Strategic Technology and Government Investment in Innovation (Essay 4)

Disclaimer: The following set of essays represent the views, opinions, and research of the author only and in no way reflect the policies or opinions of the United States Government.

Stop calling the CCP a near peer threat - the CCP was a near pear threat a decade ago - now they are just a threat.

The PRC strategy, or at least partial strategy, can be garnered from a book on modern day military and state strategy entitled, “Unrestricted Warfare,” or translated more aptly “Warfare Beyond Bounds,” written by two Peoples Liberation Army (PLA) Colonels, Qiao Liang and Wang Xiangsui. The book carefully lays out strategies that include a delicate balance of the diplomatic, information, military, and economic (DIME) instruments of national power to achieve Sino-influence around the globe. Qiao was quoted as stating that "the first rule of unrestricted warfare is that there are no rules, with nothing forbidden."[1] The book hones in on what the authors see as a blaring weakness in the United States modern military and state strategy. They point out that historically, the U.S. has relied on new and innovative technology to maintain military and economic state superiority around the globe to promote free markets and capitalism through western run institutions like the International Monetary Fund, World Trade Organization, and World Bank.[2] They conclude that the U.S. strategy has become unbalanced and is now detrimental to U.S. institutional expertise in the execution of the other instruments of national power outside of the military. This observation leads the authors to posit innovative ways to exploit this weakness in their strategy. The authors state that the future will not belong to states that, “use armed force to compel the enemy to submit to one’s will,” but rather belong to states that “use all means, including armed force or non-armed force, military and non-military, and lethal and non-lethal means to compel the enemy to accept one’s interest.”[3]

An Information Technology and Innovation Foundation (ITIF) report entitled, “Stopping China’s Mercantilism: A Doctrine of Constructive, Alliance-Backed Confrontation,” explored the PRC challenge the United States will face over the next decade and beyond. The report set the foundations of this challenge with the following statement: “There is a growing understanding that China is an outlier when it comes to global norms and rules governing trade, investment, and economic policy, and that the unremitting and even accelerating ‘innovation mercantilist’ behavior on the part of the Chinese government represents a threat not only to the U.S. economy, particularly its advanced industries, but indeed to the entire global economic and trade system.”[4]

Currently the Peoples Republic of China (PRC) has effectively executed the following strategies in an effort to gain a technological advantage over the United States. First, they have introduced high volumes of capital to drive Chinese industry development in key dual use technologies like 5G, AI, and Quantum Computing.[5] Second, they have clearly defined national strategic priorities for such technologies as well as tactical and operational requirements for them.[6] Third, they have aggressively pursued the use of equity investment capital to fund and capture technology through U.S. and European startups in addition to the use of espionage to access non-Sino intellectual property for national security and economic purposes.[7]?Finally, the PRC has essentially demonstrated no restraint when pursuing such technologies for their strategic ends.[8]

Taken directly from China’s 5-year strategy (2016-2020) document, the following paragraph demonstrates a concerted effort to take the global lead in technology innovation. The strategy states that China will, “Achieve significant results in innovation-driven development, ensure that business startups and innovation flourish, and see that total factor productivity is markedly improved. Science and technology will become more deeply embedded in the economy, the ingredients needed for innovation will be allocated to greater effect, major breakthroughs will be made in core technologies in key sectors, and China’s capacity for innovation will see an all-around improvement. Fulfillment of these goals will help China become a talent-rich country of innovation.”[9]

China’s Belt and Road Strategy demonstrates how adept the Chinese Communist Party (CCP) has become at executing with all instruments of national power to attain global strategic advantage and is analogous in its use of the strategies depicted in “Unrestricted Warfare”. China seeks to accomplish its strategic end state of establishing global, political, and economic influence through the subtle, and sometimes not so subtle, use of its economic, information, diplomatic, and military instruments of national power.

The China Market Strategy (Belt and Road), as described in its five-year plan, includes the proliferation of Chinese made 5G Technology around the globe and the use of Artificial Intelligence to manage the movement of goods across key nodes along their newly minted “silk road.”[10] The Chinese information strategy appears to encompass two separate and distinct narratives derived to convince the United States that China, as a nation still in growth, poses no threat to U.S. interests and simultaneously that China’s technological trajectory will allow it to dominate the world in AI, Quantum Computing, and 5G amongst other emergent dual use technologies. Both narratives are used to produce the same result within U.S. policy circles – for U.S. leaders to acquiesce and do nothing different with respect to its China strategy.[11]

The Chinese diplomatic strategy is equally telling through their use of ?“public diplomacy” as a long-term strategic communication effort to build a favorable foreign public perception and national image while achieving “mutual cross-cultural and cross-border understanding and relationships.”[12] They accomplish this diplomacy through cultural exchanges meant to highlight the history and providence of the Chinese people in addition to their public support of the Westphalian principles of non-intervention and state sovereignty.

