China seeks to win on a battlefield more discrete but as consequential to American interests: supply chains.
Since the end of World War II, technological superiority has been the cornerstone of American military strategy. Over the past 80 years, the U.S. restrained the all-out world war conflict of the twentieth century with sufficient numbers, highly capable weaponry, and logistical agility to timely deliver force en masse. The success of this strategy has also shaped how China is challenging the existing U.S.-led world order. Violent confrontation while the U.S. maintains this technological advantage with a network of alliances would mean ruin. Instead, China seeks to win on a battlefield more discrete but as consequential to American interests: supply chains.
Framing this global supply chain competition in militaristic terms is important, given the potential impact to U.S. military readiness and power projection capabilities globally. While generations of U.S. scholars and government officials previously held up China as a model for countries seeking to integrate with the global economy through cooperation and peace, it is becoming increasingly clear that leaders in the Chinese Communist Party seek outcomes that run counter to American interests.[1] The systematic suppression of dissent in Hong Kong, the consistent threats from the People’s Liberation Army to conquer Taiwan, and the persecution of Uighur Muslims are all examples of how China will likely use its influence, particularly as the country expands an already dominant role in global supply chains.[2]
In addition to semiconductor production, China has invested substantially in artificial intelligence and its telecommunications infrastructure.
Semiconductors, November 15, 2017, (Jonas Svidras)
To what extent does China control supply chains and how will this impact the U.S. military? In microchips and semiconductors, which are used in everything from iPhones to the newest F-35 fighter jets, China is on track to achieve its goal to fulfill 70% of domestic production requirements by 2025 and to lead global production by 2030.[3] While the U.S. and its allies account for more than 53 percent of these technological building blocks and China lags at 6 percent, the country has earmarked $118 billion to further develop its domestic industry—a development which the Center for Strategic and International Studies assesses will be used for “intelligence, military, commercial, and political advantage.”[4] The loss in global market share would limit the pool of potential chip vendors that support the production of American military equipment and weapon systems.
Chinese development of artificial intelligence capabilities with 5G will exacerbate supply chain vulnerabilities, enabling greater technology theft and exposing data on materiel used in the production of U.S. and NATO weapons systems.
In addition to semiconductor production, China has invested substantially in artificial intelligence and its telecommunications infrastructure. This combination of data from the country’s global roll out of 5G and unprecedented processing capability will provide the Chinese government with unrivaled power to influence governments and control societies. [5] These capabilities also make it easier for Chinese agents to access proprietary and confidential information, posing a threat to supply chains as American businesses engage in commerce globally. The current FBI Director, Christopher Wray, has sounded the alarm on this issue, describing the scale of Chinese intellectual property theft as “the largest transfers of wealth in human history.”[6] Chinese development of artificial intelligence capabilities with 5G will exacerbate supply chain vulnerabilities, enabling greater technology theft and exposing data on materiel used in the production of U.S. and NATO weapons systems.
This infiltration into supply chains that support military requirements is not theoretical. In 2018, the Department of Defense published a report “Assessing and Strengthening the Manufacturing and Industrial Base and Supply Chain Resiliency of the United States,” which found that the majority of counterfeit electronics came from China and create vulnerabilities in American defense systems.[7] In 2019, the U.S. Justice Department uncovered and prosecuted cases involving Chinese-made cameras and surveillance equipment found on American military installations.[8] The presence of these electronics shows how military supply chains may be compromised. Even with fifth generation aircraft, autonomous naval vessels, or next generation squad weapons, Chinese exploitation of supply chain vulnerabilities may jeopardize U.S. Military capabilities by diminishing the readiness and potential production of these weapons systems.
Beyond domestic investment, China’s reach extends through foreign direct investment in the infrastructure of resource rich developing countries—particularly in Africa. Capturing supply of these rare-earth elements (REEs) that are critical to the production of technological components, China is posturing to corner global markets, raising concerns over the tremendous leverage it will have on the world economy writ large.[9] Chinese companies now control or have influence over 59 percent of global lithium reserves, a mineral important for the manufacture of batteries and other advanced electronics.[10] From the development of rare-earth element mines to the Belt and Road Initiative that aims to connect markets across Europe, Africa, Asia and Australia, China’s control of supply chains and infrastructure is unmatched. [11] Current estimates suggest that the Chinese government has given more than $1 trillion to foreign countries for this Belt and Road Initiative investment.[12] China has not yet asked for payment on the debt it holds over these countries—at least publicly—but the country’s dominant market positions and the substantial amount it is owed for these infrastructure projects will provide economic, military, and diplomatic leverage.[13]
By exploiting opportunities within supply chains to dominate markets critical to national security, assert undemocratic values, and control natural resource rich areas, China seeks to increase its relative position globally and limit how the U.S. could respond to protect its interests.
