Turning Weakness into Strength
If names cannot be correct, then language is not in accordance with the truth of things. And if language is not in accordance with the truth of things, affairs cannot be carried on to success. (名不正, 则言不顺; 言不顺, 则事不成 míng bùzhèng, zé yán bù shùn; yán bù shùn, zé shì bùchéng)
—CONFUCIUS
OUR LAST meeting in the Great Hall of the People was with Li Keqiang, the premier of the State Council, the titular head of government. If anyone in our party, including President Trump, had any doubts about China’s view of its relationship with the United States, Premier Li’s long monologue should have removed those doubts. He began with the observation that China, having already developed its industrial and technology base, no longer needed the United States. He dismissed U.S. concerns over unfair trade and economic practices, indicating that the U.S. role in the future global economy would be to provide China with raw materials, agricultural products, and energy to fuel its production of the world’s cutting-edge industrial and consumer products. President Trump listened for as long as he could and then interrupted the premier, thanked him, and stood up to end the meeting.
As we drove to the hotel to prepare for the state dinner back at the Great Hall, Matt Pottinger and I discussed how starkly Premier Li’s monologue had revealed the CCP’s break from Deng Xiaoping’s guidance during China’s opening and reform period in the 1990s: “hide our capabilities and bide our time, never try to take the lead, and be able to accomplish something.”1 After the 2008 financial crisis, Chinese leaders gained confidence in their economic and financial model as Western economies lost confidence in theirs. Many in China believed that the United States had caused the crisis due to the subprime mortgage problem. The U.S. inability to regulate its own banks had led to a loss of faith in the Western capitalist model and the search for a new one. Chinese leaders aggressively marketed their statist economic model across the Indo-Pacific region and globally brandished their growing power. They also made clear that they expected servile relationships with their neighbors. In 2010, Yang Jiechi, who was then China’s foreign minister, told his counterparts at a meeting of the Association of Southeast Asian Nations (ASEAN) in Hanoi, Vietnam, “China is a big country and you are small countries.”2
The next day, as we departed Beijing on the way to the Asia-Pacific Economic Cooperation (APEC) conference in Danang, Vietnam, I was grateful for the extraordinary hospitality and the grandeur of the “state plus” visit. Pottinger and I knew, however, that our Chinese counterparts would be disappointed in the result. The United States and like-minded nations were undergoing a fundamental shift from strategic engagement with China to competitive engagement. It was an inevitable course correction as China’s aggressive foreign and economic policies, having gone unchecked for so long, could no longer be ignored. The range of CCP actions under China’s strategy of co-option, coercion, and concealment cast doubt on the assumption that positive engagement with CCP leaders would convince them to become responsible stakeholders in the rules-based international order. We were entering a new era, one that required us to use new tactics to convince party leaders that it was in their interest to play by the rules internationally, relinquish a degree of control, and return to the path of reform and openness.
U.S. policy toward China has suffered from strategic narcissism since the American Revolution, as businessmen, missionaries, and diplomats over two centuries have tended to define China based on economic, religious, and political hopes rather than realities.3 After the break in relations that followed the Chinese Civil War and the Korean War, China was receptive to President Nixon’s overtures in the 1970s because of the two countries’ shared enemy. During the Cold War, Nixon and his national security advisor, Henry Kissinger, pursued “triangular diplomacy,” which took advantage of the PRC’s and Soviet Union’s mutual wariness by forging a closer relationship with each of the Communist powers than they had with each other. Even Mao became an enthusiastic partner under the construct of “the enemy of my enemy is my friend.” “We were enemies in the past, but now we are friends,” Mao told Kissinger in 1973. “A horizontal line—the U.S.—Japan—China—Pakistan—Iran—Turkey, and Europe” could “together deal with the bastard” (i.e. the Soviet Union).4 But after the collapse of the Soviet Union, the U.S. relationship with the PRC returned to the hope that the United States could change China.
