"Call Forth the Assault"

On the morning of January 17, 2017, in a packed congress hall in a snowed-in Alpine valley, Xi Jinping walked onto a stage that no Chinese leader before him had agreed to stand on. The Davos audience was the audience the World Economic Forum had been assembling since 1971: bankers, ministers, central-bank governors, the heads of industrial multinationals, and the editors who interviewed them. The Forum’s organizers had spent fifteen years trying to convince a sitting Chinese president to deliver the opening keynote. Hu Jintao had sent a vice premier. Wen Jiabao had sent a regret. Xi had been head of state for almost four years before he accepted, and he accepted in the end to send a message that was easiest to send from this stage at this moment.

Donald Trump had not yet been inaugurated. The president-elect’s transition team had spent the previous weeks signaling that the United States would withdraw from the Trans-Pacific Partnership, reopen NAFTA, levy tariffs on Chinese goods, and restrict immigration in ways the Davos delegates regarded as alarming. The conventional architecture of the global economic order was about to acquire, in its largest member state, an executive openly contemptuous of it. Into that vacuum walked the general secretary of the Chinese Communist Party.

Xi spoke for fifty-three minutes. He quoted Dickens. He likened the global economy to an ocean from which no country could now escape. He warned that no one would emerge as a winner in a trade war. He mocked protectionism as locking oneself in a dark room: the wind and rain stayed outside, but so did the light and the air. He made a defense of globalization that, in language and cadence, would not have sounded out of place from a postwar American secretary of state. The hall applauded. The next morning’s papers, in London, New York, Frankfurt, and Tokyo, ran the story under variations on the same headline. The Chinese head of state had become the global champion of openness. The American president-elect had become its principal threat.

Watching from a seat near the front, the journalist Gillian Tett, who had been covering Davos for the Financial Times for a decade, would later write that what struck her most was not the content but the choreography. Xi had brought a delegation large enough to host its own side events; the China House on the Davos promenade was the most heavily staffed pavilion of any country there. The performance was not improvised. It was a planned occupation of vacated rhetorical territory.

Fifteen months later, that performance would be impossible to reconcile with the speech Xi was delivering inside China.

The trigger came on a Monday. On April 16, 2018, the Bureau of Industry and Security at the U.S. Department of Commerce announced that ZTE Corporation, with roughly seventy-five thousand employees and a presence in more than 160 countries, would be denied access for seven years to any U.S. hardware, software, or technology subject to American export controls. The reason was, by Commerce’s account, well documented. ZTE had pleaded guilty in 2017 to violating U.S. sanctions by shipping American-made telecom gear to Iran and North Korea, paid a record $1.19 billion fine, and committed to disciplining the executives responsible. Subsequent investigation had found that ZTE had paid them bonuses instead, and had sent letters to Commerce describing punishments that had never been imposed. The denial order activated penalties Commerce had originally suspended.

The practical effect was almost immediate. ZTE’s smartphone line ran on Qualcomm chips, its base stations on cores from American suppliers, its operating systems on Android, its testing equipment on Keysight. Within three weeks the company stopped most production. On May 9, it filed a notice with the Hong Kong stock exchange suspending “major operating activities.” At a Shenzhen press conference on April 20, chairman Yin Yimin told reporters in a tone the Chinese press described as shaken that the U.S. action had thrown ZTE into a state of shock. He said the company could not accept it. He did not yet say the company could survive it.

In Beijing, the political reading was sharper than the operational one. ZTE was not a private firm in any meaningful sense. It had been founded as a state-owned enterprise in the early 1980s and remained tied to the Ministry of Aerospace Industry’s successor entities. It was a national champion. The American government had reached across the Pacific, identified a non-compliant reporting practice on a sanctions case from two years earlier, and switched the company off. Seventy-five thousand workers, contracts in 160 countries, carrier relationships on five continents, all of it could be made to stop by a memorandum issued in a building most Chinese citizens had never heard of. Inside the Politburo, the lesson was understood within days, and Xi’s response began almost at once.

