Section 2: Emerging Technologies and Military-Civil Fusion: Artificial Intelli
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SECTION 2: EMERGING TECHNOLOGIES AND MILITARY-CIVIL FUSION: ARTIFICIAL INTELLI- GENCE, NEW MATERIALS, AND NEW ENERGY Key Findings • China’s government has implemented a whole-of-society strat- egy to attain leadership in artificial intelligence (AI), new and advanced materials, and new energy technologies (e.g., energy storage and nuclear power). It is prioritizing these areas be- cause they underpin advances in many other technologies and could lead to substantial scientific breakthroughs, economic dis- ruption, enduring economic benefits, and rapid changes in mili- tary capabilities and tactics. • The Chinese government’s military-civil fusion policy aims to spur innovation and economic growth through an array of pol- icies and other government-supported mechanisms, including venture capital (VC) funds, while leveraging the fruits of civil- ian innovation for China’s defense sector. The breadth and opac- ity of military-civil fusion increase the chances civilian academ- ic collaboration and business partnerships between the United States and China could aid China’s military development. • China’s robust manufacturing base and government support for translating research breakthroughs into applications allow it to commercialize new technologies more quickly than the Unit- ed States and at a fraction of the cost. These advantages may enable China to outpace the United States in commercializing discoveries initially made in U.S. labs and funded by U.S. insti- tutions for both mass market and military use. • Artificial intelligence: Chinese firms and research institutes are advancing uses of AI that could undermine U.S. economic lead- ership and provide an asymmetrical advantage in warfare. Chi- nese military strategists see AI as a breakout technology that could enable China to rapidly modernize its military, surpassing overall U.S. capabilities and developing tactics that specifically target U.S. vulnerabilities. • New materials: Chinese firms and universities are investing heavily in building up basic research capabilities and manu- facturing capacity in new and advanced materials, including through acquisition of overseas firms, talent, and intellectual property. These efforts aim to close the technological gap with the United States and localize production of dual-use materials integral to high-value industries like aerospace. They could also enable China to surpass the United States in applying break- through discoveries to military hardware. (205) 206 • Energy storage: China has quickly built up advanced production capacity in lithium-ion batteries and established control over a substantial portion of the global supply chain, exposing the Unit- ed States to potential shortages in critical materials, battery com- ponents, and batteries. China’s heavily subsidized expansion in lithium-ion batteries will likely lead to excess capacity and drive down global prices. If Chinese producers flood global markets with cheaper, technologically inferior batteries, it would jeopardize the economic viability of more innovative energy storage technologies currently under development in the United States. • Nuclear power: China is positioning itself to become a leader in nuclear power through cultivating future nuclear export mar- kets along the Belt and Road, particularly in sub-Saharan Afri- ca, and attracting advanced nuclear reactor designers to build prototypes in China. Recommendations The Commission recommends: • Congress direct the U.S. Department of Justice to reestablish a higher education advisory board under the Federal Bureau of In- vestigation. In concert with the U.S. Department of Commerce’s Bureau of Industry and Security, U.S. Department of Homeland Security, and U.S. Department of State, the higher education advi- sory board would convene semiannual meetings between univer- sity representatives and relevant federal agencies to review the adequacy of protections for sensitive technologies and research, identify patterns and early warning signs in academic espionage, assess training needs for university faculty and staff to comply with export controls and prevent unauthorized transfer of infor- mation, and share other areas of concern in protecting national security interests related to academic research. • Congress direct the U.S. Government Accountability Office to conduct an assessment on the risks posed by Beijing’s efforts to co-opt foreign researchers or students at U.S. universities to unlawfully appropriate research and other knowledge for the benefit of the government, companies, or interests of the Peo- ple’s Republic of China. This report should: ○ Include the number of foreign students and researchers from China studying in science, technology, engineering, and math- ematics fields; past and current affiliations; primary areas of research; duration of stay in the United States; and subse- quent employment; ○ Identify whether federally funded university research related to emerging technologies may have been unlawfully appropri- ated by individuals acting on behalf of Chinese entities; and ○ Evaluate the efficacy and ability of the U.S. Department of State’s visa screening mechanism to mitigate the risk of in- appropriate technology transfer to China, including but not limited to: assessing the ability of that process to identify students, researchers, and research entities, through a visa disclosure requirement, that are receiving funding from the 207 government of China or an intermediary entity acting in sup- port of China’s government. • Congress amend Internal Revenue Code Section 41 to extend the research and development tax credit to initial stages of de- ployment for new products, processes, computer software, tech- niques, formulae, or inventions that increase the production of final and intermediary goods manufactured primarily in the United States. The tax credit should also extend to precompeti- tive commercial development of basic and applied research per- formed in the United States, particularly in industrial sectors where the People’s Republic of China threatens the technologi- cal leadership of the United States. • Congress direct the U.S. Geological Survey, in coordination with the U.S. Department of Energy, U.S. Department of Commerce, U.S. Department of the Interior and U.S. International Trade Commission to develop and maintain a risk assessment frame- work that identifies materials used in manufacturing industries critical to both national security and commercial vitality. Such a framework should provide an early warning mechanism for any threats to the U.S. supply of these critical materials, including an increasing concentration of extraction and processing by an- other country or entity and acquisition of significant mining and processing facilities; increasing export restrictions by another country; large gaps between domestic prices for these materi- als in another country versus prices on international markets; sharp increases or volatility in price; and substantial control in supply of minerals used within the same industry or related minerals that serve as substitutes by another country. • Congress direct the National Science Foundation, in coordina- tion with other agencies, to conduct a study on the impact of the activities of Chinese government, state-sponsored organizations, or entities affiliated or supported by the state in international bodies engaged in developing and setting standards for emerg- ing technologies. The study should examine whether standards are being designed to promote Chinese government interests to the exclusion of other participants. Introduction Emerging technologies like AI, new and advanced materials, and new energy* have the potential to advance new products, disrupt established patterns of commerce, and alter established methods of military confrontation and deterrence. China’s government has indi- cated clear intent to achieve technological leadership by promoting domestic firms, absorbing foreign technology, and localizing and mo- nopolizing entire supply chains to establish technological self-suffi- ciency and strategic advantage. The objective of these policies is also achieved through other licit and illicit activities, such as extensive government subsidies, guarantees of substantial domestic market * “New energy” is often used synonymously with “alternative energy” or “clean energy technol- ogy” in Chinese policy discussion, and refers to nonfossil fuel energy sources, including nuclear energy and renewables like wind and solar power, as well as energy storage technologies like lithium-ion batteries. 208 share for Chinese firms, and intellectual property theft. While these objectives and approaches are not new, China’s economic planners continually modify strategies to capitalize on successes and elimi- nate methods that fail to deliver results. Under General Secretary of the Chinese Communist Party (CCP) Xi Jinping, industrial policies increasingly aim to leverage the ca- pabilities of China’s most dynamic private firms for state-directed objectives through military-civil fusion. Loss of U.S. leadership in these areas—not only in research breakthroughs but also in appli- cation—could impact the United States’ economic vitality, ability to project military power, and influence in international standards-set- ting and governance for future generations of these technologies. This section assesses China’s current capabilities and policy objec- tives in AI, new materials, and new energy, and identifies challeng- es China poses to U.S. interests