U.S. leaders and policymakers from the George H. W. Bush administration through the Obama administration believed that economic, political, and cultural engagement would lead to the liberalization of China’s economy and, eventually, its authoritarian political structure.5 Hopeful aspirations for reform overwhelmed any desire to confront China’s unfair economic practices, technology theft, abysmal human rights record, and increasingly aggressive military posture. Only one year after the Tiananmen Square Massacre, President George H. W. Bush maintained, “As people have commercial incentive, whether it’s in China or in other totalitarian countries, the move to democracy becomes inexorable.”6 President Bill Clinton argued for China to join the World Trade Organization, despite the risk that its state-directed economy could distort global markets to its advantage. To sell China’s membership, Clinton claimed that “By joining the W.T.O., China is not simply agreeing to import more of our products; it is agreeing to import one of democracy’s most cherished values: economic freedom. The more China liberalizes its economy, the more fully it will liberate the potential of its people.”7
Though President Obama announced a “pivot” or “rebalance” to Asia, the policy rested on vestiges of hope that a cooperative relationship with China would finally emerge. In April 2012, National Security Advisor Tom Donilon cut language from a speech referencing human rights and U.S. military presence and instead added the phrase “pursuing a stable and constructive relationship with China.”8 In November 2013, Susan Rice, who had replaced Donilon as national security advisor, announced that the United States would “seek to operationalize a new model of major power relations.”9 It did not take long for Chairman Xi to embrace that language while taking a series of actions to undermine U.S. interests. First, the CCP began to build islands in the South China Sea and directly challenge territorial claims of East Asian nations. Next, China declared unilaterally an air defense identification zone above a large area of the East China Sea, including the Senkaku/Diaoyu Islands, which are Japanese territory. Soon thereafter, news broke that China was building multiple military bases on the islands in the South China Sea. The PLA Navy and maritime militias intruded into other nations’ territorial waters. In 2015, when the United States and other nations objected to the reclamation efforts, Chairman Xi promised that the islands were only for maritime safety and natural disaster support.
In 2015, President Obama demanded that China halt its campaign of economic cyber espionage. At a joint press conference in the Rose Garden of the White House later that year, Chairman Xi and President Obama announced that they had reached a “common understanding” that neither government would knowingly support cyber theft of corporate secrets or business information. But the Chinese attempted a large-scale cyber attack the next day.10 In an ineffective effort to cover their tracks, the CCP shifted the lead of its cyber offensive from the People’s Liberation Army to the Ministry of State Security and began to use more sophisticated techniques.11 Some thought that because America’s decline relative to China’s rise was inevitable, that China should be accommodated to avoid competitions that might lead to confrontation. “We have more to fear from a weakened, threatened China than a successful, rising China,” Obama once stated.12 But avoiding competition only emboldened the CCP. China became more aggressive in cyberspace as well as in the South China Sea.
When, in July 2016, the Permanent Court of Arbitration ruled against China’s specious claims of control and its unlawful building of islands in the South China Sea, the PLA Navy maneuvered warships into those waters, rammed fishing vessels, and sailed recklessly near U.S. Navy ships on the grounds these activities violated the United Nations Convention on the Law of the Sea (UNCLOS). And by 2018, it was clear that Xi had lied, as satellite imagery showed construction of missile shelters and radar facilities. Later, the PLA added air defense and anti-ship missiles to those facilities.13 False hope allowed the CCP to conceal its actions and intentions while developing the ability to coerce other nations into recognizing its claims.
The Obama administration was not the first to base its China policy on the belief that engagement would foster cooperation, but Pottinger and I believed that it should be the last. We set out to build bipartisan support for the most significant shift in U.S. policy since the end of the Cold War.
By the time Pottinger and I worked on the China strategy, evidence overwhelmingly proved that the CCP was neither playing by the rules economically nor going along the expected path of reform. Moreover, its policies were actively undermining U.S. interests. By incentivizing China’s transition to a free-market economy and a more liberalized government with favorable trade terms, access to advanced technology, investment, and membership in international organizations, the United States had actually enabled the growth in power of a nation whose leaders were determined not only to displace the United States in Asia, but also to promote a rival economic and governance model globally.14
OUR NATIONAL Security Council staff’s assessment of China policy in 2017 began with an emphasis on strategic empathy. We needed to ground our approach to China in a better understanding of the motivations, emotions, cultural biases, and aspirations that drive and constrain the CCP’s actions. The recognition that the CCP was obsessed with control and determined to achieve national rejuvenation at the expense of U.S. interests and the liberal international order led to the adoption of new assumptions.15 First, China would not liberalize its economy nor its form of government. Second, China would not play by international rules and would instead try to undermine and eventually replace them with new ones more sympathetic to its interests. Third, China would continue to combine its form of economic aggression, including unfair trade practices, with a sustained campaign of industrial espionage to dominate key sectors of the global economy and lead in the development and application of disruptive technologies. Fourth, China’s aggressive posture was designed to gain control of strategic locations and infrastructure to establish exclusionary areas of primacy. Finally, absent more effective competition from the United States and like-minded nations, China would become more aggressive in promoting its statist economy and authoritarian political model as an alternative to free-market economics and democratic governance. For me, the trip to Beijing confirmed those new assumptions and reinforced my belief that the United States and other nations with a stake in this competition could not remain passive in countering the CCP’s strategy. We could no longer adhere to the narcissistic view that defined China in aspirational terms: what the West hoped China might become.
