding will lead to innovation and import substitution.
A total of more than $150 billion has been pledged to spur advances in semiconductors. A report last year by the Semiconductor Industry Association (SIA), a group of US chipmakers, found that China's National Integrated Circuit Fund had already invested $39 billion, mostly in new manufacturing projects.
In addition, more than 15 local governments have announced funds totaling $25 billion to support Chinese semiconductor companies. An additional $50 billion is earmarked in the form of "government grants, equity investments and low-interest loans," the SIA report said. By comparison, America's plan to shell out $50 billion to support its own domestic semiconductor industry looks much more modest.
Semiconductors are generally considered the Achilles heel of the Chinese industry. It imported $2020 billion of semiconductors in 378, which represents a vulnerability in the supply chain.
However, there have been some significant developments. This summer, it emerged that SMIC, one of China's leading chipmakers, had successfully built a seven-nanometer chip, putting it just one or two "generations" behind industry leaders such as Taiwan's TSMC and South Korea's Samsung.
Several analysts, however, say that despite such progress and the vast resources China has devoted to developing its chip industry, goals of full semiconductor independence are delusional. This industry is so complex and interconnected that no country can be independent.
Another part of China's efforts to achieve technological self-sufficiency focuses on two interrelated areas - the state's selection of potential champions such as Tianjin Saisyang and the government's support for strong encouragement of venture capital.
At a national meeting this month in the eastern province of Jiangsu, China dubbed 8.997 companies "small giants", lining them up for tax breaks to help China compete with the US and other Western powers.
Xi, in a letter to meeting participants, said he hoped such companies would "play a more important role in stabilizing supply chains", pointing to his ambition that the "little giants" would help China's technology industry adapt to the local environment.
Support for such efforts can be found in Beijing's assertion of increased control over the country's venture capital industry. In recent years, China has overseen the establishment of more than 1.800 so-called government guidance funds, which have raised more than six trillion renminbi ($900 billion) for investment in technology sectors that Beijing considers "strategic."
These funds are characterized by the fact that they are mainly managed by provincial and local governments or state-owned enterprises. But here too, analysts are skeptical about the long-term effectiveness of Beijing's attempts to "pick winners."
Focus on renewable energy
At the intersection of geopolitics and technology lies another major vulnerability for China - energy supply. During a visit to an oil field in northern China late last year, Xi made a loud and clear call that has echoed through official media ever since.
"We must keep our energy rice bowl in our own hands," said the Chinese leader.
With the country's current energy self-sufficiency rate of about 80 percent, this leaves about 20 percent of the supply, mostly in the form of imported oil and gas, relatively vulnerable to external shocks. China is particularly concerned about shipping routes through “bottlenecks” such as the Malacca Strait, where the US still has supreme maritime power.
Michal Mejdan, director of the Oxford Institute for Energy Studies, says Beijing is starting to increase its focus on renewables such as solar and wind as part of the solution.
"China is watching the global geopolitical situation and assessing vulnerabilities around supply chains," says Meydan.
Analysts point out that China is on track to early achieve a national plan to get about 33 percent of its energy from renewable sources by 2025. However, they add that it will be many years before its vulnerability to oil and gas imports from the sea is reduced.
A key food front
The more difficult to solve dependence on the outside world is in agriculture. China's food security has declined sharply over the past three decades as its population has grown and agricultural land use has shifted from grain to more lucrative crops. In 2021, only 33 percent of the country's total demand for three major edible oils — soybean, peanut and canola — was met by domestic production, down from more than 100 percent in the early 1990s.
Although successive Chinese leaders have stressed the vital importance of food safety for years, analysts believe that tone has hardened under Xi.
This is especially the case since the US under Donald Trump launched the rhetoric of a trade war and since the Chinese State Council published a white paper on food safety in 2019. Since then, senior leaders have clearly linked food security and national security, and the goal of independence in the field of basic food is increasingly being described in a similar way to other ambitions of "Fortress China".
Key policies regarding grain production focus on the need for ever-increasing yields, as well as greater protection of arable land, more efficient water use, and other major water-saving projects. China aims to maintain self-sufficiency in major grains, which reached over 95 percent in 2019.
But the most important policy, according to Goldman Sachs analyst Trina Chen, is the revitalization plan for the seed industry, which Xi first promoted in 2021 and which requires greater efforts to achieve independence.
A key tipping point that will see food production enter the "Fortress China" category will be the introduction of the first generation of genetically modified seeds in China - a change that has been strongly resisted but that analysts now see as inevitable. (China currently only uses GM cotton.) Attitudes have changed since the Chinese took over Syngenta, a Swiss agritech group whose large business portfolio includes seeds and the development of domestic GM producers.
The dollar as a weapon
The calculations of "Fortress China" can also be seen in China's attitude towards the dominance of the dollar. For Beijing, one of the most alarming features of Western sanctions against Russia has been the exclusion of some of its financial institutions from Swift, the global messaging system central to international money transfers.
Chinese officials have long warned of such a scenario. "When the Americans ... frequently use sanctions and overemphasize US interests while ignoring their international responsibilities, more and more nations hope to reduce reliance on the dollar," Zhou Chengjun, director of the People's Bank of China's Institute of Finance, wrote in May last year.
Vulnerability to this type of sanctions arises because around three-quarters of China's trade is invoiced in dollars - meaning it depends on access to Swift.
Beijing's solution can only be long-term. His efforts to “internationalize” the renminbi currency have so far met with limited success. Similarly, the initiative to promote the "digital renminbi", which does not require the use of platforms like Swift, is slow.
"In the short term, Beijing is trying not to violate Western sanctions imposed on Russia over its invasion of Ukraine, but it has also increased its focus on decoupling from the dollar," said Diana Choyleva, chief economist at Enodo Economics in London.
Since 2015, Xi's administration has placed increasing emphasis on independence in industrial supply chains. This was intensified by last year's launch of China's 14th "five-year plan" and the introduction of a policy called "dual circulation", which emphasized China's need to rely on internal dynamism.
Since then, the rising tide of US sanctions against Chinese companies, geopolitical divisions stemming from China's support for Russia in the war in Ukraine and rising tensions over Taiwan have reinforced pro-"Fortress China" trends.
Such a heavy emphasis on domestic technology represents a significant risk for those multinational companies focused on supplying the Chinese market. According to one Asian banker, there is currently a huge disconnect on the boards of Western companies between their enthusiasm for the growth potential of their business in China and their silence on the geopolitical debate shaping the environment in which they must operate.
China cannot afford to isolate itself completely from the world due to its export-oriented structure and is likely to adopt a hybrid approach depending on the industry
"Many Western companies blame themselves for not speaking up and making it clear what they think the business relationship between China and the West should look like," said the banker. "But at the same time they feel quite powerless to do anything about it, because given the situation, what's the advantage of being a company that speaks up?"
However, some analysts believe that despite all the political slogans, there are still significant limitations regarding the scope of the "Fortress China" plans.
Yu Ji, a senior research fellow at Britain's Chatham House Institute, argues that China cannot afford to isolate itself completely from the world because of its export-oriented structure. As a result, Beijing is likely to adopt a hybrid approach depending on the industry.
"Sectors of strategic importance and related to the daily needs of the population will be treated as national security issues," Ju said, "while sectors that require foreign capital and labor will remain open and interconnected with the world."
Translation: A. Šofranac
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