Review: Debate on the EU-China digital leadership race

November 24, 2019

On 20 November, LSE alumni had the opportunity to engage with two experts who shared their views on the global digital leadership race, with a focus on the EU and China. The event was kindly hosted by ECIPE, the European Centre for International Political Economy.

Hosuk Lee-Makiyama, Director of ECIPE and Fellow at the Department of International Relations at the LSE, argued that China’s technological rise is not a problem in itself – on the contrary, China’s sheer size and scale allow it to take its rightful place on the global stage, including in technology. Europe has not moved into high value-added digital industries with the same momentum as it did during the industrial revolution, and now others are catching up. This is the case for several reasons:

• Geography: Artificial Intelligence (AI) is very much language driven. In Europe, languages and consumer diversity represent trade barriers and make scaling up difficult.
• Risk & finance: In Europe, lending is focused on banking and risk-taking is not part of the investment culture.
• Choice: Europe chose to be “bad at AI and digital” because it focused on infrastructure rather than devices, platforms or services.

While Europe might not have (enough) digital unicorns, it does, however, have the lion’s share in online advertising, banking and brand recognition and can thus afford not to be first in the slim share of the value chain that is digital. Europe is also in the lead on standard setting. Lee-Makiyama concluded by saying the EU and China are two distinct ecosystems which makes access to each other’s markets difficult.

Yu Jiao, Head of External Affairs at ChinaEU acknowledged anxiety about Europe falling behind in the innovation field. While the potential is there, Europe needs to better commercialise its basic research and technology. This is a challenge inter alia because the EU still has a fragmented market due to language barriers and some regulatory divergence.

Jiao’s impression was that China is intimidating by sheer size alone. Yet Europe continues to be an innovator and can influence others as regards standards setting. The Chinese government, for its part, regulates more vaguely and then solves practical implications. Finally, it was important to remember that there are many European companies in China, but not that many Chinese companies active in Europe.

These interventions were followed by participant remarks and questions. The topic was further explored informally during a drinks reception.