On April 20 and 21, four and five days after the denial order, Xi convened the second National Cybersecurity and Informatization Work Conference in Beijing. The 2018 speech sharpened a formulation he had been refining since 2016. Core technologies, Xi said, were 国之重器, instruments of state. He was applying a classical phrase for vessels and weapons whose loss meant the polity was lost to integrated circuits and operating systems. The Xinhua summary called for accelerating breakthroughs in core information technology and moving China toward becoming a cyber superpower through indigenous innovation. The text did not mention ZTE. It did not need to.

Five days later Xi flew to Wuhan, put on a white bunny suit, and walked the Yangtze Memory cleanrooms alongside Tsinghua Unigroup’s Zhao Weiguo. The interior speech and the photo opportunity were two halves of the same instrument. The pictures were the point.

A month later, on May 28, Xi opened the joint biennial meeting of the Chinese Academy of Sciences and the Chinese Academy of Engineering, the closest thing to a single audience of the country’s senior scientific establishment. He told the assembled academicians that China faced major deficiencies in science and technology, including in basic research and in high-end machinery and chips. Only by holding key and core technologies in their own hands could the country guarantee its economic and defense security. The Chinese phrase, 牢牢掌握在自己手中, hold firmly in one’s own hands, would lead the next morning’s People’s Daily and become one of the most repeated formulations of Xi’s domestic agenda.

The trade press caught up quickly. Caixin, in late July, published “The Wake-Up Call for China’s Chip Industry,” which surveyed the damage. China imported, by Caixin’s reporting, ninety-five percent of the components going into its high-end CPUs, programmable logic, and design tools. Domestic CPUs ran at thirty to fifty percent of the efficiency of comparable Intel parts. SMIC was at 28 nanometers. TSMC was sampling 7. The gap was years, and those years were now a national-security exposure of the first order. Dan Wang, writing his year-end letter from Shanghai a few months later, described the new mood inside Chinese boardrooms with a line that stuck: U.S. actions were being treated as unpredictably as major earthquakes, and companies were rearranging themselves accordingly. Bill Bishop, whose Sinocism newsletter had been describing Xi’s evolving policy posture for years, observed in real time that the ZTE order had done the work years of internal advocacy by China’s chip lobby had failed to do. It had given the general secretary political cover to spend any sum required.

The contradiction with Davos sharpened by the week.

On April 10, six days before the ZTE order, Xi had stood at the Boao Forum on Hainan Island and delivered another speech in the Davos register. China’s door, he had said, would not close; it would open wider. He announced reductions in auto tariffs and reaffirmed openness in the financial sector. The audience of foreign CEOs read it as a calibrated response to U.S. trade-war threats. Boao was the second installment of the Davos performance, with the same script and a different stage. Then, within weeks, Xi was inside cleanrooms in Wuhan calling chips the heart of the nation, and inside conference halls in Beijing telling cadres that core technologies were instruments of state. Both Xis were real. Both audiences had been chosen.

A pattern the China Media Project’s editors would later describe was already visible. The Davos and Boao speeches were exterior, written for foreign markets and broadcast outward. The cybersecurity and academy speeches were interior, written for the Party and broadcast inward. The exterior register emphasized integration and shared prosperity. The interior register emphasized struggle, vulnerability, and what was now openly called the imperative of self-reliance, 自力更生. The phrase carried the unmistakable echo of Mao, who had used it through the 1960s to justify foregoing Soviet aid and building a domestic industrial base. Deng Xiaoping had quietly retired the slogan during the reform era. In the spring of 2018, with the door to American technology being slammed shut on a Chinese champion in real time, Xi began to bring it back.

The bring-back was not subtle. In late October 2018, Xi traveled to Guangdong, the home province of the reform era, where Deng had famously toured the special economic zones in 1992 to defend opening up against an internal backlash. Xi’s itinerary mimicked Deng’s; his message did not. State media reports of the tour, the analyst Damien Ma observed, made no mention of Deng at all. Xi told his audiences the country was at a moment of unprecedented change and would have to take a path of self-reliance and indigenous innovation. In his New Year’s address on December 31, 2018, looking into the camera from his book-lined office on the Zhongnanhai compound, he told the country that China and the world were undergoing 百年未有之大变局, great changes unseen in a century, and that the country would need to rely fundamentally on its own efforts. The phrase had been coined years earlier by an analyst at the Ministry of State Security; Xi made it his own, and made it the organizing premise of his foreign policy for the next half decade.

