The Pentagon’s recent release of its annual report on the Chinese military signals an ongoing shift in international politics. It points to a more challenging international environment fraught with risks, where states and companies alike will be exposed to an array of challenges including a greater toleration of human rights abuses and the increased politicisation of companies, raising questions for technological transfers, and increased operational risks. NGS Risk Analyst, Gary Abbott, considers the consequences for companies with a global footprint outside the west below:
August 2022 marked a substantial deterioration of relations between China and the United States and Taiwan. Following the visit by then-House Speaker Nancy Pelosi to Taiwan, China’s People’s Liberation Army (PLA) conducted a series of live-fire exercises and military drills in the South and East China Seas throughout August, including missiles flying over Taiwanese territory, and dozens of Chinese jets and warships manoeuvring over the median line (the de facto demarcation separating Taiwan’s and China’s maritime boundary) in the Taiwan Strait. The PLA was clear in its intentions for the drills, stating that the combined arms exercise was training for an “island attack” scenario, a clear reference to simulating an invasion of Taiwan.
Then, three months later, the United States Department of Defense (DOD) published the Pentagon’s annual review of the PRC (a 200-page document covering China’s military developments), which is overtly pessimistic about the future bilateral relations between Beijing and Washington. In particular, the report offers an important glimpse into the likely coming great power competition between Washington and Beijing, in which technology is increasingly politicised while both sides are likely to tug and pull for influence in the international community. The report signals the likely coming demise of Washington’s dominant position in international politics, raising questions for the rules-based order, globalisation and extended supply chains, technology diffusion, and human rights on the international stage. Combined, the PLA’s military drills on the doorstep of Taiwan and the Pentagon’s report signal an ongoing change in the international community, one fraught with challenges where companies with a global footprint outside the West are vulnerable to numerous operational threats and risks, ranging from supply chain disruption to increased risks for female travellers and members of the LGBT community.
The DOD annually submits its congressionally mandated report on the “Military and Security Developments involving the People’s Republic of China”, often referred to as the China Military Power Report. The DOD states that the report is an “authoritative assessment of the Department’s pacing challenge and charts the current source of the PRC’s military and security strategy”. The 200-page document is extensive in its subject matter, covering multiform topics ranging from Beijing’s national strategy and foreign policy to its economic policy. Overall, the document makes several important points that warrant close consideration:
In other words, the PRC is building the capabilities that could be used in a direct military setting, but also more ‘grey-zone’ capabilities that fall below the line of overt warfare, such as the use of cyber-technologies that could paralyse telecommunications and the electricity grid of an adversary, be it a state or a corporation.
In terms of time frames, Beijing has charged the PLA with accelerating the development of these conventional and emergent technologies (i.e. Cyber, AI, robotics) by 2027. By 2049, the PLA is charged with creating a ‘world class’ military, inferred by Washington that “the PRC will seek to develop a military by mid-century that is equal to – or in some cases superior to – the U.S. military”.
Beijing wants to dominate in the areas of smart cities, autonomous systems (which offer lethal autonomous weapons, such as robots and drones), AI, quantum technologies, biotechnology, and advanced material and manufacturing.
Further, it is noted that military action is only a method of last resort, which would be triggered by Taiwanese actions such as the declaration of independence, extensive civil unrest in Taiwan, indefinite delays to talks on unification, and the acquisition of nuclear weapons.
The document also notes the military options and proposed courses of action for Beijing. The first option is an air and maritime blockade that incorporates missile strikes on mainland Taiwan and the use of electronic warfare, such as network attacks, to force Taiwan to capitulate. This scenario would also likely include precision missile strikes against civilian (primarily communications and energy facilities), government, and military installations, in a bid to neutralise the country’s leadership and undermine public resolve. The other option is a large-scale invasion, which would involve a combined arms effort including the army, air force, and navy to invade Taiwan. The document highlights the high risks with the latter, in particular the possibility of international intervention. Overall, the most likely course of action for unification with Taiwan would be one with the least risks, reducing the likelihood of a full-scale invasion scenario, where failure would entail a severely weekend PLA and the likely undoing of President Xi and the Chinese Communist Party.
Short of internal collapse or a black-swan event that would derail China’s current military trajectory, the China Military Power Report 2022 alludes to several stark likely consequences for the international community, impacting an array of actors including states, corporations, and civil society.
Additionally, as China’s middle class expands, access to the Chinese consumer market is likely to be contingent on companies and states toeing Beijing’s political line, placing a premium on states and non-state actors avoiding criticisms of China and its territorial claims. Such problems have already been foreshadowed: in 2018 Beijing asked Marriott, Delta Airlines, and Zara to remove references to Taiwan as a country; all three complied, likely to avoid operational restrictions.
The Department of Defence’s 2022 report on the Chinese military implies a more contested international stage. In the decades after the Cold War, the United States’ hegemonic position in global politics offered relative stability that allowed companies to forget about the importance of politics. Under this order, stability has tended to prevail, a premium was placed on human rights, and technology was generally freely diffused across the globe. China’s rise and its likely competition with Washington is likely to unravel these developments, erecting barriers to productivity and economic gains, while increasing the tolerance of infringements on human rights, likely increasing the operational risk for companies with a global footprint outside the West. While the United States is often politically short-sighted – usually focusing on the next election cycle – and distracted with domestic grievances, Beijing has been focusing on how to return China to its historical place as a global power, goals that extend decades into the future. Through the utilisation of emergent technologies, Beijing will attempt to influence and shape the global system in its image, impacting states, corporations, and other and non-state actors alike. Overall, it is important to conclude on an important observation: economic activity does not occur in a political vacuum, something that will become increasingly clear over the coming decades.
Northcott Global Solutions provides risk assessments, tracking, security escorts, personal protective equipment, remote medical assistance and emergency evacuation.
Author: Gary Abbott, Risk Analyst, Northcott Global Solutions
Contact: gabbott@northcottglobalsolutions.com
Photo source: Chinese President Xi Jinping shakes hands with U.S. (then) Vice President Joe Biden inside the Great Hall of the People in Beijing December 4, 2013. REUTERS/Lintao Zhang.
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