As expected, the Biden Administration announced it will for the first time be imposing restrictions on American investment in sensitive Chinese sectors such as microelectronics, quantum computers and AI. It’s a decidedly modest step in view of the fact that a Center for Security and Emerging Technology study in Feb. 2023 found that U.S. investors were involved in transactions with Chinese AI companies that amounted to more than $40 billion between 2015 and 2021.
What the Biden Administration should be doing is addressing one of the great taboo subjects in America–the fact that American investors and CEOs have a stake in U.S. national security. Up until now, acting under the philosophy of globalization, business leaders have sought to make money in China without much regard for how their products are used. Any national security issues are the U.S. government’s problem, in their view.
But now it is abundantly clear that China is engaged in a hostile pattern of actions against the United States–sending the spy balloon over sensitive U.S. military installations to try to detect their communications frequencies and embedding malware in U.S. critical infrastructure such as power grids and communications systems. And as Michael McLaughlin and my book, Battlefield Cyber, proves beyond a shadow of a doubt that Chinese state-supported actors have deeply penetrated American computer systems and are engaged in massive patterns of technology theft, compilation of data about Americans of high interest, and the spread of disinformation through social media as well as more conventional media that China either owns or seeks to influence.
This is a kind of war. It is not traditional kinetic war. It is a war in the shadows. It is a different pattern of conflict than Americans have ever witnessed. U.S. companies are caught in a terrible bind. Many of their IT systems have been penetrated and there are even suspicions that Microsoft’s software has been compromised. (Chinese hackers were able to obtain Microsoft’s email encryption keys.) Apple is a complete captive to the Chinese party-state.
President Biden seems to be placing great faith in the power of diplomacy with Xi Jinping. But at the same time, he should be quietly conferring with CEOs and demonstrating to them that the U.S.-China game has permanently changed. He should use a mix of sticks and carrots to persuade them to ease back on any technology that carries military or surveillance implications. Otherwise, America loses.
