A failure to understand

A disturbing article by David Goldman highlights the American establishment’s failure to correctly ascertain the contours of China’s grand strategy, and the unfolding and soon-to-be highly unpleasant (for the US) consequences of said failure:

Not only the Chinese, but South Korean, Japanese, British and other teams are building the capability to embed quantum communications in the new 5G networks. Not only will China go dark to U.S. signals intelligence; the rest of the world will, too, and in short order. Huawei’s 5G systems will wipe out America’s longstanding advantage in electronic eavesdropping. The U.S. intelligence community spends $80 billion a year, mostly on SIGINT, and the whole investment is at risk. […]

Huawei owns 40 percent of the patents related to fifth-generation broadband, largely because it spent twice as much on research and development as its two largest rivals (Ericsson and Nokia) combined. The strategic challenge to the United States comes not from Chinese technology theft, obnoxious as that is, but from Chinese innovation backed by state resources. The American intelligence community realized too late that China had gained the upper hand, and convinced the Trump administration to try to postpone the 5G rollout until it could work out what to do next. The failure is of such catastrophic proportions that no one in a position of responsibility dare acknowledge it for fear of taking the blame.

Domination of E-Commerce and E-Finance

Huawei’s vision of a global broadband market under its domination is hardly a secret. This is a case where China has advertised its intentions while the United States ignored the issue. Since 2011, the company’s website has promulgated an “eco-system” enabled by broadband networks that in turn would bring in Chinese e-commerce, e-finance, logistics, and marketing—in short, the whole array of business and financial services that will integrate the labor of billions of people into the greater Chinese model.

The world will become a Chinese company store: Chinese banks will lend the money, Huawei will build the broadband network and sell the handsets, Alibaba and JD.Com will market the products, Ant Financial will make micro-loans, and Chinese companies will build airports and railroads and ports. […] Among other things, Huawei is building most of Mexico’s new national broadband network, including 5G capability, in a consortium with Nokia financed by a group led by Morgan Stanley and the International Finance Corporation. Huawei also dominates telecommunications infrastructure in Brazil and other Latin American countries. China’s tech dominance in America’s neighborhood, remarkably, has occasioned no official comment from Washington.

In my view, this is far more alarming than what Gertz envisions. He writes, “China will control all deals and win any business arrangements it seeks by dominating the information domain and thus learning the positions of bidders and buyers. All Chinese companies will be given advantages in the marketplace.”

That simply isn’t the way things work. China will lock whole countries into Chinese hardware through state-financed national broadband networks, including Brazil and Mexico, where construction is underway. It understands the network effect that made Amazon and Facebook dominant players in the U.S. market, and will use its financial and technological head start to establish the same sort of virtual monopoly for Chinese companies throughout the Global South.

China envisions a virtual empire, with military deployments to protect key trade routes, starting with oil from the Persian Gulf. China’s navy established its first overseas base in Djibouti last year. Meanwhile China has invested heavily in high-tech weaponry, including satellite killers. During the first minutes of war, the United States and China would destroy each other’s communications and reconnaissance satellites. But China has a network of thousands of high-altitude balloons around its coasts, too many for U.S. forces to destroy.

And the money quote:

As we examine the details, the picture of a Soviet-style communist regime bent on world domination falls apart. China’s concept of world domination is so different from what we imagine that it has halfway come to fruition before we noticed it.

Quite.

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