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Betting on chips

Bloomberg

Forget missiles and military troops. Semiconductors, artificial intelligence and next-generation networks are the new weapons in the competition between the world's two biggest economies.

While the U.S. under Donald Trump targeted some of China's tech giants such as Huawei and the video-sharing app TikTok on national security grounds, President Joe Biden is seeking to rally allies around the fight for an edge in semiconductor fabrication and quantum computing.

U.S. officials are calling it a case of "techno-democracies" versus China-style "techno-autocracies."

As Nick Wadhams writes, the idea is to deny China access to key technologies for as long as possible while boosting state involvement in vital industries.

Giving the stance a sense of urgency is the cascading global shortage of microchips needed in products such as cars, mobile phones and refrigerators and the growing worldwide dependence on two Asian powerhouses — Taiwan Semiconductor Manufacturing Co. and Samsung Electronics.

Yet the hostility toward China bears consequences.

While the pandemic fueled the chip shortage, Huawei's hoarding of components because of U.S. sanctions contributed to it. Trump's decision to deprive the company of Google's core apps for its smartphones prompted Huawei to build its own version of Android, known as Harmony.

U.S. dependence on foreign suppliers reflects the fact that it failed for many years to recognize the need to build a robust enough domestic chip industry.

Expect self-reliance in technology and innovation to be a key theme this week at the annual session of the National People's Congress, China's legislature.

With Washington and Beijing squaring off over technology dominance, the next phase of superpower competition is unfolding. — Karl Maier 

Biden holds a semiconductor during his remarks before signing an Executive Order on the economy at the White House on Feb. 24.

Photographer: Doug Mills/Pool/Getty Images North America

Check out all our biggest stories on the Bloomberg Politics web page here and tell us how we're doing or what we're missing at balancepower@bloomberg.net.

Global Headlines

Wage restraint | Democrats in the U.S. Senate are dropping a proposal to tax companies that don't raise their minimum wage, in a bid to secure quick passage of Biden's $1.9 trillion pandemic relief package. As Steven T. Dennis and Erik Wasson explain, efforts to win support from all 50 Senate Democrats would risk missing the March 14 deadline for extending supplemental unemployment benefits.

Trump's back | Trump teased a possible run for the presidency in 2024 in a speech to the Conservative Political Action Conference yesterday that showed his continued command of the Republican party. In his first public appearance since leaving office, he attacked Biden's stimulus plan as a "a $1.9 trillion boondoggle" and fellow Republicans who hold him responsible for the Jan. 6 attack on the U.S. Capitol.

  • The Supreme Court is preparing to hear arguments in an Arizona case that voting-rights advocates say could undercut a law that's protected minorities for a half century.

Tensions surge | Israeli Prime Minister Benjamin Netanyahu accused Iran of attacking one of its cargo ships last week in the Gulf of Oman, heightening tensions over Biden's desire to rejoin the 2015 nuclear deal with Tehran. Iran rejected the accusation. Netanyahu opposes the U.S.'s return to the pact, saying it would pave the way for Iran to build a nuclear weapon.

Location of incident according to U.K. Maritime Trade Operations.

Source: Bloomberg

Gulf pivot | The United Arab Emirates is scaling back its role in foreign conflicts, accelerating a shift from policies it pursued after the 2011 Arab Spring, with the new administration in the U.S. a key factor. The oil-rich nation has reduced arms and logistical support for Libyan military commander Khalifa Haftar and is dismantling parts of its base in Eritrea, vacating troops used to support the Saudi-led coalition's war in Yemen.

Border unease | After the deadliest fighting in decades, India and China are setting up demilitarized areas along their disputed Himalayan border. But, as Sudhi Ranjan Sen reports, the move has rankled some members of India's security establishment who believe the creation of non-militarized areas works in Beijing's favor.

What to Watch

  • Hong Kong protesters risked arrest outside a local court in the biggest demonstration in months, as dozens of pro-democracy activists were jailed on subversion charges.

  • Beijing has stepped up requirements for entering the city ahead of the NPC meeting this week.

  • Foreign ministers of the 10-nation Association of Southeast Asian Nations are expected to discuss the coup in Myanmar when they meet this week.

  • Allies of President Nayib Bukele are on track to win a landslide in El Salvador congressional elections, according to a partial vote count.

  • A string of mass abductions of students is disrupting education in Nigeria, which already has one of the highest number of out-of-school children globally.

Thanks to the more than 60 people who responded to our quiz question — almost all correctly — and congratulations to Mond Mckenzie, who was the first to identify India as the country that made the rare move of naming a stadium after a leader who's both living and in power.

And finally ... A rise in food prices couldn't have come at a worse time. As the pandemic wreaks havoc on the global economy, it has ushered in new concerns about hunger and malnutrition, even in the world's wealthiest countries such as the U.S., where the poorest Americans already spend 36% of their income on food. There is little chance of a respite soon due to poor weather, increased demand and virus-mangled international supply chains.

Volunteers from the Kindness Homeless Street Team charity prepare food at George Square in Glasgow, U.K. on Feb. 22.

Photographer: Emily Macinnes/Bloomberg

 

 

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