Any strategy to reduce the threat of the CCP’s aggressive policies must be based in a realistic appraisal of how much influence the United States and other outside powers have on the evolution of China. There are structural limits on influence because the party will not abandon practices it deems critical to maintaining control. Despite the CCP’s best efforts, however, China is not and will never be monolithic. There are opportunities to expand engagement with entities that are not dominated by the party, such as true commercial, academic, religious, and civil society enterprises. And while there are historical, cultural, and structural limits on U.S. and other foreign influence in China, those limits should not be an argument for passivity in confronting the CCP’s oppression of the Chinese people domestically or its economic and military aggression internationally.
We concluded, as we crafted a new strategy, that there was reason for optimism. The 1989 Tiananmen Square uprising, the protests in Hong Kong thirty years later, and the thriving democracy in Taiwan demonstrate that the Chinese people are neither culturally predisposed toward dictatorship nor happy to surrender fundamental rights, including having a say in how they are governed. Despite our limitations, the United States and like-minded partners possessed tremendous latent potential for influencing the party’s behavior because we had been largely absent from arenas of competition. Those who worked on the strategy felt that the shift from engagement to competition had initiated a multigenerational effort. The need to compete enjoyed growing support across the political spectrum in the United States and from other nations, international corporations, and academic institutions. Awareness of the threat that the policies of the CCP posed to freedom and prosperity was growing.
Before we departed Beijing, at the press conference held at the end of a long day of meetings, President Trump summarized China’s unfair trade and economic practices. He then looked over to Chairman Xi and said, “I don’t blame you. I blame us.” The message was that it would be unnatural for the United States and its partners to remain passive as the CCP undermined democracy, liberal values, and free-market economic practices abroad while repressing its people at home. But competition should not be seen as leading to confrontation. Pottinger and I believed that if the United States and our allies and partners began to compete effectively, it would be possible to turn what the CCP saw as weakness into strength. Competing might also generate confidence in the principles that distinguished our free and open societies from the closed, authoritarian system China was promoting. We saw competitive advantage in freedom of expression, of assembly, and of the press; freedom of religion and freedom from persecution based on religion, race, gender, or sexual orientation; the freedom to prosper in our free-market economic system; rule of law and the protections it affords to life and liberty; and democratic governance that recognizes that government serves the people rather than the other way around.
THE CCP views freedom of expression as a weakness to be suppressed at home and exploited abroad. The free exchange of information and ideas, however, may be the greatest competitive advantage of our societies. We have to defend against Chinese agencies that coordinate influence operations abroad—such as the Ministry of State Security, the United Front Work Department, and the Chinese Students and Scholars Association—but we should also try to maximize positive interactions and experiences with the Chinese people. Those who visit and interact with citizens of free countries are most likely to go home and question the party’s policies, especially those that stifle freedom of expression. So, the people who direct academic exchanges or are responsible for Chinese student experiences should ensure that those students enjoy the same freedom of thought and expression as other students. That means adopting a zero-tolerance attitude for CCP agents who monitor and intimidate students and their families back home.
Foreign students at universities abroad, regardless of their country of origin, should gain an appreciation for the host nation’s history and form of governance. When universities and other hosting bodies protect the freedoms that these students should enjoy, it serves to counter the propaganda and censorship to which the students are subjected in their home country. Perhaps most important, Chinese and other foreign students should be fully integrated into student bodies, to ensure they have the most positive academic and social experience.
The protection of students’ ability to express themselves freely should extend to expatriate communities. The U.S. and other free nations should view their Chinese expatriate communities as a strength. Chinese abroad, if protected from the meddling and espionage of the CCP, are capable of making their own judgments about the party’s activities. As the party becomes more aggressive in controlling its population to maintain its exclusive grip on power, Chinese expatriates may further appreciate the benefits of living in societies that permit freedom of expression. It is appropriate, for example, for free and open societies not only to disabuse their Chinese visitors of the party’s anti-Western propaganda, but also to create safe environments for Chinese expatriates to question the CCP’s policies and actions. Investigations and expulsions of Ministry of State Security and other agents should be oriented toward protecting not only the targeted country, but also the Chinese expatriates within it.
Expatriates also have the potential to counter the party’s predatory actions under Made in China 2025, One Belt One Road, and Military-Civilian Fusion. As the U.S. Senate Committee on Homeland Security concluded in November 2018, the United States should not only block efforts to recruit Chinese expatriates for espionage, but also provide “more incentives for highly educated Chinese talents to participate in the U.S. economy.”16
Freedom of expression and freedom of the press also play a key role in promoting good governance to inoculate countries from bad deals under One Belt One Road (OBOR). Uganda provides an example of how the combination of law enforcement and investigative journalism countered China’s predatory economic behavior to U.S. advantage. In 2015, the Ugandan government agreed to borrow $1.9 billion from a Chinese bank to build two dams. An investigation in 2018 revealed shoddy construction in the unfinished dams, later that year, a New York court convicted a Chinese energy company representative of paying bribes to African officials. Ugandan leaders then asked a U.S. consortium to bid on a new oil refinery project, a bid it won.17 Uganda demonstrates the potential associated with freedom of the press enabling public accountability under the rule of law. Over time, the combination of exposing China as an untrustworthy partner and providing alternatives to its predatory behavior will give the CCP incentives to alter its behavior.
