Negating China’s High-Tech Cyber Threat
The United States is making progress in understanding the national security threat posed by China’s high-tech sector and making progress against it.
Summing up years of research, my Hudson colleagues recently highlighted how:
China’s most destructive maneuver has been to subvert the miracle of free-market capitalism by turning international investment and trade into a weapon against the U.S. and its democratic allies. Through subsidies, forced technology transfers, and state-directed investment, the CCP [Chinese Communist Party] has planted itself on choke points in global manufacturing…[in] a coordinated strategy to attack U.S. vulnerabilities.…Supply-chain dominance is an economic weapon the CCP has built carefully through decades of manipulation.
The experts at Second Line of Defense have been issuing similar warnings about CCP-controlled tech companies like Huawei for decades.
Beijing’s rulers believe that realizing their great power aspirations requires establishing high-tech supremacy. They seek to leverage Chinese companies’ preeminent market position to reshape global tech standards, boost their status, and strengthen the People’s Liberation Army (PLA).
In his celebratory New Year’s speech, President Xi Jinping boasted of China’s recent achievements in artificial intelligence and other high-tech sectors under CCP leadership.
The PRC’s Military-Civil Fusion strategy and Chinese security laws and practices mandate that Chinese firms share tools and skills with the PLA. Chinese tech companies have helped the military acquire semiconductors, artificial intelligence, and other advanced technologies that underpin today’s modern weaponry.
CCP-controlled cyber technologies also generate hacking vulnerabilities that Chinese operators exploit to harvest sensitive data on behalf of the PRC intelligence community.
China’s massive domestic market, state subsidies, and other formal and informal instruments distort markets and crowd out competitors. In particular, lavish subsidization allows PRC firms to underprice foreign competitors and build market share at Americans’ expense.
Through these means, Huawei and other Chinese companies have embedded themselves throughout global telecommunications structures and expanded their worldwide footprint in everything from 5G infrastructure to enterprise networking equipment to artificial intelligence.
No single U.S. company had the size or breadth to effectively challenge Chinese firms operating with comprehensive CCP financial and political backing. In the global 5G ecosystem, Huawei commands a dominant share, while American firms, fragmented and lacking massive state backing, have struggled to match its reach. The U.S. intelligence community has warned that American companies must achieve a comparable scale to compete with these firms.
The Trump administration understands that sustaining long-term U.S. technological dominance in the national security sector requires proactive measures that empower American companies to provide quality products and services that can compete in a free and open marketplace based on merit alone. For example, the Department of Justice acted with foresight last year in approving the Hewlett Packard Enterprise–Juniper Networks merger.
Thanks to congressional and executive-branch actions, U.S. government agencies have decreased dependence on technology companies subject to Beijing’s influence for critical national security missions. Additionally, American diplomats throughout the world now more comprehensively help U.S. enterprises compete with their Chinese counterparts.
The new U.S. approach has given American innovators the freedom to compete and the scale to win. U.S. companies are gaining ground in several networking segments long dominated by Huawei, despite competing without its subsidies, political protection, and guaranteed domestic demand.
Stronger U.S. firms are better positioned to invest in next-generation technologies, including artificial intelligence, cloud infrastructure, and secure data centers. The Department of War needs strong U.S. companies to provide the assets, skills, and other attributes required to design and produce cutting-edge defense technologies.
Having made progress in strengthening its homeland defenses against CCP-controlled technology, the United States should more proactively exploit opportunities to weaken PRC threats by shaping China’s internal market dynamics.
Chinese consumers, once encouraged to buy Huawei products as a patriotic duty, are becoming increasingly skeptical of the company. Reports from Chinese-language outlets describe growing resistance to what some now call a “patriotism tax,” as buyers question whether loyalty to a state-backed firm is worth higher prices, fewer choices, and declining quality.
Huawei’s recent struggles at home and abroad have exposed the fragility of dominance built on state support rather than market trust. It also suggests that other Chinese tech companies, including those in the emerging AI sector, are comparably vulnerable.
Two and a half decades ago, the United States overcame a comparably massive Soviet threat through enhanced defenses and proactive countermeasures, especially in the information space. Now that the United States is celebrating the 250th anniversary of the signing of the Declaration of Independence, it’s time to build on past successes to bring a better tomorrow.