The ZTE crisis itself ended, in a fashion. On June 7, 2018, the Trump administration reached a deal with Beijing to lift the denial order in exchange for a fresh $1 billion fine, a $400 million escrow, a complete replacement of ZTE’s board and senior management, and a ten-year compliance monitor embedded in the company’s offices. The deal passed over the protests of Senate Democrats and several Senate Republicans, who accused the president of trading a national-security enforcement action for trade concessions. By July 13 the order was formally terminated. ZTE survived. Its share price recovered most of what it had lost. To a casual outside observer the crisis resolved itself within ninety days.

To Xi, the resolution was the lesson, not the relief. The U.S. government had demonstrated that it could shut down a Chinese champion at will, and that the only thing that could turn the order off was the personal intercession of two heads of state. Whether or not Trump, who had framed the deal as a favor to Xi to save Chinese jobs, intended the message that way, it was received. Beijing now knew the on-off switch existed, that the U.S. controlled it, and that no commercial relationship could be relied on to keep it from being thrown again.

What followed was the slow conversion of the post-ZTE rhetoric into doctrinal fixture. In October 2020, at the fifth plenum of the 19th Central Committee, the Party adopted as its science-and-technology slogan a new four-character formulation. 科技自立自强, technological self-reliance and self-strengthening, replaced the older 自主创新, indigenous innovation, as the operative phrase. It deliberately echoed the Maoist 自力更生, but with a Confucian-era couplet on the back end and a tighter scope on the front. The new wording was the China Media Project’s bellwether through 2020 and 2021. It appeared in People’s Daily editorials almost daily, and was named in the 14th Five-Year Plan, adopted at the National People’s Congress in March 2021, as the strategic support for national development. What had begun as Xi’s reaction to a Commerce Department denial order had become the organizing principle of the country’s economic posture.

The institutional consequences were visible by the early 2020s. The Big Fund doubled in size and began financing dozens of new domestic projects. Local-government chip funds proliferated. A March 2020 Politburo Standing Committee directive expanded what China meant by 新基建, new infrastructure, to include 5G base stations, data centers, industrial internet, and AI computing platforms, all of which depended on chips Beijing did not yet make. Universities expanded semiconductor curricula. MIIT issued recruitment guidance to draw overseas Chinese talent home. Whether any of it would close the technological gap was an open question. That it was happening at scale was not.

What the period from 2017 to 2021 had produced, as a set of speeches and as a change in mood, was a single political fact that would shape the next decade of the chip war. The Davos Xi who had defended the global economic ocean and the Wuhan Xi who had called the chip the heart of the body were not separate Xis or contradictory ones. They were a single Xi, addressing different audiences with different purposes, drawing on the same underlying state strategy. The strategy treated openness as a tool when openness paid and self-reliance as a fallback when openness failed. The ZTE shock had not changed the strategy. It had reset the tempo. After April 2018 the fallback was the foreground, and a vocabulary buried for thirty-five years, the vocabulary of mass mobilization for technological self-rescue, was back on the front page of People’s Daily.

The cleanest expression of the new tempo turned up not in the speeches but in a four-character phrase Chinese provincial officials began deploying in their work reports through 2019 and 2020. 吹响号角, sound the bugle, was an old mobilization metaphor from the Party’s revolutionary years, used to mark the start of a campaign all cadres were expected to join. By 2020 it was being used routinely for chip projects. The country had been called to assault. The walls being assaulted were no longer Chiang Kai-shek’s positions in the late 1940s or American imperialism’s during the Korean War. They were the leading-edge nodes of TSMC, Samsung, and Intel, and the ASML lithography lines that fed them. The bugle had been sounded. Whether the assault would succeed was a question for the next decade. The decision to launch it had been made on a Monday in April 2018, in a Beijing study where the news from the Bureau of Industry and Security had just arrived.