As with freedom of expression, the CCP views tolerance of diversity as a threat. It is in this area that the United States and other countries might draw a strong contrast. Although some might see expanded immigration from an authoritarian state as a danger, I believe the United States and other free and open societies should consider issuing more visas and providing paths to citizenship for more Chinese, especially those who have been oppressed at home. Immigrants who have experienced an authoritarian system are often most committed to and appreciative of democratic principles, institutions, and processes. They also make tremendous contributions to our economy. Should the CCP intensify the coercion of its own people in Hong Kong and elsewhere as it did in Xinjiang or engage in brutality reminiscent of the Tiananmen Square Massacre, the United States and other nations should consider offering visas or granting refugee status to those able to escape the repression. Following the bloody crackdown in Tiananmen Square, President George H. W. Bush issued an executive order that granted Chinese students in the United States the right to stay and work. In the following decade, more than three quarters of the highly educated mainland Chinese students stayed after graduation. Many Chinese Americans who remained in the United States after Tiananmen to become U.S. citizens were at the forefront of innovation in Silicon Valley. The Chinese diaspora could, through its familial connections, provide a significant counter to the CCP’s propaganda and disinformation.18
THE CCP views its centralized, statist economic system as bestowing advantages, especially the ability to successfully coordinate efforts across government, business, academia, and the military. And it views America’s and other nations’ decentralized, free-market economic systems as rendering them unable to compete with China’s centrally-directed strategies, such as Made in China 2025, OBOR, and Military-Civilian Fusion. That is why the United States and other free-market economies need to demonstrate the competitive advantages of decentralization and unconstrained entrepreneurialism while defending themselves from Chinese predation. Here, the private sector plays a vital role. Companies and academic institutions at the forefront of developing and applying new technologies must recognize that China is breaking the rules to take advantage of our open societies and free-market economies. A first step toward preserving competitive advantage is to crack down on Chinese theft of our technologies. Although there have been significant reforms in national security reviews of foreign investments, another effective defense would be to enforce requirements that U.S. companies report investment by China-related entities, technology transfer requests, and participation in the CCP’s core technology development or PLA modernization programs.19
There is much room for improvement in the effort to prevent China from using the open nature of the U.S. economy to promote not only its state capitalist model, but also to perfect its surveillance police state. Many universities, research labs, and companies in countries that value the rule of law and individual rights are witting or unwitting accomplices in the CCP’s use of technology to repress its people and improve PLA capabilities. For dual-use technologies, the private sector should seek new partnerships with those who share commitments to free-market economies, representative government, and the rule of law. Many companies are engaged in joint ventures or partnerships that help the CCP develop technologies suited for internal security, such as surveillance, artificial intelligence, and biogenetics. Others accede to Chinese investments that give the CCP access to such technology. In one of many examples, a Massachusetts-based company provided DNA sampling equipment that helped the CCP track Uighurs in the Xinjiang region.20 Google has been hacked by China, used by the CCP to shut off the Chinese people’s access to information, and refused to work with the U.S. Department of Defense on artificial intelligence. Companies that knowingly collaborate with CCP efforts to repress the Chinese people or to build military capabilities that might one day be used against those companies’ fellow citizens should be penalized.
Tougher screening for U.S., European, and Japanese capital markets would also help restrict firms’ complicity in helping the CCP’s authoritarian agenda. Many Chinese companies directly or indirectly involved in domestic human rights abuses and violation of international treaties are listed on American stock exchanges. Those companies benefit from U.S. and other Western investors. There are more than seven hundred Chinese companies listed on the New York Stock Exchange, about sixty-two on the NASDAQ Composite index, and more than five hundred in the poorly regulated over-the-counter market.21 One company that is a candidate for delisting is Hikvision, a company responsible for facial recognition technology that identifies and monitors the movement of ethnic Uighurs. Hikvision produces surveillance cameras that line the walls of Chinese concentration camps in Xinjiang. Together with its parent company, the state-owned China Electronics Technology Group, Hikvision is on the U.S. Commerce Department Entity List (what many call “the Blacklist”). Free-market economies like ours have far more leverage than they are using because they control the vast majority of the world’s capital.
