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.
There is no clearer sign that tensions in East Asia are warming up than the news that the Russians are deploying a new reconnaissance ship to snoop on US missile defense in Hawaii and Alaska. This comes after the Russians simulated a bombing run on a US missile defense radar in Japan. The Russians vehemently oppose increased US missile defences around Asia, which could compromise Russian offensive missile capabilities. The short-term catalyst for more US missile defense is North Korea, of course. Kim Jong-Un can only threaten to leave Seoul – or Washington – in a “sea of fire” so many times before the US begins shoring up defenses – even if the stories of threats may be poorly translated into English. The longer-term catalyst for increased US missile defence is China, which is developing anti-ship missiles designed to keep the US Navy further from its shores. There is a great irony the latest deployments by the US. For years, China and Russia, especially, have been glad to look the other way on North Korea’s threats because they tied up the US in Asia. Now that North Korea has ramped up the rhetoric to new levels, the US has all the justification it needs to boost its presence in the region – something neither Russia nor China wants. And they say the Cold War ended.
I hear little talk about this but I think it’s possibly some technology that is more or less universal will become balkanized, or divided between two or more poles in coming years. What do I mean by this? The internet has developed and spread through the period of unchecked, relatively borderless globalization. China’s rise occured roughly over the same period of the PC, Windows, up through the iPad and iPhone. But what the Western globe wants from technology platforms and what the Chinese want is different. There could be enough incentive in China-world to push for software, networks and more that are suited to their needs. At the same time, the wholesale ripping off of Western technology to advance China’s economy may spur the development of more technology that isn’t meant to adopted in China. This is all very nebulous. But you have to look at the objectives of the technology companies and the risks. For the West, the pitfall of a universal market is an endless vista of pirates and hackers. For the Chinese Communist Party and other authoritarian regimes, the very openess of technology conceived of by Western minds, represents a threat to their power. It doesn’t take much to imagine new softwares, networks (look at Weibo) one day even new protocals and code that isn’t designed to communicate on a world wide basis, but with a section of the world. And this is crucial to the notion of a new kind of Cold War. This balkanization first of the internet and then of technology itself, will allow other divides to emerge. The fact is, there are incentives on both sides of the Pacific to cordon off networks. That’s not to say the tech border won’t be porous. Maybe even highly so. But the flow of data and information may, over time, more closely reflect the culture, law and objectives of the two competitive regions. Am I wrong? I’d be very curious to hear other people’s thoughts on this.