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:
Introduction
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’s China Military Power Report 2022
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:
- The PLA is increasing its military capabilities to challenge the United States: As part of its new operational concept dubbed “Multi-Domain Precision Warfare” (MDPW), China is increasing its military capabilities along several dimensions. This includes developments in nuclear weapons, chemical and biological weapons, electronic warfare, cyberspace capabilities, space capabilities, and conventional modernisation, such as the increased use of modern armoured vehicles, jets, and warships. The report highlights that these developments are a direct means to “fight and win wars against a strong enemy (a euphemism likely for the United States)” and to “counter an intervention by a third party in a conflict along the PRC’s periphery, and project power globally”. Unlike Russia, which focused primarily on more conventional means in its war with Ukraine, Beijing is placing an emphasis on cyberwarfare, which “presents a significant, persistent threat of cyber-enabled espionage and attack on an adversary’s military and critical infrastructure systems”.
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 emergent technologies and achieve technological independence: Similar to the above, with an emphasis placed on the importance of emergent technologies for future warfare, Beijing wants to dominate new technological developments and achieve technological independence. The latter is a likely bid to reduce the reliance on Western technology that could be leveraged against Beijing, as occurred in October 2022 when Washington implemented restrictions on the export of semiconductors to China.
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.
- Beijing intends to shape international politics to fit its interests: Unlike other emerging powers, such as India, China is clear on its intention of becoming a great power that has the capacity to shape the international system by 2049 (the centenary of the People’s Republic of China). As noted by the report: “the People’s Republic of China is the only competitor with the intent and, increasingly, the capacity to reshape the international order”. In practice, this is a nod to the likelihood of Beijing reforming the rules that underpin the international community (norms such as good governance, which place a premium on the rule of law, democracy, and human rights).
- Taiwan plays a central role in Beijing’s future plans for the international order: The report highlights the importance of Taiwan for China’s “national rejuvenation” (a reference to when China returns to its historical place as a world leader with substantial economic, political, and military power). According to the report reunification with Taiwan “is one of the fundamental conditions of national rejuvenation”, driven by the assumption that a divided China is a weak one.
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.
The Array of Likely Challenges Ahead for the International Community
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.
- Increased acceptance of authoritarianism and human rights abuses: As China continues its upward trajectory along economic, military, and technological dimensions, the United States and its Western allies will be forced to compromise and tolerate infringements on human rights, or risk isolating bilateral relations. As seen with Afghanistan, North Korea, and Myanmar, Beijing is willing to cooperate with states that are shunned by the West, meaning that authoritarian states will have alternative bilateral options. To prevent isolating states and tilting them towards Beijing, Western policymakers will be forced to balance external relations with states that may impede upon human rights with domestic audiences that may be less tolerant of such regimes. In such a scenario, civil unrest by human rights groups in Western nations is likely to increase in frequency and scale over the coming years. This environment also raises concerns of increased tolerance for breaches of LGBT and women’s rights, increasing operational risks for companies with a global footprint.
- Decreased ability for the West to shape international society: Similar to the above, the West’s immense economic and military power historically coerced states into line, allowing for the emphasis on norms such as good governance, democracy, and human rights. Going forward, China’s rise will likely entail the relative decline of Western countries, meaning that coercive foreign policy tools such as economic sanctions are prone to be increasingly ineffective. Economic isolation will increasingly be circumvented by China, whose immense economy could blunt – though not completely undermine – Western sanctions regimes, something that occurred with Russia in 2022. In this scenario, China’s rise is likely to off-set an emphasis on Western norms, increasing the tolerance of non-democratic governance and infringements upon human rights.
- Increased power projection by Beijing: Going forward, China’s material rise will likely entail a greater operational footprint along several dimensions, allowing Beijing to increasingly shape the world in its image. In particular, with its emphasis on emergent technologies in the realms of cyberspace, electronic warfare, and AI, Beijing will be able to increasingly utilise grey zone tactics, which fall below the threshold of overt military action, against perceived adversaries. This scenario is likely to include targeted attacks against organisations or states critical of China, or those that fail to acknowledge Beijing’s sovereignty on contested territories, such as Taiwan.
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.
- Increased politicisation of technology and non-state institutions: As Washington increasingly views China’s material rise as a direct threat to the United States and the rules-based international order, companies and other non-state institutions are likely to face increased operational restrictions to reduce the PLA’s military capabilities. This is likely to include export restrictions, as occurred in October 2022 with semiconductors, and barriers to technological cooperation between Chinese and American institutions (such as universities and research institutes). On the flip side, Beijing’s perception of dual-use technologies (i.e. civilian and military) as vital for its military modernisation is likely to result in increased protection of technological advancements, particularly in the realms of robotics, AI, quantum computers, and autonomous systems. In this regard, the future international community is likely to be plagued by greater technological protectionism, leading to asymmetrical advancements and decreased cooperation in the realms of science and technology, potentially stifling gains in productivity (and thus economic growth) while increasing vulnerabilities to supply chain disruptions.
On the Path Towards a Bi-Polar World
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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