The threat from artificial intelligence (AI) has long been represented in film, literature and beyond. Cinemas right now are showing Hollywood’s recent adaptation of Frank Herbert’s 1965 classic Dune, a novel that imagines a world in which AI-weapons are banned due to fears of universal annihilation (one reason why hand-to-hand combat features so heavily in Herbert’s futuristic saga).

While fencing and jousting have yet to return to the British Army’s training ground (what a sight that would be), Dune’s dystopic world is not far off.

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“AI will not stay in the domain of superpowers or the realm of science fiction,” said a recent report on AI from the US National Security Commission (NSC). The 756-page document, presented to Congress and President Joe Biden after a two-year investigation, concluded that, unless drastic measures are taken, China could soon replace the US as the world’s AI superpower. As things stand, the US is not prepared to defend or compete in the AI era, contends the NSC.

The report’s authors, led by former Google CEO Eric Schmidt, added that China’s domestic use of AI is “a chilling precedent for anyone around the world who cherishes individual liberty”. Indeed, the country’s social credit system is underlined by AI technology, while, back in 2019, the New York Times reported that Beijing was using AI to scan 500,000 faces a month in its surveillance of the Muslim Uyghurs community – a minority group that have faced systemic persecution and ethnic cleansing in recent years.

Schmidt and his co-authors also stated: “China’s plans, resources and progress should concern all Americans. We take seriously China’s ambition to surpass the US as the world’s AI leader within a decade.” China has indeed stated that it wants to be a global leader in AI by 2030, and the country is fast closing the tech gap with the US. In fact, in some domains, it is already showing signs of pulling ahead, as seen in mid-2021 with the use of hypersonic weapons. AI in quantum computing could also help Beijing make gains that could allow China to break the security encryption codes used by US intelligence agencies. In short, the stakes are high.

Washington makes the big moves

Few things unite Democrats and Republicans as much as the ‘China question’. This is why June 2021 saw bipartisan support in the US Senate for legislation that provides more than $250bn to help maintain the US’s competitive edge over China in critical tech such as AI.

Called the US Innovation and Competition Act, it brought together various China-related measures to form the largest piece of US industrial policy legislation in decades. Despite the aforementioned sums, the NSC’s recent report recommends that the US government more than double its AI development spending to $32bn a year by 2026.

Nonetheless, the act shows just how seriously Washington is taking the AI issue. A big part of the bill dishes out $120bn for investment in AI, quantum computing and other areas that China has also prioritised as part of its high-end tech development.

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The document will also ban government agencies from buying drones made by China (home to the world’s largest drone makers), while also banning federal employees from downloading the popular Chinese video-sharing app TikTok on government devices.

Meanwhile, the US looks set to pioneer a new Bill of Rights that protects citizens from the abuse of AI’s transformative technology, but not just from authoritarian governments abroad. Let’s not forget that decisions in the legal, health and other potentially life-changing realms are increasingly being made by machines, not humans.

Multinationals will be impacted by AI wars

Recent months have seen the US step up a campaign to warn US companies about the dangers of interacting with China in critical industries, as part of a push to make it harder for Beijing to obtain technology and data.

Washington, under blue or red governments, has long complained about intellectual property (IP) theft in China, data harvesting and others issues. The private sector has also been very vocal on this too.

Yet the US National Counterintelligence and Security Center (NCSC) still thinks that many businesses are insufficiently aware of overt or covert links between Chinese companies, universities and the government, and the extent to which Beijing is weaponising state powers to force companies to share technology with its military and intelligence services.

The NCSC, which is leading the government’s awareness campaign, is contacting US companies – across AI, quantum computing, biotechnology, semiconductors and autonomous systems – to make sure that they are not inadvertently providing China with the technology that would allow Chinese companies to dominate. This is an issue for both US companies operating in China or just trading with it from the US.

Meanwhile, recent months have seen China introduce laws that make it easier to secure access to private data, tapping into one of several issues that led LinkedIn, Microsoft and now Yahoo! to move out of China. At the same time, Beijing has unveiled a new legal weapon to combat claims of IP theft. Through a so-called ‘anti-suit injunction’, the law has already been used to halt a Delaware-based company from suing China’s Xiaomi, the world’s biggest smartphone maker, which has sold millions of handsets using an US company’s patents.

Last year saw four major instances of Chinese courts granting anti-suit injunctions that bar foreign companies from taking legal action (anywhere in the world) to protect their trade secrets – lest they want to lose their access to the China market.

While there can be no outright exodus of US companies from China’s gargantuan market, all of the above means we are likely to see a growing trend of ‘critical’ tech companies divesting, avoiding and cutting down on their China presence when and if possible (a big if), or at the very least, vastly stepping up their security and legal apparatuses.

Those tech companies can also expect the US – or more specifically, the Committee on Foreign Investment in the United States (CFIUS) – to possibly set up new regulation of outbound investment to China.

Since 2018, the CFIUS has carefully scrutinised Chinese foreign direct investment into the US (a trend that is only set to grow). However, there are growing signs in Congress of bipartisan support for the ‘reverse’ screening mechanism. Meanwhile, we are going to see increasing incentives and legislation promoting ‘safer’ supply chains, in other words nearshoring, with regards to AI-related activity (much as in semiconductors).

Despite the polarisation of US politics today, policy on China is moving fast. Although sword fighting is not making a comeback (sadly), foreign investors in critical tech can expect the US-China tech clash to grow, meaning more barriers to Sino investment, most especially around AI.

This article forms part of GlobalData’s AI week. For other articles in the series, please visit: