FBI Now Joins in China Warmongering in Bizarre Speech in London with MI5 About Taiwan, Intellectual Property Theft

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The US is continuing to escalate with China, and as with Russia, both the logic and the pretexts are close to unhinged.

Before we proceed to discussing speeches given in London yesterday at MI5 headquarters to “London business leaders” by FBI director Christopher Wray and MI5 chief Ken McCallum, let us point out what ought to be obvious but for some bizarre reason isn’t. The US and its Western allies cannot hope to come out well in a conflict with China on top of its proxy war with Russia. The fact that the US and its allies are losing the conflict in Ukraine against Russia, where Russia has sent in a peacetime army which it is able to regularly rotate out for R&R, is deploying massive artillery barrages, day after day, with no apparent concern about supplies, has used long-range missiles to great effect, while the West is scraping the NATO supply cupboards dry and Ukraine is suffering massive troop losses in Donbass, ought to be focusing a few minds. But no! Because we are so convinced of our superiority, despite massive evidence otherwise (starting with not having won a war in decades), we’re now gonna go show China who’s boss too!

So what was the excuse for this first ever joint FBI-MI5 briefing? That China plays dirty and steals Western intellectual property! And we are supposed to believe this is news? Back when US businesses eagerly started setting up shop in China in the early 2000s after China entered the WTO, your humble blogger could not make sense of it. This was a Communist country, meaning there was no reason to thing they’d respect property rights. The Chinese have not done anything as gauche as expropriate factories. But it’s been known from the get-go that Chinese partners have insisted on technology transfer, which often means the foreign entrant soon finds its co-venturer setting up a directly competing operation.

And why is this a surprise? If you’re going to deindustrialize, um, offshore, the knowledge goes with the operations.

As for China purloining intellectual property, that’s hardly news either. Intellectual property theft was one of reasons Trump gave for imposing tariffs against China. From CNBC in 2018:

The new measures are designed to penalize China for trade practices that the Trump administration says involve stealing American companies’ intellectual property. They will primarily target certain products in the technology sector where China holds an advantage over the U.S.

Needless to say, it’s bizarre to see these agencies try to whip up a lot of upset about a long standing issue and then try to work in Taiwan. The BBC got the memo. From its story:

FBI director Christopher Wray said China was the “biggest long-term threat to our economic and national security” and had interfered in politics, including recent elections…

MI5 is now running seven times as many investigations related to activities of the Chinese Communist Party compared to 2018, he added.

The FBI’s Wray warned that if China was to forcibly take Taiwan it would “represent one of the most horrific business disruptions the world has ever seen”….

McCallum also said the challenge posed by the Chinese Communist Party was “game-changing”, while Wray called it “immense” and “breath-taking”.

Wray warned the audience – which included chief executives of businesses and senior figures from universities – that the Chinese government was “set on stealing your technology” using a range of tools.

We’ve embedded the prepared version of Wray’s speech at the end of this post. It is anything is even more disturbing than the BBC summary suggests.

The first it the heavy handed regime change signaling, that the US has no beef with the Chinese people, only their evil scheming Commie government. And following that logic, only the government and various government agents are depicted as stealing. If you read sites like China Law Blog that advise foreign entrants how to navigate in China, it quickly becomes clear that private companies are out to get Western companies’ know-how too. As one of my colleagues back at Sumitomo Bank said, “Why should you build a business? It’s so much easier to steal it.” A typical section:

We’ve seen the regional bureaus of China’s MSS — their Ministry of State Security — key in specifically on the innovation of certain Western companies it wants to ransack. And I’m talking about companies everywhere from big cities to small towns — from Fortune 100s to start-ups, folks that focus on everything from aviation, to AI, to pharma. We’ve even caught people affiliated with Chinese companies out in the U.S. heartland, sneaking into fields to dig up proprietary, genetically modified seeds, which would have cost them nearly a decade and billions in research to develop themselves.

And those efforts pale in comparison to their lavishly resourced hacking program that’s bigger than that of every other major country combined.

The Chinese Government sees cyber as the pathway to cheat and steal on a massive scale.

Lambert and I found the seed story to be overwrought. Surely the Chinese could buy them via cutouts.

Wray argues that all Chinese companies are China Inc:

To start with, a whole lot of Chinese companies are owned by the Chinese government — effectively the Chinese Communist Party. And often that ownership is indirect and not advertised. And those that aren’t owned outright are effectively beholden to the government all the same, as Chinese companies of any size are required to host a Communist Party cell to keep them in line.

So, when you deal with a Chinese company, know you’re also dealing with the Chinese government — that is, the MSS and the PLA [People’s Liberation Army] — too, almost like silent partners.