“The ultimate achievement is to defeat the enemy without even coming to battle” wrote Sun Tzu in the Art of War.[14] Some 1500 years later, modern China has embraced a derivative approach to do just that. By exploiting opportunities within supply chains to dominate markets critical to national security, assert undemocratic values, and control natural resource rich areas, China seeks to increase its relative position globally and limit how the U.S. could respond to protect its interests.
Rare Earth Oxides, US Department of Agriculture (Peggy Greb).
The extent of Chinese control vis-à-vis supply chains will ultimately depend on how the Biden administration, Congress, military services, and American businesses respond. To counter, the administration must renew American commitment to international organizations by placing the wealth and the credibility of the U.S. behind them. The International Monetary Fund and World Bank are ideally positioned to offer financing options for developing countries seeking modernization as an alternative to China’s ambiguous motivations and unsustainable lending through the Belt and Road Initiative. By engaging the international community to ensure borrowing countries can maintain their own sovereignty, the U.S. can reduce dependencies on China in global supply chains. Secondly, the U.S. government must partner with American businesses to develop domestic sources of supply for rare-earth elements and invest in materials science initiatives to explore alternatives and mitigate dependencies. In the past year, the U.S. Department of Defense has invested $13 billion in domestic mines, but this is only a start. [15] In 2018, the United States was solely dependent upon imports for the seventeen elements classified as rare-earth elements, with 80 percent sourced from China.[16] Every percent of market share that can be shifted away from China will reduce the country’s leverage over the U.S. and its allies.
…the ability of the U.S. to produce more weapons to meet the demand of a war with China would be limited because of bottlenecks in military supply chains.
More than merely raw material access, the American military services must consider the supply chains of potential weapons systems throughout the acquisitions process. Specifically, the services must evaluate the critical supply chain dependencies of weapon systems in addition to balancing cost, schedule, and technical performance. [17] With respect to China as a rival, it is particularly relevant that the U.S. military knows its critical dependencies in weapon system production because of China’s capacity to marshal a leading industrial base for its own weapons manufacturing. As David Alman and Heather Venable rightly point out, the principle of mass in warfare still matters in war, even while the U.S. maintains a technological edge over potential adversaries.[18] However, the ability of the U.S. to produce more weapons to meet the demand of a war with China would be limited because of bottlenecks in military supply chains. Scalability of production, dependency of materials, and manufacturing facility requirements for prospective weapon systems must be considered to ensure government-owned and -operated facilities, such as the military’s arsenals, academic centers, and private businesses that make up the American defense industrial base are ready to support potential requirements of the U.S. military in conflict and maintain a conventional military overmatch to deter China.[19]
China’s deliberate approach to secure critical resources abroad and leverage vulnerabilities in American supply chains simultaneously strengthens their position and limits the potential of the U.S. technological advantage. While China may not overtly confront the U.S. militarily, its influence on the global economy through supply chains is changing the equation of a formula that has maintained a peace between great powers. Even if great power competition does not lead to war, China’s crowning achievement in applying Sun Tzu’s maxim of victory without battle may be the extent of its control on global supply chains.
Evan Hanson is a logistics officer in the U.S. Air Force. The views expressed in this article are the author’s alone and do not reflect the official policy or position of the U.S. Air Force, the Department of Defense, or the U.S. government.
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Notes:
[1] Zheng Bijan, "China's "Peaceful Rise" to Great-Power Status," Foreign Affairs, September 1, 2005, https://www.foreignaffairs.com/articles/asia/2005-09-01/chinas-peaceful-rise-great-power-status; Larry Diamond, "The End of China's "Peaceful Rise," The American Interest, July 17, 2020, https://www.the-american-interest.com/2020/07/17/the-end-of-chinas-peaceful-rise/.
[2] James Pomfret, "Exclusive: China Plans Further Hong Kong Crackdown after Mass Arrest – Sources," Reuters, January 12, 2021, https://www.reuters.com/world/china/exclusive-china-plans-further-hong-kong-crackdown-after-mass-arrest-sources-2021-01-12/; Tony Munroe and Yew Lun Tian, "China Sharpens language, Warns Taiwan that Independence 'Means War'," Reuters, January 28, 2021, https://www.reuters.com/article/us-china-taiwan-idUSKBN29X0V3.
[3] Arthur Herman, "Biden, Semiconductors, and America's Future," Forbes, February 17, 2021, https://www.forbes.com/sites/arthurherman/2021/02/17/biden-semiconductors-and-americas-future/?sh=6f94ce734412; James Andrew Lewis, China's Pursuit of Semiconductor Independence, Center for Strategic and International Studies, published February 27, 2019, https://www.csis.org/analysis/chinas-pursuit-semiconductor-independence.
