US-China Rivalry Exacerbates US Corporate Risk

It’s been more than two decades since US officials recognized the challenges of China’s return to strategic significance. When he ran for president, then-Governor George W. Bush said, the United States “made a mistake [in] calling China a strategic partner … We need to be tough and firm.”

A focus on counterterrorism after 9/11 and optimism that a growing Chinese economy would yield to political liberalization dominated the Bush and Obama administrations. However, hope for US-China relations was supplanted by the Trump and Biden administration’s recognition that the United States is in a strategic competition with China. This competitive lens defines the future of international security. American companies should be advised that they will be on the frontlines of this competition.

While record trade levels between the United States and China may prevent an immediate reversion to a new Cold War and conflict is not inevitable, some US defense leaders are forecasting China’s invasion of Taiwan in 2023, 2025, or 2027. If these forecasts are correct, President Joe Biden has said that the United States would come to the aid of Taiwan. Although the Chairman of the Joint Chiefs of Staff General Mark Milley told leaders to tone down the rhetoric on China, the Director of National Intelligence Avril Haines testified earlier that China does not want a war, but added that “if Beijing feared that a major conflict with the United States were imminent, it almost certainly would consider undertaking aggressive cyber operations against U.S. homeland critical infrastructure.” The globally interconnected nature of computer networks exacerbates the uncertainty in assessing this type of risk and challenges corporate leaders to analyze risk.

Geopolitical risk is not new, but geopolitics complicates risk assessment–US adversaries often consider American companies as extensions of the US government, making them targets.

American firms have been dealing with state-sponsored intellectual property theft for a long time. Then-Chairman of the House Intelligence Committee Mike Rogers said in 2011, “China’s economic espionage has reached an intolerable level and I believe that the United States and our allies in Europe and Asia have an obligation to confront Beijing and demand that they put a stop to this piracy.”

President Barack Obama and Xi Jinping declared in 2015 that neither government “will conduct or knowingly support cyber-enabled theft of intellectual property (IP), including trade secrets or other confidential business information for commercial advantage.” The agreement appeared to be short-lived, as Western companies continue to face significant intellectual property theft risk.