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Michael Settelen: “China today may arguably be investing more than any other country into quantum technologies”


Expert background: Michael Settelen – CMG Senior Consultant

Michael is Senior Consultant with CMG. Before that, he worked in different China-related roles and capacities at the nexus of policy and business, including at the Economic Section of the Swiss Embassy in Beijing, the EU Chamber of Commerce (EUCCC), a Beijing-based market entry and economic development boutique consultancy, as academic lecturer at the ZHAW School of Management and Law teaching courses on China’s economy, and as an economic editor for Asia at the Neue Zürcher Zeitung (NZZ).

 

CMG: Michael, why is this new report important for the European policy debate?

In the European debate about economic security, the focus has been predominantly on Europe’s vulnerabilities. The European Economic Security Strategy is a good example. This report, however, suggests – realistically in my mind – that as most “technology ecosystems” are transnational in nature, decoupling is not a policy option, and therefore interdependence needs to be managed more strategically, also taking into account Europe’s technological strengths. These strengths can be deployed defensively or offensively against what are perceived as strategic adversaries to inflict cost on them for adopting coercive measures against Europe.

 

It thus proposes a new angle to the economic security debate – the angle of indispensability. Plus, to identify these areas of indispensability, the report looks at both Europe’s and China’s policy ambitions and technological capabilities respectively, and on this comparative view understanding proposes fact-based and calibrated strategic ambition levels for Europe to maintain or strengthen its strategic position as well as policy recommendations. It is thus a first systematic overview that attempts to provide actionable insights into where and how European policymakers can realistically bolster European technological competitiveness and security in its engagement with China, albeit for now only relying on a case-study approach.

 

Can you give an example?

Sure. In the chapter where CMG contributed, for instance, we looked at quantum technologies. Quantum technologies have the potential to revolutionize our cybersecurity infrastructure, defense capabilities, healthcare and medical innovations, and thus are on the minds of most national policymakers. Some of them are also “dual-use” in nature, and therefore strategically even more relevant in this age of geopolitics.

 

Out of the three quantum technology sub-fields computing, communications and sensing, we chose sensing as Europe has established itself as a quantum sensing leader for both innovation and commercialization, despite the generally still nascent stage of this technology. We further narrowed it down to healthcare applications. Quantum sensing may revolutionize also healthcare by enhancing diagnostic precision, enabling early and accurate detection of diseases, or by facilitating non-invasive medical procedures.

 

What is the situation for quantum sensing in China?

In our analysis we found that while quantum technologies as such are of great strategic importance for China on the country’s path to becoming a global “great power in science and technology”, there are to date no publicly accessible substantive and inter-ministerially coordinated policies to drive the development of quantum sensing, let alone for healthcare applications.

 

Quantum initially moved into the focus of Chinese policymakers after Edward Snowden’s revelations in 2013 about US intelligence activities that stoked worries about the security of China’s communications infrastructure. So, in early policy documents, for instance the 13th Five-Year Plan (FYP), communications and computing technologies were prioritized, while sensing was not explicitly mentioned.

 

On aggregate, however, China today may arguably be investing more than any other country into quantum technologies, also in sensing. In line with the country’s “innovation driven development strategy” launched in 2016 or the “S&T Innovation 2030” major projects under the 14th FYP, China in recent years with ample funding established new institutions such as the Quantum Information and Quantum Science and Technology Research Institute by the Chinese Academy of Sciences (CAS) or the National Laboratory for Quantum Information Science at the University of Science and Technology of China (USTC) in Anhui province – according to some the world’s largest quantum research facility.

 

How successful has this policy approach been?

Well, China today is the country with the second most advanced industrial base in quantum, only behind the US. But in quantum sensing, China lags both the US and Europe in terms of demonstrated technical capability. Most research remains at the laboratory stage.

 

So, while Chinese researchers and institutions have been churning out more quantum sensing patents or research publications than their EU or US peers in recent years, they have yet to translate into commercial breakthroughs. Other than in Europe, the market in China for these applications is not as developed yet and only a handful of companies does relevant quantum R&D, with most of them also focusing on communications or computing technologies. And on sensing, research efforts are targeted predominantly at military applications.

 

Our research also found that China has not yet established a research framework for quantum technologies and respective application areas. Chinese academics see this as a key problem keeping China from catching up more successfully. They urge a more coordinated approach to research and development, also for sensing applications. Besides, China also faces a quantum talent shortage and depends on imports for certain components and equipment, further exacerbating the development challenge.

 

The chapter thus concludes that Europe has a strategic window of opportunity if it wants to capitalize on its “first-mover advantage”. If Europe keeps its lead in market maturity and commercialization potential, this can strengthen the Union’s coercive capacity.

 

So this could be an area of European strategic leverage over China?

To some degree, yes. The economic rationale for keeping a competitive edge is obvious. The broad involvement of the private sector compared to China means that European companies have found viable business opportunities and are willing to invest. These companies create jobs and can shape industrial standards.

 

The strategic rationale, however, is less obvious. First, in order to fully understand the trade interdependencies, a more detailed analysis of the supply chains in question is needed. To date, no granular overview of the components needed in the relevant healthcare supply chains is publicly available. This means it is not clear what components to check for when trying to establish if China sources them abroad, and whether they are sourced in Europe. Likewise, any European dependencies on Chinese inputs in these supply chains would in turn reduce Europe’s leverage.

 

Second, as this is currently no policy priority for Beijing, applying coercive pressure may simply be without any effect. Plus, and we have seen that in other areas, should Beijing change its mind and decide to mobilize resources in a more coordinated way towards catching up and possibly taking the lead in this particular technology area, they may very well be able to do so, regardless of current dependencies.

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