In November 2025, Huawei founder Ren Zhengfei remarked at a meeting with winners of the International Collegiate Programming Contest that the United States “only forbids Huawei from using anything containing American elements; it does not mean it forbids China from using them.” Though understated, the comment precisely captures a widely misunderstood reality of the Sino-US technology rivalry: Washington’s export controls do not constitute full technological “decoupling,” but rather a targeted strategy of selective supply-chain severance aimed at specific firms, with Huawei as the central example.
This distinction reveals the core logic of the US approach—often described as a “small yard, high fence”—and, at the same time, highlights China’s measured response to strategic pressure. Rather than pursuing outright disengagement, China has sought to balance bottom-line security with continued openness, and technological self-reliance with sustained global cooperation. This calibrated posture of strategic clarity and resilience forms the backdrop to the evolving contours of today’s high-tech competition.
U.S. Precision Containment: Targeting Huawei as China’s Digital Pivot, Not the Nation
The United States’ restrictions on Huawei since 2019 represent a carefully calibrated technological containment strategy rather than a blanket sanction against China as a nation. Beginning with Huawei’s placement on the Entity List in 2019, escalating through the semiconductor supply cutoff in 2020, and deepening between 2023 and 2025 with layered restrictions on advanced AI chips, EDA software, and lithography technologies, Washington has pursued a sustained, precision-focused campaign. The core objective has been to sever Huawei’s access to the most critical nodes of the global high-end technology supply chain.
Huawei was selected not arbitrarily, but because it functions as a strategic “pivot” enterprise in China’s digital ecosystem. It is simultaneously a global leader in 5G infrastructure, a designer of advanced chips through HiSilicon, a builder of operating systems via HarmonyOS, and a major developer of AI computing platforms through its Ascend series. This rare combination of communications, computing, cloud, and AI integration positioned Huawei as one of the few non-U.S. firms approaching true end-to-end technological self-sufficiency. From a U.S. strategic perspective, constraining Huawei meant constraining the emergence of an alternative full-stack digital infrastructure outside American control.
To achieve this, the United States relied on extraterritorial regulatory mechanisms grounded in its “long-arm jurisdiction” doctrine. By defining the use of U.S. technology, software, or equipment above certain thresholds as subject to U.S. export control law, Washington was able to compel third-party firms to comply. This framework blocked TSMC from fabricating advanced chips for Huawei, prevented ASML from delivering EUV lithography systems, and forced leading EDA vendors to suspend key licenses. Law was thus leveraged as a structural instrument of technological exclusion.
Crucially, these measures were directed at Huawei and its affiliates—not at China as a whole. Huawei Technologies Co., Ltd. was explicitly named on the U.S. Commerce Department’s Entity List, while the People’s Republic of China itself was not subjected to a comprehensive, country-wide sanctions regime comparable to those imposed on states such as Iran, Cuba, or North Korea. Instead, the U.S. pursued a pattern of targeted controls aimed at specific firms, technologies, and supply-chain chokepoints. This distinction underscores that Washington’s campaign is best understood as a focused strike against a strategically significant corporate actor, rather than an undifferentiated economic war against China in its entirety.
Not a Blockade: China Remains Deeply Embedded in the Global Tech Ecosystem
Ren Zhengfei’s remarks underscore a crucial distinction often obscured in external commentary: constraints placed on specific Chinese firms or advanced technologies do not amount to a comprehensive technological blockade on China itself. On the contrary, China remains deeply integrated into the global technology ecosystem, continuing to lawfully and extensively utilize U.S. and other Western technologies across a wide range of industries. What is being restricted is not China’s participation in global technological consumption, but its ability to command the most advanced segments and define future technical standards.
In the semiconductor and computing sectors, this distinction is especially evident. Although access to leading-edge manufacturing processes is constrained, Chinese foundries still rely on U.S.-licensed equipment to mass-produce mature-node chips, which account for the overwhelming majority of global chip output and underpin essential sectors such as automobiles, home appliances, and industrial control. At the systems level, Chinese smartphone, electric vehicle, and server manufacturers continue to purchase large volumes of Qualcomm, NVIDIA, AMD, and Intel products. These realities demonstrate that China remains an active participant in, rather than a detached outsider from, the global hardware value chain.
The same pattern holds in software ecosystems, electric vehicles, and green technologies. Windows, Android, and major enterprise platforms such as Oracle and SAP remain foundational across China’s universities and industries, even as domestic alternatives accelerate their development within international open-source frameworks. In the EV sector, the Shanghai Gigafactory of Tesla operates at world-leading scale with deeply localized manufacturing, yet key software and control architectures remain globally coordinated. Meanwhile, Chinese battery champions supply the world’s leading automakers, reinforcing a highly symbiotic industrial structure.