[4] Saif M. Khan, Alexander Mann, and Dahlia Peterson, The Semiconductor Supply Chain: Assessing National Competitiveness, CSET Issue Brief, Center for Security and Emerging Technology, accessed June 13, 2021, https://cset.georgetown.edu/wp-content/uploads/The-Semiconductor-Supply-Chain-Issue-Brief.pdf; Lewis, China's Pursuit of Semiconductor Independence.
[5] Ross Andersen, "The Panopticon Is Already Here," The Atlantic, September, 2020 issue, accessed June 13, 2021, https://www.theatlantic.com/magazine/archive/2020/09/china-ai-surveillance/614197/; Dan Strumpf, "U.S. vs. China in 5G: The Battle Isn't Even Close," The Wall Street Journal, November 9, 2020, https://www.wsj.com/articles/u-s-vs-china-in-5g-the-battle-isnt-even-close-11604959200.
[6] Russell Flannery, "China Theft of U.S. Information, IP One of Largest Wealth Transfers in History: FBI Chief," Forbes, August, 7, 2020, https://www.forbes.com/sites/russellflannery/2020/07/07/china-theft-of-us-information-ip-one-of-largest-wealth-transfers-in-history-fbi-chief/?sh=6379266f4440.
[7] Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States, Department of Defense, October 5, 2018, https://media.defense.gov/2018/Oct/05/2002048904/-1/-1/1/ASSESSING-AND-STRENGTHENING-THE-MANUFACTURING-AND%20DEFENSE-INDUSTRIAL-BASE-AND-SUPPLY-CHAIN-RESILIENCY.PDF.
[8] Nicole Hong, "A Military Camera Said 'Made in U.S.A.' The Screen Was in Chinese," The New York Times, November 7, 2019, https://www.nytimes.com/2019/11/07/nyregion/aventura-china-cameras.html.
[9] "Mining the Future," Foreign Policy, May 1, 2019, https://foreignpolicy.com/2019/05/01/mining-the-future-china-critical-minerals-metals/; "U.S. Dependence on China's Rare Earth: Trade War Vulnerability," Reuters, June 27, 2019, https://www.reuters.com/article/us-usa-trade-china-rareearth-explainer/u-s-dependence-on-chinas-rare-earth-trade-war-vulnerability-idUSKCN1TS3AQ.
[10] Jakob Puckett, "America and China's Chess Match for the Future of Green Energy," The National Interest, November 28, 2020, https://nationalinterest.org/blog/buzz/america-and-china%E2%80%99s-chess-match-future-green-energy-173358.
[11] Andrew Chatzky and James McBride, “China's Massive Belt and Road Initiative,” Council on Foreign Relations, January 28, 2020, https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative.
[12] Dylan Gerstel, “It’s a (Debt) Trap! Managing China-IMF Cooperation Across the Belt and Road,” Center for Strategic and International Studies, accessed June 13, 2021, https://www.csis.org/npfp/its-debt-trap-managing-china-imf-cooperation-across-belt-and-road.
[13] Deborah Brautigam and Meg Rithmire, 2021, “The Chinese ‘Debt Trap’ Is a Myth,” The Atlantic, February 6, 2021, https://www.theatlantic.com/international/archive/2021/02/china-debt-trap-diplomacy/617953/.
[14] Sun Tzu, The Art of War, (London: Amber Books Ltd, 2011), 17.
[15] Ernest Scheyder, "Pentagon Awards $13 Million in Rare Earths Funding to U.S. Projects," Reuters, November 18, 2020, https://www.reuters.com/article/usa-rareearths-idINKBN27Y2F0.
[16] Sabri Ben-Achour, “The U.S. is Trying to Reclaim its Rare-Earth Mantle,” Marketplace, April 30, 2021, https://www.marketplace.org/2021/04/30/the-u-s-is-trying-to-reclaim-its-rare-earth-mantle/.
[17] "Federal Acquisition Regulation," The U.S. Congress, accessed June 13, 2021, https://www.acquisition.gov/far/16.401.
[18] David Alman and Heather Venable, “Bending the Principle of Mass: Why that Approach No Longer Works for Airpower,” War on the Rocks, September 15, 2020, https://warontherocks.com/2020/09/bending-the-principle-of-mass-why-that-approach-no-longer-works-for-airpower/.
[19] Barry Watts, "The Defense Industrial Base: A National Security Imperative; Statement Before the House Armed Services Committee," Washington, DC: Center for Strategic and Budgetary Assessments, October 24, 2011, https://csbaonline.org/research/publications/the-defense-industrial-base-a-national-security-imperative/publication/1.