Defensive measures, however, are inadequate. Free and open societies need to become more competitive through reform and investments. China here has a clear advantage in the adoption of new technologies. Its centralized decision-making system, government subsidies, underwriting of risk, the relative lack of the kinds of regulations and bureaucratic hurdles typical in the United States and other democratic nations, and the lack of ethical impediments (e.g., in the areas of biogenetics and autonomous weapons) all foster fast application of technologies in the civil sector and the PLA. Although the United States and other nations should not compromise their ethics, many of the weaknesses relative to China are self-imposed. For example, the U.S. national security institutions suffer from chronic bureaucratic inertia. The slow, inflexible nature of defense budgeting and procurement in the United States has long been studied, with little effective change. But the stakes are now too high to tolerate the lack of predictable multi-year procurement budgets, convoluted procurement systems, and deferred defense modernization. The sheer difficulty of doing business with the Department of Defense discourages the most innovative small companies from contributing to defense capabilities and makes it difficult to innovate within the life cycle of emerging technologies. The old model of multi-year research and development to design and test a capability is no longer valid. The U.S. Department of Defense and military services risk exquisite irrelevance as the PLA develops new capabilities and countermeasures that vitiate long-standing American military advantages. Reducing barriers to collaboration between the private sector and national security and defense-related industries could release the potential of free-market innovation in this critical area.
But even streamlining bureaucracy will prove insufficient to compete with the vast investments China is making in emerging dual-use technologies that will advantage its data economy and its military capabilities. That is why government and private-sector investment in technologies in the areas of artificial intelligence, robotics, augmented and virtual reality, and materials science will prove crucial for the United States to maintaining differential advantages over an increasingly capable and aggressive PLA.22 Defense cooperation across the Indo-Pacific region should extend to multinational development of future defense capabilities, with the ultimate goal of convincing the CCP that it cannot accomplish objectives through the use of force. Multinational cooperation in the development of space and cyberspace capabilities could also deter Chinese aggression in these contested domains. And Taiwan’s defense capabilities must be sufficient to ward off China’s designs for what would be a costly war with the potential of expanding across large portions of East Asia.
JUST AS the CCP views our free markets as a disadvantage, so, too, they see the rule of law in the United States and other democratic nations as a relative weakness. The CCP considers the supremacy of the law as an unacceptable encumbrance; so too, the requirement to treat all people equally before the law and the standards of fairness in the application of the law.23 Here, again, what the Chinese see as weakness is in fact a foundational advantage of free and open societies that we must apply to competition with the CCP. It is the rule of law and, in particular, investigations conducted under due process of the law (the results of which are then made public) that give the people, companies, and governments the information they need to counter Chinese espionage. For example, in 2019, when it became obvious that Chinese communications infrastructure combined with a sustained cyber-espionage campaign posed a severe threat to economic security and national security, the United States, Australia, New Zealand, Japan, and Taiwan banned the Chinese telecommunications company Huawei from their networks and urged others to follow suit.24 In February 2020, the U.S. Department of Justice charged Huawei and its subsidiaries with racketeering and conspiracy to steal trade secrets.25 Law enforcement investigations will continue to play an important role, but CCP infiltration of universities, research labs, and corporations is so pervasive that others, including investigative journalists, are needed to expose the full range of Chinese industrial espionage.
Freedom of expression, entrepreneurial freedom, and protection under the law are interdependent. Together, they bestow competitive advantages useful not only in countering Chinese industrial espionage and other forms of economic aggression, but also in defeating CCP influence campaigns designed to mute criticism and generate support for CCP policies. From 2018 to 2020, studies of Chinese influence in mature democratic countries, including Australia, Germany, Japan, and the United States, exposed methods the CCP uses to cultivate witting and unwitting agents across national and local governments, industry, academia, think tanks, and civil society organizations.26 The free press in those countries exposed the CCP methods, and CCP agents were prosecuted under due process of law. International cooperation among like-minded nations magnifies competitive advantage. For example, in December 2018, the United States and its closest allies revealed China’s twelve-year-long cyber offensive in twelve countries and applied a complementary range of sanctions and indictments.27
STRENGTHENING DEMOCRATIC governance at home and abroad could be the best means of inoculating free and open societies against the CCP’s campaign of co-option, coercion, and concealment. The party sees its exclusive and permanent grip on power as a strength relative to pluralistic democratic systems. There is growing evidence, however, that citizens’ participation in the democratic process in countries targeted by the CCP has been effective in countering predatory policies under One Belt One Road. From 2018 to 2020, Chinese “investment” was no longer playing well with populations who were the real victims of the CCP’s “debt traps.” In 2019, the new (and former) prime minister of Malaysia, Mahathir Mohamad, promised to renegotiate or terminate the “unequal treaties” with Beijing—a term designed to evoke Chinese memories of the century of humiliation. New governments in small countries such as Sri Lanka, the Maldives, and Ecuador exposed the degree to which Chinese-funded and -constructed infrastructure projects had indebted them, violating their sovereignty.28
Strengthening democratic institutions and processes in target nations may be the strongest remedy to China’s aggression. After all, citizens want a say in how they are governed and want to protect their nation’s sovereignty. Wang An migrated to the United States from China in the 1950s and founded the groundbreaking computer company Wang Laboratories. Of his adopted country, the United States, he observed, “As a nation we do not always live up to our ideals, [. . .] but we have structures that allow us to correct our wrongs by means short of revolution.” That is why support for democratic institutions and processes is not just an exercise in altruism. Democracy is a practical means of competing effectively with China and other adversaries who attempt to promote their interests at the expense of other nations through corrupt practices. If functioning democracies identify predatory actions by the CCP and act to hold leaders accountable for defending against them, the party will have coercive influence only on authoritarian regimes who prioritize their leaders’ affluence and exclusive grip on power over the welfare of their citizens.