Taken together, these facts point to a consistent strategic logic: the United States has sought to constrain China’s access to the technological “high ground” without severing China from the global system of technological use. China is still permitted to consume, integrate, and commercialize global technologies at scale, but faces heightened resistance when it approaches the frontier where standards are set and future trajectories are shaped. It is precisely within this tension—between deep integration and strategic restriction—that the current structure of global technological competition now resides.
China’s Dual-Track Strategy: Bottom-Line Security Meets Open Innovation for New Productivity
China’s response to intensifying external technological containment is neither naïve faith in uninterrupted globalization nor a turn toward inward-looking self-sufficiency. Instead, it has crystallized into a dual-track strategy that combines bottom-line security with open innovation. This approach defines the underlying logic of China’s new productivity growth: safeguarding systemic survival while remaining deeply embedded in global knowledge, capital, and talent flows.
At the core of this strategy is bottom-line thinking, which prioritizes independent controllability in a limited number of lifeline sectors rather than across the entire economy. In semiconductors, the objective is not to rival global leaders at the cutting edge, but to ensure uninterrupted operation of critical systems—defense, energy, transportation, and finance. China has therefore focused on mature and “survival-level” process nodes through SMIC and Huahong, localized equipment and materials for 28nm and above, and architectural innovation via RISC-V and heterogeneous computing. System-level design—chiplets, in-memory computing, and hardware–software co-optimization—serves to offset constraints at the process frontier. The guiding principle is clear: accept performance gaps, but reject systemic fragility.
A parallel logic governs the operating system layer. China’s goal is not immediate global dominance over Windows, Android, or iOS, but the full replacement of foreign systems within government, critical infrastructure, and national defense. HarmonyOS and openEuler form a dual-core domestic foundation across terminals and servers, while security is reinforced through formal verification, trusted execution environments, and deep integration of national cryptographic standards. Ecosystem expansion proceeds from closed, controllable scenarios—such as power grids and high-speed rail—toward broader industrial and automotive applications. Crucially, this autonomy is pursued through open-source governance, using community participation to enhance trust, resilience, and international legitimacy.
These efforts converge in a distinctive development logic: scenario-defined technology and system-level engineering compensate for single-point technological disadvantages. China leverages ultra-large-scale application environments—from 5G base stations and smart grids to industrial internet platforms—to compress R&D cycles and reduce innovation costs. This is reinforced by the country’s unmatched manufacturing scale, which provides continuous real-world feedback loops. Rather than betting solely on frontier breakthroughs, China builds cumulative advantage through deployment, iteration, and integration.
Institutionally, this strategy is carried by an upgraded “new national system”(Juguo Tizhi system 2.0, new “whole-nation system”)—a state-guided yet market-driven framework for strategic technologies. Centralized top-level design sets priorities, while enterprises execute innovation under competitive “horse-race” mechanisms. National laboratories, industrial consortia, and the third phase of the National Integrated Circuit Industry Investment Fund channel resources toward identified bottlenecks in equipment, materials, and core software. Large-scale infrastructure initiatives—such as the national computing power network, 5G-A and 6G testbeds, and the industrial internet identifier system—provide the engineering substrate for AI and intelligent manufacturing. The result is focused objectives, competitive processes, and shared risk in early-stage innovation.
What differentiates China’s response most sharply from that of the United States is its application-driven path. Whereas the U.S. emphasizes a “model-first” logic anchored in computing power and frontier algorithms, China prioritizes scenario-driven engineering closed loops—autonomous driving through vehicle–road–cloud integration, digitalized power systems, and industry-specific large models under the “AI+” initiative. Connectivity itself—spanning 5G, future 6G, satellite, and low-altitude networks—has become a strategic carrier of national capability, embedding intelligence directly into infrastructure.
Yet this bottom-line focus is paired with a deliberate commitment to open innovation. China remains among the world’s largest destinations for foreign direct investment, with multinational firms continuing to expand high-value manufacturing and R&D operations. It sustains deep scientific collaboration with leading global universities and supports international technology competitions and research exchange platforms. In the automotive sector, China’s market remains far more open to foreign brands than those of Japan or South Korea, even as Chinese electric vehicle firms now compete globally on cost and technology. The message is consistent: openness is not weakness, and autonomy does not imply exclusion.
Ultimately, China’s strategy is best understood not as “decoupling,” but as the construction of a strategic backup system. Self-reliance is treated as a safeguard, not a substitute for globalization. The objective is to ensure that no single external shock can paralyze national development, while simultaneously preserving the benefits of deep international integration. By combining bottom-line security with open collaboration, China is forging a distinct pathway toward new productivity—one rooted in engineering resilience, large-scale application, and sustained participation in the global innovation ecosystem.
