The US government may be neglecting its own people in its quest to preserver its dominance over China. Image: Getty via AFP

The strategic importance of the high-tech sector is undeniable. Nowadays, the sphere of influence a nation is able to expand in this domain equals the degree of authoritativeness that it can exercise in the global stage at large, influencing major geopolitical dynamics.

With emerging technologies being synonymous with power and influence, the rivalry between China and the United States has always been particularly intense in the tech domain.

However, since the outbreak of the Covid-19 crisis, the confrontation between Beijing and Washington has intensified, alarming observers worldwide, who have also witnessed a greater presence of these superpowers’ governments in the technology sector, leaving room for the implementation of approaches mainly intended to protect national interests.

But what will the international implications be if China and the United States continue to adopt extremely tough tones in their confrontation?

In an effort to find answers to that question, from June 8-13, Washington-based geo-strategic consulting company Wikistrat held an economic war game simulating a US embargo on high-tech trade and investment in China in 2021 under Donald Trump if he is re-elected for a second term as president of the United States.

With 40 leading experts from all over the world divided into Team China and Team US, the three-round activity aimed to investigate new strategies and policies in the face of an extreme-case scenario in order to interpret what the repercussions could be if the relationship between the two countries continues to be at such low point.

Specifically, Wikistrat chief executive officer Oren Kesler told me: “It seems that the stand in the US against China has been gaining bipartisan support. The outbreak of Covid-19, and recent news coming from Hong Kong, Taiwan and North Korea, made it clear that the relations are at a crucial point, and it is important to better understand what motivates and guides both actors. A great way to do it is via a simulation.”

Wargaming is relevant to creating synthetic environments that to a high degree replicate the real world, within which the participation of players and their decision-making processes represent the engine to produce new insights. Over recent years, this methodology has been particularly successful in multiple domains.

Indeed, even if it has been mainly used for defense experimentation, the number and types of organizations opting for it in times of complexity and dynamism has increased. Thanks to their participative nature, strategic simulations allow players to overcome the assumptions and generalizations which affect their way to read certain situations.

In general, scholars argue that war games can help overcome “cognitive barriers,” such as mental filters that lead to a distortion of the elements of the reality that do not suit existing frames; overconfidence; and dislike for ambiguity.

In the scenario developed by Wikistrat of a US embargo on China’s technology sector, the actors captured important trends and signals providing key insights on some hot topics that shape the international arena.

First, the European Union is confirmed to be a sort of battlefield in the US-China competition. Washington and Beijing could consider it extremely relevant to have Brussels allied on their side if the competition persists and exacerbates.

Indeed, leveraging the EU’s fragmented approach toward the Asian giant could allow the US and China to contain the impact of their opponent’s moves.

For instance, while Italy decided to join the Belt and Road Initiative and Spain launched a 5G (fifth-generation telecom) network in cooperation with Huawei in 2019, France and Germany stand in the middle of the conflictual interests that emerge from pressures stemming from their loyalty to the North Atlantic Treaty Organization and their strategic partnerships with China.

Furthermore, the lack of a coherent approach toward China and the US is particularly evident when some EU members in the Central and Eastern Europe (CEE) region are examined: If Poland, Estonia and Romania tend to give priority to their ties with Washington, Hungary and Bulgaria enhance their cooperation with Beijing.

Second, in the framework of a severe escalation of events, China could speed up its exploration of global monetary-system alternatives, and could accelerate the Chinese digital currency, a project that has been under way since 2014 and that could support the internationalization of the renminbi. A firm signal of this trend is recent news that a Chinese plan to create an East Asia digital currency emerged to limit dependence on the US dollar in trade relations.

Third, Taiwan continues to be an important pawn on the US-China chessboard. Indeed, if Taipei were to join a Western tech alliance challenging the one-China policy, the response from Beijing could be harsh, even including retaliations on Taiwanese businesses in the mainland, which could experience relocation or even nationalization.

Last, Chinese students in the United States are not exempted from the consequences of great-power competition. They were indeed seen, by both simulation teams, as a source of economic pressure. Chinese students have been a major driver of the United States’ total international enrollment, contributing about $12 billion to the US economy between 2016 and 2017.

Russia, surprisingly, has been a big player absent from the discussion. Participants in the war game did not involve Moscow in the US-China dispute over Washington’s embargo.

Kesler said: “We picked an extreme scenario to play in this simulation. And yet it seems that both actors are already preparing [for] it, and if such a scenario takes place, China is going to be ready for it.

“The team playing the Chinese leadership didn’t try to fight the decision to impose an embargo on its technology sector, but it accepted it and worked during the entire simulation on creating a front against the US.”

These considerations highlight that we are now living in an unpredictable context, where we should be ready for every possible move when assessing the rivalry between China and the United States. Nothing can be taken for granted or underestimated, and that is why organizing war-game simulations could represent a useful way to the navigate global complexities.

Federica Russo

Federica Russo is director of research at Wikistrat, a consulting firm helping Fortune 500 corporations, governments, universities and non-profit organizations to brainstorm solutions and obtain an in-depth understanding of their landscape by using a crowdsourcing approach. She is currently based in Kuala Lumpur, Malaysia.