Converging Strategy on China

In an analytical and ideological convergence, atypical for official Washington these days, the Republican-led House of Representatives China Task Force (CTF) and the Democratic Chairman of the House Intelligence Committee have simultaneously, but separately, concluded that China is the leading national security and economic danger to the United States. Both determined that the country is unprepared for this new reality – “by a longshot.”

The two congressional reports led a raft of new analyses on the intensifying competition between the U.S. and China, from clean energy to nuclear power to strategic minerals.

The intelligence committee assessment honed-in on a central reality of the 21st century – “China views competition with the United States unfolding in ideological and zero-sum terms.” It also noted that the U.S. must be prepared to respond to “soft threats” including those related to climate change. And it made clear that, “the United States cannot give up on global leadership, because if it does, China will gladly step in with its malign intentions.”

The CTF recommendations primarily focus on building higher barriers against China’s ideological and economic influence in the U.S., countering them militarily, and restoring and enhancing domestic supply lines and R&D.

But it also addressed some of the core issues highlighted by the other analyses. It specifically identified the Made in China (MIC) initiative as “a direct threat to U.S. economic and national security.” In part this is because of the potential for China to “dominate international standards development” and institutions. It noted that, “U.S. experts have traditionally been leaders in international standards development” but that, “there is a concern that the U.S. is losing its edge.”

Related to this was a key finding that China is pursuing aggressive efforts under the Belt and Road Initiative (BRI) to, “dominate long-term energy relationships,” creating a “geostrategic and economic threat to the U.S,” and that ceding the global nuclear export market to China will result, “in an increase in proliferation and safety risks.”  

The confluence of China’s increasing power in setting international standards and the lagging ability of the U.S. to strongly compete in the international nuclear market is the potential knockout punch for any effort to modernize global nonproliferation standards as a new generation of nuclear technology approaches deployment.

While the two political parties in the U.S. seem to be coming to a meeting of the minds on the new threat environment, the financial community is still living in the past.

The CTF called on the Development Finance Corporation (DFC) and Export Import Bank among other government entities to “robustly counter” the BRI. And DFC has recently eliminated its restriction on financing overseas nuclear projects. But the government and investment worlds are out of synch on the value of nuclear power.

An example is the Vanguard Group’s launch of its new environmental, social, and governance (ESG) corporate bond exchange-traded fund. ESG index funds recently hit $250 billion as corporations and investors pursue socially conscious profits. But the Vanguard fund specifically screens out investments with “substantial revenue” derived from nuclear energy.

If one of the key concerns of ESG funds is the impact of climate change, then the Vanguard managers should be aware of the fact that nuclear power in the U.S. generates 54.8% of its carbon-free electricity. Next generation nuclear power is also a means of providing clean energy to developing economy nations that are facing growing populations, increasing energy demand, and the escalating ravages of climate change.

The challenges of this year have been an accelerant to the extreme partisanship that now dominates American politics and society. But there seems to be a slow dawning of reality on national security leaders in both parties that the country is facing a very new challenge from China. It is not like the U.S.-Russia Cold War and it cannot be managed by military means alone. The soft threats like the COVID-19 pandemic, climate change, and eroding international standards can impose significant economic and security damage without a shot being fired.

At the moment, we are governmentally, financially, and societally unprepared for this new danger. But, if the warring Democrats and Republicans can come to similar, if separate, conclusions about the threat, maybe they can find a way to collectively navigate the country through this new challenge. It is essential that they do.

Ken Luongo, President, Partnership for Global Security