A GOOD offense based on the competitive advantages of our free and open societies requires a strong defense against the CCP’s sophisticated strategies. The case of Huawei, the Chinese telecommunications giant at the forefront of the CCP’s effort to control global communications infrastructure and the data it carries, provides an example, showing the effectiveness of bold, aggressive measures from the United States and the continuing importance of working with our allies. From the outside, Huawei looks like a highly successful company. Founded by former PLA military technologist Ren Zhengfei in 1987, Huawei surpassed Cisco as the world’s most valuable telecommunications company after it stole the latter’s source code. By 2020, Huawei controlled approximately 30 percent of the global market share in telecommunications equipment. It had also made tremendous progress toward its goal to dominate the emerging market in fifth-generation communications networks, or 5G. Throughout its expansion, Huawei benefited from a comprehensive campaign of cyber espionage and subsidies from the CCP.29 It and other telecommunications companies, such as ZTE, are indispensable to Made in China 2025 and Military-Civil Fusion because they are on the cutting edge of acquiring the technologies (e.g., microchips and energy storage) and manufacturing know-how critical to Chinese self-sufficiency in high-end manufacturing. They also provide a communications backbone that allows the exfiltration of data critical to the future global economy. The “data economy,” as it is known, is an emerging global digital ecosystem consisting of data suppliers and users. Whoever controls data, the protocols associated with it, and analytical tools powered by quantum computers will be in a position of tremendous competitive advantage. The CCP stands to gain significant intelligence, military, and economic advantages if a company it created and a company that must by law act as an extension of the Chinese government captures global data flows.30 Moreover, control of communications infrastructure gives Huawei and, by extension, the CCP the ability to cripple communications and data flows vital to national defense and routine economic and financial activity.
The United States took defensive measures when, in 2019, it imposed tariffs on Chinese imports and banned U.S. companies from using networking equipment from Huawei. Earlier that year, Huawei’s chief financial officer, Meng Wanzhou, was indicted by the U.S. Department of Justice and arrested in Canada on charges involving circumvention of sanctions on Iran.31 In response, the CCP engaged in hostage taking, arresting two Canadian citizens without cause. Then, they sentenced to death another Canadian citizen for drug offenses after retrying him in one day. The CCP reactions demonstrated clearly that China cannot be regarded as a trusted partner and also exposed the lie that Huawei is a private company not associated with CCP policies.
While many countries joined the United States in restricting Huawei from its communications infrastructure, France decided to allow the company to build two of its three 5G networks. France, in effect, gave China’s Ministry of State Security easy access to 67 percent of its telecom networks as well as the internal computer network of France-based companies. But it is actually worse than that because 5G, a system up to one hundred times faster than the 4G network, will permeate every aspect of citizens’ personal lives, corporate world, national infrastructure, transportation, health, and defense. U.S. policy makers made a similar mistake two decades earlier, when they allowed China Telecom to establish a network in California. The rationalization was that the network’s limited geographic scope would mitigate any security risks. It took the United States a decade and a half to understand the immensity of the Trojan horse it had let in. Terabytes of the most sensitive corporate, personal, and government data were redirected from all over North America to Beijing via China Telecom points of presence in the United States and Canada.32
There should no longer be any dispute concerning the need to defend against Huawei and its role in China’s security apparatus. In 2019, a series of investigations revealed incontrovertible evidence of the grave national security danger associated with security vulnerabilities in a wide array of Huawei’s telecommunications gear. An independent researcher found that many Huawei employees are simultaneously employed by China’s Ministry of State Security and the PLA’s intelligence arm. Furthermore, Huawei technicians have used intercepted cell data to help autocratic leaders in Africa spy on, locate, and silence political opposition.33 China’s use of major telecommunications companies to control communications networks and the internet overseas is a one-way street: American and other Western companies have little to no presence in the Chinese market. On the global scale, with tremendous subsidies, illicit financing techniques, and industrial espionage, Chinese companies are attaining monopolistic control of the industry, in another example of how a failure to defend against Chinese economic aggression turned a strength of free-market economies into a weakness.34 A priority area for multinational cooperation should be the development of infrastructure broadly and, in particular, 5G communications to develop trusted networks that protect sensitive and proprietary data.
The United States and other free and open societies must work together to defend against the broad range of Chinese economic aggression to include unfair trade and economic practices. The Obama administration attempted to counter China’s unfair trade practices with a painstakingly negotiated multilateral trade agreement with eleven nations, including seven from the Asia-Pacific region. The Trans-Pacific Partnership, however, would have met fatal opposition in either a Hillary Clinton or a Donald Trump administration after 2017. In 2018, the Trump administration imposed the first in a series of escalating tariffs on Chinese imports as a defensive measure against Chinese industrial overcapacity, overproduction, and dumping of products on the international market. Although the national security justification for initial tariffs on steel and aluminum (and simultaneous tariffs on those products imported from other countries, including close allies) was questionable, the subsequent “trade war” that followed marked a return of the United States to the arena of economic competition with China. Subsequent tariffs lent a sense of urgency to the extended negotiations, mainly between the exceptionally knowledgeable and determined U.S. trade representative Robert Lighthizer and China’s vice premier, Liu He. The initial result was a phase-one trade deal that President Trump and the vice premier signed in January 2020. More important than Chinese promises to buy more U.S. goods were pledges to reduce barriers to entry to the Chinese market, to avoid currency manipulation, and to implement a new Chinese law to protect intellectual property and sensitive technology. The trade deal, however, marked only the end of the beginning of what will be a protracted competition with the United States and its fellow free-market economies on one side versus China and countries that opt into its statist economic model on the other. The grievances concerning China’s unfair economic practices (e.g., government subsidies to state-owned enterprises) are likely to prove intractable because the party cannot address those grievances without loosening its grip on power.
AS CHINA protects and promotes its statist economic model, it will be important for the United States and like-minded countries to demonstrate collective resolve. Otherwise, China will take a divide-and-conquer approach. Multinational cooperation will also prove vital to protecting the sanctity and usefulness of international organizations such as the WTO, which the CCP seeks to subvert and bend toward its interests.
The need to compete within international organizations extends beyond trade and economic practices. China has systematically embedded officials in key high-ranking management positions in major global organizations. In 2016, for example, it used the secretary generalship position of the International Civil Aviation Organization (ICAO) to aid in its campaign of diplomatic isolation toward Taiwan. And it has used the United Nations Human Rights Council to advance CCP norms that allow states to justify abuses in pursuit of national interests.
China’s most egregious abuse of an international organization centers on its membership in the World Trade Organization. When it signed the WTO accession agreement in 2001, Beijing made many commitments that remained unfulfilled nearly two decades later. These included refusing to report state subsidies enjoyed by Chinese firms and continuing the practice of forcing foreign firms to transfer proprietary core technologies as the price for access to the Chinese market. Because China threatens economic retaliation, few firms bring complaints to the WTO. In addition to co-option and coercion, the CCP added concealment, changing its rules to make transfers “voluntary,” although they are still mandatory to gain access to the market. China continues to claim special status as a developing market and argues, essentially, that it should enjoy global market access while failing to adhere to global rules and standards. The United States and other nations committed to free, fair, and reciprocal trade may at some point have to consider threatening China’s removal from the WTO if it does not reform its practices and adhere to the standards met by that body’s other members.
A natural economic “decoupling” is occurring between China and free-market economies based not only on unfair economic practices, but also on the increasing risk of doing business with an authoritarian regime. The United States might help organize that decoupling in a way that protects against slowing economic growth and disruptions to global supply chains. The most effective countermeasures to CCP policies lie in the private sector. China’s dishonest tactics and abuses have been uncovered, and companies are questioning whether access to the Chinese market is worth the cost. The reduction of investment in the Chinese market and the withdrawal of manufacturing and other industries from China may prove to be the only way to convince CCP leaders that true economic reform is in their best interest.
