What are the Chinese looking for? All. – by Danielle Pletka
In 2018, in the small hamlet of Pordenone, in northern Italy, a company known as Alpi Aviation SRL, a manufacturer of light aircraft and mini-drones used by the Italian army in Afghanistan, was acquired by a new Hong Kong company called Mars Information Technology. . It was then that the story, reported recently by the the Wall Street newspaper, becomes interesting. Mars, Italian investigators concluded, was a shell company for two Chinese state-owned and local government companies, China Railway Rolling Stock Corp., or CRRC, and “an investment group controlled by the Wuxi municipal government. , a city near Shanghai. “What do a rail joint-stock company and a local investment group want from an Italian drone maker?
The same things the Chinese government wants across Europe, Africa, the Middle East, Latin America and, perhaps most importantly, the United States: artificial intelligence technology, military technology, and avionics. advanced, monitoring equipment, power supply, etc. You name it, Beijing wants it, wants to own it, and most of the time, doesn’t want you to know exactly who is using it and for what.
Return to the little Alpi. Italian authorities believe Chinese buyers have significantly overpaid their majority stake in the company. And a year after its first investment, the now Chinese company Alpi transferred a military drone to the PRC, found on the shipping manifest for both the product (which was not a “radio controlled aircraft model” ”) And its destination (apparently not an import fair in Shanghai).
On its own, this drone, as capable as it is, will not upset the global balance of power. But multiply Alpi’s story thousands of times, and an already well-known but largely unmanaged problem becomes a little more visible. And for the curious, why can’t China build its own damn drones? Well, it can. But communism does not stimulate innovation like free societies do; and why do the work if you can steal it or buy it from someone else.
The question, as always, is what to do about it. And as liberal democracies focus on the growing threat posed by an expansionist, aggressive and increasingly dictatorial Chinese Communist Party, there is a myriad of ideas, a growing consensus that “something” must be done. But there is almost no consensus on “what” needs to be done.
A victory has been won for those who have long argued over the threat posed by China: the challenge is now contested only by the most ardent sycophants of the Middle Empire. That’s it, however. The United States has tightened up some export controls on sensitive technology and probably has the best global system for screening foreign investment under its process called the Committee on Foreign Investment in the United States (CFIUS). Presumably, the Office of Personnel Management locked the barn door after the 2015 loss of more than 22 million highly sensitive files of government employees, their families and friends. Fortunately, Lockheed no longer has Chinese spyware in its system. But the scope of illicit and lawful Chinese investment and theft of US technology and goods remains very high.
At the tip of the iceberg, according to researchers at the Georgetown Center for Security and Emerging Technologies, the Chinese People’s Liberation Army is investing heavily in artificial intelligence, leveraging technology and capital Americans to improve their game on everything from the back-end. surveillance and arming equipment. They also note that “the overwhelming majority of advanced computer chips at the heart of China’s military AI systems are designed by US companies like Intel, NVIDIA and Xilinx, and manufactured in Taiwan. We have found that the vendors are in fact depicting NVIDIA branded processors in their product photos, clearly proving the role American technology is playing in China’s advancement. (China is investing heavily in its own semiconductor manufacturing, and experts believe that without substantial capital investment here in the United States, China will account for over 80% of the global market by 2030. months in Capitol Hill, although House and Senate leaders have announced they will move it late Wednesday.)
Responding to congressional mandates, the Defense Ministry also refers to contributors “Communist Chinese military companies operating indirectly or directly in the United States” and “Military-Civil Fusion” (MCF, primarily Chinese public-private partnerships). The DOD provides now-completed aggregate listings in accordance with a Biden Executive Order (which recast orders from the Trump administration) attempting to identify, list, and limit sales and investments of U.S. companies to those listed. Confused? Indeed. It should come as no surprise, then, that research on the companies involved, listed on which lists, compiled by which agency, restricting which activity, is dominated by links to law firms excited about the opportunity to help companies. Americans to navigate the thicket of regulations.
Despite the dispersed nature of U.S. regulations and bans (which bizarrely prohibit only companies on the list of Chinese companies in the military-industrial complex from listing on U.S. stock exchanges, allowing everyone else to access U.S. capital and investments by American pension funds), the United States is a true paragon of clarity and purpose in relation to Europe. A 2020 study by a Dutch consulting firm looked at 650 Chinese investments in Europe since 2010, finding that almost half have “high or moderate involvement of state-owned or state-controlled companies, some of which are in technology. peak “. And as in the United States, the question of “beneficial ownership – who really is the ultimate buyer / investor – is too often hidden in a labyrinthine labyrinth of holding companies, front companies and European fronts.
What are the Chinese looking for? Well, everything. Billions of oil and gas investments in Mozambique. Billions of non-traditional oil and gas projects in the United States. Schist in Canada. Egypt. Kazakhstan. Dozens and dozens of oil projects in Iraq. In short, Chinese oil production abroad is increasing by leaps and bounds (in many cases, Chinese state-owned companies are looking to buy these assets from US companies, especially in Iraq). Some of these investments are direct purchases by the Chinese state or subsidized by the state of foreign oil and alternative assets; some are indirect efforts to control key infrastructure sectors through Belt and Road debt trap diplomacy (see, for example, Hambantota International Port in Sri Lanka).
Ideas on how to fix the problem run the gamut. Some have suggested revitalizing the CoCom (the Coordinating Committee for Multilateral Export Controls) which regulated arms exports during the Cold War. But CoCom has been replaced by the much weaker Wassenaar Arrangement, which is more concerned with transparency than regulating sales of militarily useful products, let alone combating Chinese aggression. (Not to mention that Russia is in fact a member of Wassenaar.) Others have suggested strengthening Wassenaar and adding tech sourcing to required disclosures.
The Trump administration has taken a more frontal and one-sided approach, directly sanctioning and banning Chinese companies, attacking U.S.-China trade and Chinese exports, and targeting European and other companies that welcome Chinese investment and equipment. strategic infrastructure of companies like Huawei. But the Biden administration, despite professions of concern, has slowed down Trump’s frenzy, in conflict between European complaints about American brutality and a willingness to co-opt the Chinese to join the fight against climate change. .
Still others have suggested that the Group of 7 industrialized nations organize to compete with China and coordinate a more unified strategy to address Beijing’s panoply of political, economic and military challenges. And indeed, the G7 agreed to do just that, but with worrying murmurs from Germany about the need for “nuance” and partnership. Additional suggestions included creating a network of democratic nations to trade with each other, a closed virtuous circle of capitalist democracies that would agree to sell themselves out and exclude the bad guys in Moscow and Beijing.
Neither of these ideas are terrible, and some may actually limit Chinese investment and theft, and slightly hamper its strengthening of defense. But – and it’s not a hot idea – the heck, it’s the details. Nations don’t want to stop doing business with China because it’s lucrative and necessary. Theoretically, it should be possible to split desirable and non-dual-use exports like plastic toys or filing cabinets from Huawei switching equipment and military drones. But it all requires leadership, unlikely from a Washington concerned with spending trillions and evaluating kindergarten programs. Europe will also fall short, having retreated further year on year. Those directly in the sights of China’s guns – Japan, Australia and India – have increased their coordination and fine-tuned their defenses. But that alone will not be enough to respond to a global effort by China to infiltrate Western economies, defense industries and international organizations.
The problem has been brought to light and there is a growing consensus on the risks and the need for a response. New speed bumps were erected. But a lot more is needed. Some insist that the world must wait for China to do something really blatant to push Western democracies to act. But each day that passes without an organized defense in place strengthens China’s hand. It would be nice to have a plan. Not a list of concerns and bullets. A plan executed.