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Wang Yong | Geopolitical Game, Technological Containment, and the Growth of Great Powers

Recently, the Center for International Finance and Economics Research (CIFER) of the National Institute of Financial Research at Tsinghua University hosted...Academic Symposium on "2022 International Trade Disputes and the Restructuring of Globalization"The event was a complete success.Associate Professor and Academic Vice Dean of the Institute of New Structural Economics, Peking UniversityWang Yong,Doctoral student at the Institute of New Structural Economics, Peking UniversityZhang ZitongAttendDepend onCIFERDirector, Professor of Tsinghua University PBC School of FinanceJu JiandongHostInternational trade disputesSub-forum 1Sharing with collaborators on the topic《Geopolitical games, technological containment and great power growth》(Geopolitical Game, Technological Containment and Great Power Growth) The article.

Wang YongHe is the Academic Vice Dean and Doctoral Supervisor at the Institute of New Structural Economics, Peking University. He previously worked at the Department of Economics, Hong Kong University of Science and Technology, and the World Bank. He holds a PhD in Economics from the University of Chicago, a Master's degree from the National School of Development, Peking University, and a Bachelor's degree in World Economics from Fudan University. His main research areas include economic growth, macroeconomic development, the economies of China and India, and political economy. His papers have been published in [Journal Name - not specified].Journal of Development Economics、Journal of Monetary Economics International academic journals, etc.China and the World Economy (SSCI)Associate EditorEconomic Modelling (SSCI)Associate EditorLatin American Journal of Central BankingAssociate EditorVoxChinaEditorial staffChina Economic Review、China Agricultural Economic Review、Structural Change and Economic DynamicsHe is a guest editor for journals such as *Economics Quarterly*. He serves as an advisor to institutions such as the World Bank, the Asian Development Bank, and the Federal Reserve Bank of the United States; Secretary-General of the New Structural Economics Research Alliance; Vice President of the Development Economics Branch of the Chinese Association for the Study of Foreign Economic Theories; and a Distinguished Professor at Harbin Institute of Technology (Shenzhen).

Wang Yong

Zhang Zitong

This paper discusses how the dynamic technology containment and counter-containment policies of leading and catching-up powers are endogenously formed. By constructing a dynamic game general equilibrium model, the paper studies the three core aspects of geopolitical game, technology containment, and economic growth within a unified analytical framework, answering five closely related questions: How does the size of a catching-up power's economy affect the technology containment policies of leading powers? At the strategic level, how can the relationship between development and security be coordinated? When facing technology containment, how can the relationship between technological self-reliance and international technological cooperation be dynamically balanced? How can an effective government and an efficient market be organically combined in promoting technological self-reliance? How does the efficiency of civilianizing defense strategic industry technologies affect geopolitical game, technology containment, and economic growth among major powers?

The model includes two types of countries: leading countries with high initial technological levels and catching-up countries with lower initial technological levels. Leading countries can extract geopolitical and economic benefits from catching-up countries through investment in strategic defense industries and their economic and technological advantages. Catching-up countries can also resist and offset the leading countries' demands for geopolitical and economic benefits through investment in strategic defense industries and other related economic and technological policies. In this dynamic game, the technological progress of catching-up countries is determined by their own R&D investment and technology diffusion from leading countries. To maximize their own geopolitical and economic benefits, leading countries will adopt endogenous technology containment policies against catching-up countries, affecting their technological progress gained through technology diffusion and thus their economic growth. Simultaneously, catching-up countries can also counter the technological containment by leading countries by setting optimal fiscal and tax policies.

Based on the above theoretical framework, this paper's model analysis reveals four main findings: First, due to their smaller size, the technological progress of small, late-developing countries cannot shake the political and economic status of leading countries; instead, it can increase the geopolitical and economic gains of leading countries. Therefore, leading countries will not attempt to technologically contain them. However, large, late-developing countries, due to their larger economic size, will find their technological progress impacting the geopolitical and economic interests of leading countries, easily triggering technological containment by the leading countries. Second, compared to a "laissez-faire" policy, if late-developing catching-up countries implement optimal policy intervention (including subsidies for enterprise production costs and R&D), although they may face more severe technological containment from leading countries in the short term, in the medium to long term, it will shorten the time that leading countries can use to implement technological containment, thereby achieving faster technological progress and higher welfare levels. Third, considering the spillover effect of investment in defense strategic industries on technological progress in the civilian sector, late-developing catching-up countries' investment in defense strategic industries can not only resist and offset the leading countries' demands for geopolitical and economic benefits but also directly improve their own technological level. Therefore, improving the efficiency of "military-to-civilian" conversion in defense strategic industries will not only accelerate the technological progress of late-developing countries, but also further shorten the time required for leading countries to contain their technologies. Fourth, restrictions on the development of a country's independent defense strategic industries (such as post-World War II Japan), or high investment in defense strategic industries with low technology spillover effects on the civilian sector (such as the former Soviet Union), may lead to the failure of late-developing major powers to catch up with leading countries.

Yu Zhen

Yu Zhen, Professor and Vice Dean of the School of Economics and Management, Wuhan University The review highlighted three key contributions of this paper: first, it analyzes the causes of the trade war from the perspective of technological competition, filling a theoretical gap in recent research on the Sino-US trade war; second, it introduces the spillover effect of defense strategic industries on the civilian sector into the general equilibrium dynamic analysis of geopolitical games, supplementing international relations theory; and third, it combines the endogenous and interactive effects of relevant policies between China and the US with their underlying geopolitical motivations for theoretical analysis. Professor Yu Zhen particularly emphasized the concept of hegemonic tax, pointing out its significance and raising several questions: who is the tax-collecting entity, who is the taxpayer, and what is the object of taxation?

Professor Yu Zhen also used the analogy of a lion dividing meat to analyze the asymmetric dependence between hegemonic and non-hegemonic states, pointing out the source of power in international economic relations. He raised a series of questions that this paper needs to answer, including the decline of hegemony, cooperation among non-hegemonic states, the relationship between emerging potential hegemonic states and non-hegemonic states, and the relationship between multiple hegemonic states. Dr. Zhang thanked Professor Yu for his comments. Regarding the issue of hegemonic taxes, Dr. Zhang pointed out that this manifests on the one hand as hegemonic states demanding certain theoretical benefits from non-hegemonic states, and on the other hand as requiring hegemonic states to provide certain international public goods. As for the relationships between hegemonic states and emerging potential hegemonic states, among non-hegemonic states, and among multiple hegemonic states, this paper, based on a two-state model, cannot currently analyze issues involving multi-state interactions. Future plans will consider expanding the model, but the existing framework can still reflect some relevant factors. For example, technological cooperation between non-hegemonic states and third countries can be seen as a cost of hegemonic states containing non-hegemonic states.

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国际贸易争端与全球化重构学术研讨会 2022 2022_trade

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