THE UNITED States and other free and open societies should be confident. There are opportunities to compete effectively, counter CCP aggression, and encourage internal change. China’s behavior is galvanizing opposition among countries that do not want to be vassal states to the Middle Kingdom. Meanwhile, inside China, the tightening of control is also eliciting opposition among those who did sense the prospect of liberalization during the reform period. Despite the outward confidence of Li Keqiang and other officials, many Chinese intellectuals, businesspeople, and policymakers are increasingly aware that they have failed to solve fundamental problems in their society and economy. Many feel as if they are sitting on a powder keg of instability. The 2019–2020 protests in Hong Kong accentuated that reality, as did slowing economic growth and public anger over deficiencies and dishonesty in the government handling of the novel coronavirus. Even in the area of technology development and application under programs like Made in China 2025, it is not clear that the party’s bold attempt to create an autarchic economic powerhouse will succeed. The CCP’s obsession with control is not compatible with the academic and entrepreneurial freedom foundational to innovation and competition in the global market. Moreover, the party’s attempt at social engineering under the one-child policy in place between 1979 and 2015 resulted in a rapidly aging population with vast gender imbalances. The implications of that demographic distortion are unclear but are certain to be profoundly negative.
Still, more important than our recognition of the relative strengths of our system to China’s is our determination to protect those strengths. We might learn from China’s accomplishments in pursuit of “comprehensive national strength.” In particular, the United States and other nations might use the competition with China to galvanize improvements in areas where they are lagging. Those initiatives might include educational reform, improvements to infrastructure, and a sound approach to economic statecraft that better integrates public and private investment consistent with free-market principles.
SOME HAVE argued that competition with China is dangerous because it is tantamount to a Thucydides Trap. This was coined to express the high likelihood of a military conflict between a rising power (China) and a declining power (the United States), that emerges from a long-term structural change in global power.35 The way to avoid the trap is to neither gravitate toward war nor toward passive accommodation, the most extreme of the potential options, but instead to find a middle way. When engaging with our Chinese counterparts, I explained our need to compete fairly as the best means of avoiding confrontation. Had the United States remained complacent about China’s violations of international law and national sovereignty in the South China Sea (e.g., China’s continued reclamation and militarization efforts), conflict would have become more likely. Had we remained inactive as China used state actors to steal key U.S. technology, their clandestine campaigns would have grown more aggressive rather than have decreased in scale. Transparent competition can prevent unnecessary escalation between the two countries and enable cooperation on pressing challenges where interests overlap. Competition need not foreclose on cooperation on problems such as climate change, environmental protection, food and water security, pandemic prevention and response, and even North Korea’s nuclear and missile programs.
But it seems likely that an economic slowdown will heighten the CCP’s fears and encourage more draconian means of ensuring its exclusive grip on power and greater efforts to blame the United States and others for China’s problems. The unsound economic policies that the CCP pursued to catch up to and surpass the United States and the free world may, paradoxically, prevent its leaders from delivering on the triumphant narrative encapsulated in the China Dream.36 Possessing neither democracy’s ability for the people to administer correctives from within the system nor the tolerance for peaceful expression of discontent, China could see the possibility of active opposition to the party. The CCP’s slow response to the coronavirus outbreak in early 2020, as local officials initially tried to cover it up and then used ham-handed censorship to stifle criticism of the party, were indicators of the system’s weakness. In anticipation of potential opposition, the party is racing to perfect its technology-enabled police state. It will likely intensify these efforts. And as economic growth slows and party leaders’ anxiety grows, China’s foreign policy and military strategy could lead to dangerous confrontation in flashpoints such as the South China Sea, the Taiwan Strait, and the Senkaku Islands. The Chinese have a saying for what could occur: “to shoot accidentally while polishing a gun” (cā qiāng zǒu huǒ (擦枪走火). That is why the United States and its allies must possess the will and military capabilities to convince the CCP that it cannot accomplish objectives through the use of force.
The United States and other nations must counter the party’s narrative that any accusations are meant to “keep China down” by containing it. Competing effectively with China diplomatically and economically as well as militarily should be understood as the best way to avoid confrontation. In 2019, at an event in the Chinese embassy, Chinese ambassador Cui Tiankai delivered a speech during which he portrayed the new U.S. approach to China as an effort to arrest China’s rise and deny its people the promise of the China Dream. Matt Pottinger responded in Mandarin with an explanation of the shift in language from cooperation and engagement to competition. He quoted Confucius’s doctrine of the rectification of names: “If names cannot be correct, then language is not in accordance with the truth of things. And if language is not in accordance with the truth of things, affairs cannot be carried on to success” (míng bùzhèng, zé yán bù shùn; yán bù shùn, zé shì bùchéng 名不正, 则言不; 言不顺, 则事不成).33 Competition should aim to convince Chairman Xi and party leaders that they can achieve enough of their dream without doing so at the expense of their peoples’ rights or the security, sovereignty, and prosperity of other nations’ citizens.