The Future of Global Competition: Integration of Innovation, Not Zero-Sum Displacement
The future of global technological leadership will not be defined by whether China replaces the United States or vice versa, but by which system can integrate innovation more effectively across research, engineering, and large-scale application. The United States retains a formidable edge in foundational science, original theoretical breakthroughs, and frontier toolchains. China, however, has built complementary strengths in transforming innovation into industrial reality at unprecedented speed and scale. The emerging global order, therefore, is not a binary contest, but a structural competition between two different innovation integration models.
China’s foremost advantage lies in its extraordinarily large-scale application scenarios, supported by the world’s most complete industrial ecosystem. Accounting for roughly 30% of global manufacturing value added, China leads in sectors such as electric vehicles, power batteries, photovoltaics, shipbuilding, and industrial automation. According to the International Federation of Robotics (IFR), China installed over half of the world’s industrial robots in 2024, achieving a robot density of approximately 470 units per 10,000 workers, significantly higher than the U.S. level of about 295. China also operates more than 30,000 smart factories, including fully autonomous “dark factories” that run continuously without human labor. These realities illustrate how innovation is absorbed at industrial scale rather than remaining confined to laboratories.
This manufacturing dominance is often misunderstood due to statistical distortions in how productivity is measured. As Weijian Shan, Executive Chairman of PAG, argued in “Unraveling China’s Productivity Paradox”, the apparent gap between Chinese and U.S. productivity is largely a methodological illusion. Once price distortions and classification biases—especially the U.S. reclassification of “factoryless manufacturers” like Apple and Nvidia—are corrected, China’s manufacturing productivity emerges not only as the largest in scale but also among the most efficient globally. In terms of physical output per worker, China’s labor productivity is estimated to be 2.4 times that of the United States, underscoring its deep integration of technology and production.
Equally important is China’s exceptional engineering and industrialization speed, with laboratory-to-mass-production cycles typically 30–50% shorter than in Europe and the U.S. A Bloomberg investigation following Western venture capitalists on a road trip across China revealed why many now consider key clean-tech sectors in the West to be “uninvestable.” During their visit to CATL’s vast battery facilities, investors encountered nearly fully automated production lines where robotic systems executed the entire manufacturing process with minimal human presence—an industrial capability one participant described as “futile” to compete against. This level of automation reflects not just capital intensity, but deep engineering maturity and systems integration.
This transformation has also been observed by global industry leaders. Greg Jackson, founder of Octopus Energy, after visiting a Chinese “lights-out factory” producing mobile phones, remarked that China’s competitiveness has fundamentally shifted—from dependence on subsidies and low wages to reliance on massive cohorts of highly skilled, highly educated engineers engaged in continuous innovation. What shocked him most was not merely the scale of output, but the velocity at which engineering improvements were absorbed directly into production systems.
Underlying these capabilities is China’s distinctive state–market coordination model, often described as a “new national system,” which concentrates long-term resources on strategic technological bottlenecks in areas such as AI applications, new energy, and digital infrastructure. As Huawei founder Ren Zhengfei has articulated, a stronger China contributes not to technological monopoly but to plurality of innovation paths, especially through scenario-based solutions in sectors like mining, healthcare, traffic systems, and port logistics. In this sense, China is not positioning itself as an alternative to global technology, but as one powerful pole in a multipolar innovation ecosystem.
Ultimately, the decisive variable in future technological leadership will not be who replaces whom, but who integrates discovery, engineering, and scale more completely and more rapidly. The United States excels at inventing the future; China excels at industrializing it. The true contest ahead is not a zero-sum displacement, but a race to determine which system can most effectively convert knowledge into transformative, real-world impact—and thereby shape the next phase of global civilization.
Final Thoughts
In the face of intensifying Sino–U.S. competition, Ren Zhengfei’s observation—that U.S. restrictions target Huawei rather than China as a whole—reflects the strategic composure of a major power under pressure. It underscores three essential principles: neither exaggerating threats through panic-driven decoupling, nor underestimating challenges that demand a firm security foundation, and never abandoning openness to learning from global scientific achievements, including those of the United States. Ultimately, the true outcome of this competition may not be defined by who prevails, but by who proves first that in an interdependent world, only a civilization that is both self-reliant and open to win-win cooperation can sustain long-term prosperity.
References
- Minutes of the meeting between Ren Zhengfei and the Chairman, coaches and award-winning athletes of the ICPC, November 2025
- “China Road Trip Exposes List of Uninvestable Assets in the West”, Bloomberg, 22 Sept 2025
- “Unraveling China’s Productivity Paradox”, Weijian Shan, 6 Nov 2025, https://research.gavekal.com/article/unraveling-chinas-productivity-paradox/
- “Western executives who visit China are coming back terrified”, Matt Oliver, The Telegraph, 12 Oct 2025, https://www.telegraph.co.uk/business/2025/10/12/why-western-executives-visit-china-coming-back-terrified/