An Emerging Digital Wall

During the past thirty years, the digital revolution has transformed the traditional transportation of “atoms” in the physical space into the transmission of information “bits” in cyberspace, and the advances in transportation technology have also reduced the importance of distance barriers. Both of these factors have changed the role of traditional interactions in the geographic space and have correspondingly expanded cyberspace confrontations. This chapter highlights the various forms of cyberspace competition, penetration, and battles in recent years, mainly between the U.S. and China, and explains why such cyberspace interaction games to be introduced in later chapters are different from the ones in the physical space. We also briefly review the related literature and identify the distinction of our approach.

China has been very aggressive in the international arena in recent years and has started to challenge the U.S. hegemony in many ICT areas. Of course, such aggressions are supported by China’s expansion of its economic capacities, revealed by its extremely rapid economic growth over the past several decades. This chapter provides a brief introduction to China’s stellar growth record and addresses the contribution of China’s joining the WTO, which was welcomed by the U.S. a few decades ago. Along with the expansion of economic capacity, China’s confidence and ambition have increased, and the China-U.S. conflicts have gradually shifted from economic aspects to technological aspects. The timelines of the above-mentioned events are identified and discussed. Since the final result of the U.S.-China cyberspace interactions will depend on their future relative economic capacities, we examine the pros and cons of a Leninist regime (vis-à-vis a democratic one) in the era of innovation-driven growth, which China has entered.

The significance of cyberspace interactions encompasses several factors, namely, the proliferation of smartphones, the widespread deployment of base stations, the rapidly growing network of undersea cables, the advances in communication speed, the ability to squeeze billions of transistors into a small chip, the breakthroughs in lithography technologies, the coverage of thousands of low-earth orbit satellites equipped with high-resolution cameras in the sky, and so on. This chapter explains how the concept of cyberspace has been concretized by such technological advancements and infrastructure deployments, and how such factors have together changed the game of both domestic control and international interactions.

The most important factor facilitating the creation of a digital wall is technology decoupling. This chapter explains how the U.S. uses the ECCN (export control classification numbers), the destination regulation (country map), and the recipient regulation (entity list) to form a comprehensive web which prevents the high-tech commodities and components of the democratic camp from flowing into “countries of concern,” mainly China and Russia. These measures are targeted at some vaguely defined “emerging and foundational technologies,” which essentially decouple the supply chain and final specifications of high-tech industries into two separate camps, one in the democratic group and the other in the authoritarian one. In response, China has imposed export controls on certain rare earth elements, which are indispensable in some high-end weapons. We explain that, because military uses cannot be compromised, decoupling in some sectors of the cyberspace industries is likely to be a natural consequence.

Other than technology denial, a factor facilitating the construction of a digital wall is the restriction on data collection. Internet platforms often collect big data from users. When these platforms are owned or can be controlled by foreign adversaries, they give rise to concerns that these big data may be used by foreign governments on a future D-day to cause some damage to the country in question, which is often referred to as a “national security threat.” An essential question often asked in democratic countries relates to the interface between the national security concern and freedom of expression. A recent U.S. Supreme Court ruling (2025/01/17) on TikTok strengthens the legal justification for data collection denial based on possible D-day threats. In regard to the question of whether such foreign platforms distort content on a daily basis, we propose an experimental method which helps us identify the possible existence of algorithm interference.

While the Trump administration treats tariffs as an effective trade barrier, China has long identified another more effective trade barrier in cyberspace. Although the Internet facilitates communication and reaching out, blocking the internet service seriously impedes information gathering and market access. China’s Great Firewall (GFW) has made it difficult for Chinese to access international platforms and websites, and has therefore created a trade barrier. This chapter describes how this cyberspace trade barrier is implemented, as well as the kinds of trouble it has caused for e-commerce buyers as they try to search, browse, compare, and place orders. We explain why the current WTO rules cannot deal with it, and why democratic countries such as the U.S. cannot retaliate by imposing counteractive measures. We also provide the empirical estimate of the impact of China’s GFW on the trade and welfare of both China and the U.S.

An important factor facilitating the building of a digital wall is the networking effort by both democratic and authoritarian camps, and blockchain is a salient example. Blockchain technology is an ICT area in which China is ahead of the U.S. in terms of granted patents. A blockchain is a diversified ledger network protected by sophisticated information cryptology. This technology has many applications in areas including supply chain management, carbon footprint tracing and, most notably, cryptocurrency. Democratic countries such as the U.S. pay more attention to its application to cryptocurrency; by contrast, authoritarian regimes focus on other uses of this technology, treating them as potential ICT application networks which are parallel to the existing Western doctrine. This chapter explains how the divergence in focus determines the distinct deployment that we observe between China and the U.S. In the future we expect to see a proliferation in the deployment of blockchain-related applications in China’s close allies, which increases the resilience of the coalition led by China.

It is well known that some cyberspace tools can be more efficiently implemented by users due to their particular features. As for the tool of AI, we show that the side which has better access to big data will be the side that can use AI more efficiently. We explain why an authoritarian government (relative to its citizens) has this data advantage, and how this advantage may be used to oppress the civil society forces and sustain the stability of the authoritarian regime. Using the term adopted by Acemoglu and Robinson (Acemoglu and Robinson, The Narrow Corridor: States, Societies, and the Fate of Liberty, Penguin Press, 2019), we show that AI reduces the probability of accomplishing the process of democratization. The checks and balances in democratic regimes, on the other hand, tend to prevent the government from abusing its big-data advantage, and hence sustain the democracy.

Cyberspace penetration may take various forms: stealing business secrets, sending malware to opponents’ computers, cutting off support networks for public utilities, sabotaging enemies’ core facilities, taking the wind direction of the media, affecting voting behavior, and encroaching upon the privacy of key public officials, etc. These penetrations do not require large amounts of funding, do not directly result in casualties, are usually not known to the outside world, can be launched at a place thousands of miles away, and are not governed by international conventions on engagement rules. Some have even described that cyberspace penetration is a “perfect weapon.” We explain in this chapter that, while many countries try to launch cyberspace penetrations, democratic regimes usually face more institutional constraints.