Today’s economic news is dominated by the trade dispute between the United States and China over steel and other tariffs. It is easy to forget that these are really small disagreements in the world’s most important economic relationship. To put them in context, there are more than twice as many World Trade Organization disputes between the United States and the European Union as there are between the US and China. No one worries about the future relationship between the US and the EU. Trade disputes are just an ordinary part of doing business.
In reality, the peaceful economic ties between the US and China are much stronger than the causes of conflict. Everyone knows that international trade and investment are important economic forces linking the US and China. More than a million Chinese students have studied in the US, and an increasing number of US students are studying Chinese at Confucius Institutes and in China itself. Mutual cultural influences have enriched fields ranging from music to movies to food. Travel between the two countries is increasing too.
But as meaningful as these interactions are, the American and Chinese economies are connected at a deeper and even more durable level. Along with Japan, South Korea, and Singapore, they share a single technological ecosystem. The integration of trans-Pacific technological networks is now so dense that the individual parts have become inseparable. They have merged together to create a new entity that is both Asian and American at the same time. The Pacific basin has become one giant technological tianxia.
From production networks to networked production
Economic integration is nothing new. As China developed in the 1980s and 1990s, economic relations between the two countries expanded. Then in the 2000s, tech companies like Apple created trans-Pacific production networks in which an “American” product like the iPhone is assembled in China by contract manufacturers using components sourced from all over Asia. These production networks replaced bilateral trade as the most important form of economic integration.
Production networks may be closely integrated, but they are still made up of clearly identifiable nodes: a screen comes from Japan, a battery from South Korea, a chipset from Singapore, etc. You can take apart an iPhone and trace each individual part to somewhere. Alternatively, you can go to Shenzhen and buy all the parts at Huaqiangbei Market to make your own iPhone. A production network is a densely linked system but it isn’t a true ecosystem.
In the 2010s, a new type of technological system emerged in the Pacific basin that is much more deeply integrated than the hardware production networks of the previous decade. Today, app developers are creating hybrid technologies that tie hardware, software, users, and content into an integrated technological ecosystem that is so new it doesn’t yet have a name. Given their reliance on networks for their very existence, a good name for these technologies might be “netware.”
Netware technologies like sharing apps, interactive livestreamed chat, massively multiplayer online games, and even WeChat’s little red packets are all hybrid business models that transcend their specific individual components. Netware apps can’t be broken down into parts that can be traced to particular national origins. They are more like an ecosystem than mere networks.
In netware applications, individual components (hardware, software, users, content) can be added or removed by individual users, changing the character of the application without impeding its ability to function. This is very different from a production network in which every component must do its job or the whole system will fail. Netware technologies are thus incredibly more complicated than anything seen in the past, but at the same time more robust.
Like all contemporary information technologies, netware is heavily concentrated in the Pacific basin. But although individual netware inputs may come from all around Asia, the leading netware applications are overwhelmingly American and Chinese. Companies like Apple, Amazon, Google, Facebook, Uber, Airbnb, Activision, Alibaba, Baidu, Tencent, DiDi, Mobike, Shanda, and NetEase all share a Pacific netware ecosystem. Companies from the European Union and the rest of the world barely register.
The Calichina connection
The world’s leading netware companies may be individually based in the US or China, but their personnel and business models are almost always transnational. They tie the west coast of the US and the east coast of China into a single innovation hub. This “Calichina” ecosystem incorporates nearly all the leading thinkers and makers in the netware economy. Europeans, Japanese, Koreans, and others may participate in this ecosystem, but they usually move to California, Beijing, Shanghai, or Shenzhen to do it.
Of course, Chinese and American companies compete fiercely to dominate their own particular niches in the global netware ecosystem. But they also share a common set of practices and platforms. And each one of them is built on a mix of hardware, software, users, and content that cannot be disaggregated into national components. You can swap a German camera for a Japanese one and still have a functionally similar iPhone. But you can’t even identify the distinctively “American” or “Chinese” parts of a netware application like a livestream feed of micro-celebrities playing a massively multiplayer online game.
Over the next decade, the Calichina netware economy is likely to become much more valuable than the old-fashioned commodity trading networks of the twentieth century or even the sophisticated hardware production networks of the early 2000s. And netware is a shared ecosystem that is not subject to tariffs or trade wars. The US and China have become unintentional but indispensable partners in the development of the twenty-first century netware economy.
There are many barriers to doing business across borders, but few barriers to people sharing ideas across borders. Netware developers in both the US and China are hybridizing hardware, software, users, and content from throughout the Asia-Pacific region to create a new economic ecosystem that embraces both countries. The names of the companies may be different in the US and China, but the netware ecosystem in which they operate is the same.