Cold War: What we know now

The emerging consensus seems to be that while the US and China are trade partners in the physical world, they are adversaries online. The “good” news, is that this cyber competition is not limited to the US and China. Think Iran. Think Russia. But the US-China cyber-tug-of-war likely has some dynamics of its own.

While both sides would snoop on each other’s military capabilities, China, because of its state-controlled capitalism, links its military-run industrial espionage with its state-directed capitalism. What’s new about this? If the US were doing it, you’d have direct linkages between say the CIA with Goldman Sachs. That’s not to say some CIA guys don’t know some GS guys. But it would be GS calling the CIA and asking for the insider investment information on coal mining deals in Myanmar, which the CIA would duly provide. Under US law, it doesn’t work this way. There are safeguards. And yes, there are violations. But as a rule, you wouldn’t have an overt linkage between the state spies and industry.

But in the Chinese model, it looks like a matter of industry needing plans of more efficient power grids, for example, and then turning to the PLA to secure those plans from abroad.

This is a game changer for the US, and the way US industries must plan and act in the current business environment.

In the near-term, I think this presents a huge, existential challenge for the US economy and government.

In the long-term, all things being equal, I see the seeds of China’s Japanification through this process. And so while China postures, it hides what is a structural, cultural fragility that will manifest itself more clearly in coming years.

In terms of Cold Wars, that is where we are: A US-China Cold War online, but US-China trade partnership in the physical world.

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