Context: A top state-run Chinese think-tank Chinese Academy of Sciences has warned that China might go into a potential “middle-technology trap”. 

Is China stuck in a middle-technology trap?

• The report pointed out that China’s manufacturing sector is in the downstream of the global value chains, and it might get stuck at the low and mid-end of the supply chain. 
• Downstream supply chain involves the movement of finished goods from a business to its customers. These operations include distribution, order fulfillment and delivery.

What is a Middle-Technology Trap? 

• Definition: It is a scenario in which developing countries that had earlier benefited from outsourcing due to their low cost advantage, face long term economic stagnation because the core technologies have been retained by the developed nation.
• Limitation: These countries face the challenge because they lack original technology advances, since they employ technology importation, imitation, absorption, and tracking. 
• Challenge with China: Due to the Middle-Technology Trap, the Chinese manufacturers are finding it difficult to move up value chains.
• Solution: Open doors for new investment, scientific innovation and skilled human resources to deal with the challenge. 

About China-USA Tech War

• AI Based: UA and China, the two largest economies, are both pursuing AI to get an advantage over the other. 
• Semiconductor Industry: In an attempt to slow down Chinese AI progress, the US has recently banned semiconductor exports to China.  
  • Semiconductors needed for the training of advanced artificial intelligence models.
• Huawei and 5G: The US alleged that Huawei’s 5G technology poses a national security risk due to potential government monitoring and banned the use of its equipment in 5G architecture. 
• USA’s Stand: The USA has reasoned that the export controls are aimed at preventing the use of American-made powerful chips in China’s military.  
• Chip 4 Alliance: Comprises the US, Taiwan, Japan, and South Korea with the goal of building a more resilient and secure semiconductor supply chain. 

Source: Business Standard

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