China's Digital Challenge: Hidden in Plain Sight, Bigger Than You Thought, and Much Harder to Solve

Last week saw General Secretary Xi Jinping chair the state-level Central Financial and Economic Affairs Commission in Beijing. It was an important meeting focused on the challenge of boosting economic growth under pandemic conditions, in part through a new “all-out” effort on infrastructure. It was important for another reason, perhaps a far more important one for the United States. Xi Jinping once again accelerated Digital China, Beijing’s comprehensive digital strategy designed to help it win the future.

This part of the meeting outcome did not make the U.S. headlines, but it should have. There are multiple drivers behind China’s digital strategy, but one of them is competition, and in particular, technology competition with the United States. It is always useful when you are competing to know that the race has started. This race started more than 20 years ago, and according to Chinese Communist Party (CCP) history, Xi Jinping was the one who started it. The contest is personal, and Xi moved another piece on the board.

The Central Financial and Economic Affairs Commission’s all-out effort on infrastructure is widely defined, but it specifically included the acceleration of new type infrastructure (NTI). Easy to miss, the term describes a centrally defined list of digital technologies, numbering in the low dozens, targeted for rapid development and nationwide installation. Many of these technologies will not surprise you: 5G, 6G, or blockchain. But some of them will: a satellite internet of things, a nationally integrated network of big data centers, or an industrial internet with global reach. And the list goes on. This recent acceleration is likely to be on top of an estimated 17.5 trillion yuan (nearly $2.7 trillion) over five years, already budgeted.

NTI is one of Digital China’s major technical missions. There is no standardized English language translation for this Chinese term of art, despite Beijing designating it as such more than two years ago. One might see it in English as simply new infrastructure, or new kinds of infrastructure, and a few other variations. NTI is reported so often in Chinese media that there are now specialized terms for the campaign, like “information aorta,” coined by Xi Jinping himself in 2016. While few outside China recognize these terms, party cadre and Chinese citizens know exactly what they mean because they have been subjected to constant party-led planning, meetings, and education campaigns across the country.

Xi Jinping first accelerated construction of NTI at the onset of the Covid-19 pandemic to take advantage of the “strategic window” offered by a distracted world. His intent was to jump-start a stalled economy under Covid-19 through an immense digital infrastructure campaign. The Central Financial and Economic Affairs Commission meeting is an expanded version of the same playbook. There is a twist, though. By building NTI “in advance” of users, applications, or even the data it will carry, China will, so the strategy argues, take the lead in growing markets, writing standards, and developing governance mechanisms—a sort of “build it and they will come” field of digital dreams.

Over the past few years, the United States and its allies worked to eliminate, or at least curtail, the security risks posed by Huawei-manufactured 5G equipment to national networks. But they also approached the problem in an overly narrow way. Although 5G—the future of network architecture—is a major part of the challenge posed by China, it is only one part of the challenge. Digital China executes national projects through “bundles” of multiple technologies connected together in technology ecosystems. The development of China’s industrial internet, for example, requires 5G, gigabit optical, cloud computing, blockchain, and data centers, to name just a few. The project is executed as a coordinated whole, with the involvement of multiple state agencies, provincial-level authorities, and telecommunications vendors, both foreign and domestic. To use Beijing’s terminology, the program is executed from the center based on a top-level design. To focus on only one technology is to miss the forest for the trees.

Major Chinese digital projects, made up of multiple technology ecosystems, can be huge both in geographic scope and global implications. The recently launched Digital Beibu Gulf (Digital Gulf of Tonkin) is a case in point. The project is designed to digitally transform the transportation corridor through China that links Belt and Road countries in Southeast and South Asia by building a new digital hub in Hainan Province linking southwest China to the Association of Southeast Asian Nations (ASEAN). This is “in advance” NTI construction, and the United States and its allies should see it for what it is: another round in the coming global competition over data.

In another example, Huawei has recently signed a strategic cooperation agreement with Yantai Huadong Electronic Science and Technology Corporation to expand their work together into Smart Ports, a technology ecosystem that has the potential to straddle global shipping. Yantai Huadong manages a large portfolio of Smart Port projects in China, has a growing international business, and wants to expand more. The technical muscle behind Huawei can help a lot with that (and not just 5G). If Huawei is a security risk regarding 5G, is it a security risk with one, two, or three degrees of separation from the dozens of Chinese firms it cooperates with like Yantai Huadong (and not just on Smart Ports)? What if the cooperation with Huawei is not on 5G, but instead on Huawei cloud or data services? What about the Western firms that work with Yantai Huadong who work with Huawei—are they security risks, too? These are all part of Chinese “technology ecosystems,” or bundles, and the risks associated will only grow with the developments.

As the United States and its allies begins to take stock of the technology competition, it is important to avoid the continued focus on single-type technologies like 5G or quantum computing. There is already a number of extremely good—but localized—portraits of Chinese efforts in supercomputers, data management, artificial intelligence, quantum, 5G, semiconductors, innovation, cybersecurity, smart cities, and biotechnology, but it is important to begin to try and understand the overall strategy driving these disparate efforts. The United States and its allies should also begin to understand how these technologies intersect with each other in the various bundles developed by China and how they will impact global governance and order. Given the growing momentum inside China—the driving tempo of NTI—and the increased prioritization of political attention, increased resourcing, and strategic planning, it will be vital to understand Beijing’s wider strategy and assess its efforts.

David Dorman is a former professor at the Asia Pacific Center for Security Studies and was previously the founding director of the China Strategic Focus Group at U.S. Indo-Pacific Command. John Hemmings is an adjunct fellow with the Japan Chair at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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David Dorman

Former Professor, Asia Pacific Center for Security Studies, and Founding Director, China Strategic Focus Group, U.S. Indo-Pacific Command

John Hemmings

Adjunct Fellow (Non-resident), Japan Chair