Finally, over the past decade China has begun to exert itself militarily through the buildup of its military and space programs attempting to establish regional hegemony through the establishment of military bases in the South China Sea and an increased number of satellites put into orbit to include one that landed on the far side of the moon.[13] China’s slow and methodical use of its instruments of national power continues to provide the Chinese Communist Party with ever increasing influence around the world.

In August 2019, the return on investment (ROI) derived from one of China’s Sovereign Wealth funds saw the Chinese Investment Company (CIC) invest in “44 projects worth $26 billion under the government’s Belt and Road international trade route initiative.”[14] The strategy itself is not like the Marshall Plan executed by the United States post World War 2 to rebuild state economies ravaged by the war. Instead the “Belt and Road” initiative is an investment vehicle, for Chinese Investors and China’s sovereign wealth fund, with expectations for a return on that investment. Renowned Wharton Business School professor, Marshall W. Meyer, described it like this,?“Chinese financial institutions lend money for BRI projects in partner countries, and the construction contracts are awarded to mostly Chinese firms. A Chinese company [thus] receives much of the proceeds of the loan, but the host country has got the debt. If the [return on investment] isn’t sufficient to pay off the debt, China will repossess [the project, and it] becomes a debt-for-equity swap.”[15]

The U.S. Government business model for technology investment, development, and procurement differs from China in many ways but the following two are the most important to consider. First, China is able to martial its pseudo-command economy toward common national security ends.[16] Second, it does not have the clear separation between the commercial sector and public sector that exists within the United States.[17] The Chinese government can both drive and command its industry participants through access to capital, equity investment, clear national security priorities and overwhelming political authority.[18] These differences exist for very important reasons, and the evolution of the U.S. economy towards one more like that of the PRC would be both undesired and untenable. Nonetheless, these differences do offer the PRC certain, short-term advantages in the emerging strategic technology ecosystem; just as they offer potential lessons learned and investment strategies that could benefit the United States national security infrastructure.

[1] Liang Qiao and Xiangsui Wang, Unrestricted Warfare: China’s Master Plan to Destroy America (Pan American Pub, 2000).

[2] Qiao and Wang.

[3] Qiao and Wang.

[4] James Mulvenon, “Statement before the U.S.-China Economic and Security Review Commission ‘China, the United States, and Next Generation Connectivity,’ A Testimony By:,” n.d., 5.

[5] “Us-Tmt-5g-Deployment-Imperative.Pdf,” accessed November 7, 2019, https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-tmt-5g-deployment-imperative.pdf.

[6] “The 13th Five-Year Plan for Economic and Social Development of the Peoples Republic of China (2016-2020).Pdf,” accessed November 7, 2019, https://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf.

[7] “California Man Charged in Elaborate Chinese Spy Operation,” NBC News, accessed November 7, 2019, https://www.nbcnews.com/politics/justice-department/california-man-charged-elaborate-chinese-spy-operation-n1060446.

[8] Gallagher and DeVine, “Fifth-Generation (5G) Telecommunications Technologies: Issues for Congress.”

[9] “The 13th Five-Year Plan for Economic and Social Development of the Peoples Republic of China (2016-2020).Pdf.”

[10] “The 13th Five-Year Plan for Economic and Social Development of the Peoples Republic of China (2016-2020).Pdf.”

[11] “The World According to Thiel,” Text, Hoover Institution, accessed February 16, 2020, https://www.hoover.org/research/peter-thiel-transcript.

[12] Zhao Alexandre Huang and Rui Wang, “Building a Network to ‘Tell China Stories Well’: Chinese Diplomatic Communication Strategies on Twitter.” (International Journal of Communication, University of Southern California, Annenberg School for Communication & Journalism, 2019), https://halshs.archives-ouvertes.fr/halshs-02169217/document.

[13] “Latest News About Chinas Space Program | China in Space & China Space Missions | Chinese Rocket Launches & Space Station,” accessed February 16, 2020, https://www.space.com/topics/china-space-program.

[14] “UPDATE 1-China Sovereign Fund CIC Says Cautious of US Investment amid Trade War,” CNBC, September 20, 2019, https://www.cnbc.com/2019/09/20/reuters-america-update-1-china-sovereign-fund-cic-says-cautious-of-us-investment-amid-trade-war.html.

[15] Business Radio et al., “China’s Belt and Road Initiative: Why the Price Is Too High,” Knowledge@Wharton, accessed February 16, 2020, https://knowledge.wharton.upenn.edu/article/chinas-belt-and-road-initiative-why-the-price-is-too-high/.

[16] Ashley Feng, “We Can’t Tell If Chinese Firms Work for the Party,” Foreign Policy (blog), accessed October 20, 2019, https://foreignpolicy.com/2019/02/07/we-cant-tell-if-chinese-firms-work-for-the-party/.

[17] Feng.

[18] Feng.