U.S.-China Technological Decoupling: A Strategy and Policy Framework

A new report from the Carnegie Endowment for International Peace argues that the United States lacks a clear, coherent strategy for managing its technological relationship with China. The report, authored by Jon Bateman and published on April 25, 2022, warns that Washington may inadvertently trigger a chaotic and uncontrolled decoupling that could harm U.S. interests.

Background

The report, titled "U.S.-China Technological 'Decoupling': A Strategy and Policy Framework," comes at a time when partial decoupling of U.S. and Chinese technology ecosystems is already underway. The U.S. government has emerged as a primary driver through export controls, divestment orders, visa bans, sanctions, tariffs, and other measures. While there is bipartisan consensus that some controls are necessary, especially for strategic technologies, the report notes there is no widely accepted definition of which technologies qualify or how far restrictions should go.

The report was published with a foreword by Eric Schmidt, former CEO and Chairman of Google, who highlights the urgency of developing a policy framework. Schmidt writes that the United States has been technologically dominant for so long that leaders took it for granted, but China has emerged as a second technological superpower with astonishing speed.

Key Findings

Bateman's analysis identifies several critical gaps in current U.S. policymaking:

• Disparate objectives are often grouped into vague constructs like "technology competition" without clear definitions.
• Familiar terms such as "supply chain security" fail to clarify which U.S. interests require protection and why.
• Key decisions are siloed within opaque forums (such as CFIUS), narrow legal specialties, or individual industries, obscuring the bigger picture.
• Traditional tech policy and China policy receive outsized attention while second-order implications in areas like climate policy are overlooked.
• Domestic political polarization increasingly discourages arguments for maintaining technological ties with China.

The report advocates a middle path strategy that preserves and expands America's options. It rejects both a complete technological break and an uncontrolled escalation of restrictions. Instead, it recommends a disciplined approach focused on narrowly defined strategic technologies while avoiding overreach that could backfire.

International Context

The report situates the U.S.-China technology relationship within a broader global trend of techno-nationalism, where technology is increasingly viewed as an arena for interstate competition rather than a neutral marketplace. This shift has been driven by China's growing strength and its use of technology for military modernization, surveillance, and unfair trade practices. At the same time, many countries—including U.S. allies—are navigating their own positions in the U.S.-China technology divide, often seeking to balance economic ties with security concerns.

The report's findings have direct implications: the global technology supply chain is deeply intertwined, and any disruption carries international consequences. The report calls for greater attention to these spillover effects and urges the United States to align its strategy with allies where possible.

Analysis

Bateman's report is grounded in evidence and offers a measured assessment of the risks and opportunities. It emphasizes that the military importance of AI may be overestimated—a point over which Eric Schmidt explicitly disagrees, but acknowledges as evenhanded and thought-provoking. The analysis distinguishes between verified facts and informed interpretation, clearly separating what is known from what is uncertain.

One notable contribution is the report's effort to translate strategy into implementable policy. It proposes specific objectives for U.S. federal agencies and identifies technology areas where government controls are or are not warranted. It also highlights domestic investments and self-improvement measures that must accompany restrictive actions, such as strengthening the U.S. technology base and mitigating supply chain vulnerabilities.

The report warns that without a clear strategy, the U.S. government risks doing too little or—more likely—too much. It cautions that overreach could accelerate China's self-sufficiency and undermine U.S. competitiveness, while underreaching could allow China to gain advantages in critical technologies.

Future Outlook

The report anticipates that the paradoxes of the U.S.-China technology relationship will persist for years. It calls for continuous reassessment of the appropriate level of interdependence, and it acknowledges that decisions will be difficult and debates will remain heated. The next 2–5 years are likely to see:

• Continued expansion of U.S. export controls and investment screening mechanisms.
• Intensified domestic investment in strategic sectors like semiconductors and AI.
• Efforts to coordinate policies with allied countries.
• Regulatory evolution both in the United States and China as each side adapts.
• Increased emphasis on supply chain resilience and diversification.

The report concludes that muddling through is not an acceptable option. It urges policymakers to adopt a disciplined, forward-looking framework—one that balances national security interests with economic vitality and international cooperation.

Key Takeaways

• The U.S.-China technological decoupling is partial but accelerating; without a clear strategy, Washington risks overcorrecting.
• The report proposes a middle-path strategy that preserves essential technological ties while protecting strategic interests.
• Policymakers must clarify which technologies are truly strategic and where restrictions are appropriate.
• Domestic investment and self-improvement must accompany restrictive measures.
• International coordination with allies is essential to avoid fragmented and inefficient controls.
• The military importance of AI and other technologies is still debated; policies should be based on realistic threat assessments.
• Continuous reassessment is needed as the technological landscape evolves.