China must pay greater attention to basic research and education to “break the US-imposed technology containment” that has become part of the ongoing tensions between Beijing and Washington and engulfed technology companies including Huawei and ZTE, according an outspoken Chinese economist.

Xiang Songzuo, an economist at the Renmin University of China, has joined what has become a nationwide debate that has led to many to call for a thorough overhaul of how China supports and conducts basic research.

Xiang, a former chief economist of the state-owned Agricultural Bank of China, believes this is essential in attempts to tackle US efforts to contain China’s technological advancement and to create a new driver for economic growth.

Negotiators from China and the United States resumed trade talks in Washington this week. (Picture: Xinhua)

“Can we resort to industrial policy, business model innovation, property or peer-to-peer lending to break [US-imposed] technology containment?” Xiang said this week. “The only solution is to pay greater attention to basic research and education.”

China has tried for more than a decade to answer the question posed by Qian Xuesen, the late aerospace engineer deported by the US in the 1950s, on why the nation’s schools have failed to nurture outstanding talent and why so few home-grown scientists have won a Nobel Prize.

Xiang, who is well known for his questioning of the accuracy of Chinese economic statistics, has urged Beijing to avoid a top-down system for the nation as a whole and instead learn from the US success in leading the past two industrial revolutions.

“The US deserves our study the most… but how much we actually know about the country?” he told a lecture in Beijing on Wednesday evening.

Although the relative economic strength of the US has weakened given the rise of China and other countries, it is still unclear if its strength has decreased.

“It’s worth our deep thought. Don’t misjudge the situation,” he warned at a time when nationalist sentiment in favor of confrontation runs high.

After US sanctions last year paralyzed Chinese technology firm ZTE, forcing the phone manufacturer to pay a substantial fine, the Trump administration shifted its target to telecommunications giant Huawei, putting it on a trade blacklist that prohibited it from purchasing US components and technology.

And on Monday, eight Chinese technology companies were among those added to a trade blacklist by the US in response to China’s treatment of Muslim minorities in Xinjiang province.

This move came before talks taking place at the end of this week between China and the US in Washington in a bid to put at end, or at least tone down, the trade war between the world’s two largest economies that has rumbled on for 15 months.

In the face of the economic slowdown caused largely due to the US-China trade war, Xiang warned that short-term stimulus efforts by the government would not be effective, and that the country should stay on the course for structural reforms that promote basic research and innovation.

“The Chinese economy is already in a severe down-cycle … I don’t see a rebound in the second half of this year. There were talks of fiscal, monetary and credit policy loosening, but will those policies really work?” he added. “We might have reached a point where stimulus won’t work well. It can maintain [economic] stability at most, but is unlikely to turn around the whole situation.”

China’s leadership has already taken steps, including larger spending on research and development, to support China in the “fourth industrial revolution” of high-speed internet connectivity and artificial intelligence.

However, Xiang, like many others, warned of an overemphasis on business model innovation, whole-nation system and the role of state-owned enterprises, as well as the lack of academic competition and flow of ideas.

The whole-nation system involves mobilizing the resources of the entire country to achieve specific goals, including gold medals in sporting events, key scientific projects and breakthroughs as well as economic targets. It was once popular in command economies where governments gain full control of resources and have strong mobilization capacity.

Beijing has long since had a history of planning for the future, including five-year economic development plans and the ambitious 863 hi-tech program which intended to stimulate the development of advanced technologies in a wide range of fields to gain independence from foreign technology.

“The whole-nation system certainly generates effects and it had some successful examples, but it’s worth study whether it can work well for large-scale innovation,” he said.