But the position that the Chinese government is in charge of everything is inconsistent with this statement just a few paragraphs later:

The Chinese government has also shut off much of the data that used to enable effective due diligence, making it much harder for a non-Chinese company to discern if the company it’s dealing with is, say, a subsidiary of a Chinese state-owned enterprise.


Since 2015, they have passed a series of laws that eat away at the rights and security of companies operating in China. For example, a 2017 law requires that if the Chinese government designates a company as “critical infrastructure,” that company must store its data in China — where, of course, their government has easier access to it.

Perhaps I am missing something, but it would be awfully hard for a foreign company operating in the US not to store its data here, as well as sending important higher level information back to the mother ship, at a minimum for tax, financial reporting, regulatory compliance, and practical reasons (sales people need access to customer lists). And we have the NSA bulk collecting everything that happens over the Web….and if you use encryption, you are putting up your hand to have the security state take special interest in you.

Wray also cites, as proof of China’s anti-democracy bona fides, that they interfered in a Congressional election to undermine the campaign of former Tiananmen Square protestor. That is nasty business, but after the Mossadeq, Allende, and Maidan coups, plus a slough of other regime chagne operations, it’s not as if we have the moral high ground.

I do suggest you read the article in full. It’s striking how Wray manages to keep the dial turned to 11. He gets to the Taiwan part:

That’s in part because, as you all know, there’s been a lot of discussion about the potential that China may try to forcibly takeover Taiwan. Were that to happen, it would represent one of the most horrific business disruptions the world has ever seen.

Mind you, China is giving reassurances about chip supplies if things get ugly:

Weirdly all Wray warns of is the loss of business equity, a larger-scale version of Western companies saying they took a total of $59 billion in hits for leaving Russia. Mind you, this was the result mainly of self-sanctions and certain US/EU sanctions, not Russian action. Nevertheless access to critical chips might be interrupted and that manufacturers would then suffer supply chain hiccups and production shortfalls similar to what the auto industry has experienced. And he does not contemplate China bringing the West to its knees, say by halting sales of pharmaceutical or more specific but still critical items like ascorbic acid to “unfriendly” countries.

Wray urges businessmen to work with the FBI and MI5 against Chinese threats. Frankly, I’d never let a law enforcement agency into my business. But maybe the big boys can compartmentalize what they get at.

But I want to get back to the opening question: why the escalation on yet another front? US allies have been buzzing parts of the Taiwan Straits that China insists are national waters. I’m not able to judge the merits of this claim but pushing China hard on this position is a recent development.

The US continues to send officials to Taiwan, even after Biden effectively promised to cut that out in a call to Xi early this year:

China is also upset about yet more arms sales to Taiwan, to the degree that General Wei Fenghe had a public spat with his counterpart, Defense Secretary Lloyd Austin, at a defense summit in Singapore last month.

I’m not able to vet this theory, but one view is that the US feels pressured to pry Taiwan away from China by 2024, since public opinion is allegedly back towards alignment with the mainland:

And make no mistake that the US is provoking China:

Both Ritter and Larry Johnson believe if the US were to try to stop a Chinese intervention in China (which IMHO could take the form of a blockade rather than an invasion), China could easily and probably would sink one of the US aircraft carriers set to “defend” Taiwan. Sadly, I suspect the US would welcome such a counterattack. Most Americans don’t care enough about Taiwan, let alone US intellectual property, to go to war. But the loss of 6,000 American lives?

The wee problem is that Ritter thinks the US response would be a tactical nuclear strike on a secondary Chinese city, which would lead China to light up the US. Bye bye world.

But maybe the Chinese will think twice:

00 Wray at MI5 July 5 2022
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  1. GramSci

    “We’ve even caught people affiliated with Chinese companies out in the U.S. heartland, sneaking into fields to dig up proprietary, genetically modified seeds, which would have cost them nearly a decade and billions in research to develop themselves.”

    That just goes to show the inferior intelligence of the yellow race. The stupid Chinese could have just bought those seeds! /s

    1. GramSci

      OMG! When I was 13 years old I won my small town’s Optimist Junior Oratorical Contest. I must say that Christopher Wray’s speech is the finest exemplar of the genre I have ever read! A must read! (/s)

      1. John

        Are you implying that the Director of the FBI has made a speech that would make a Junior Orator proud? Seems so to me and I endorse that position.

  2. Wyatt Powell

    This all reeks of early 2000s Bush Doctrine/MIC/Intelligence planning that said after we took care of Iraq and Afghanistan would could then focus on Iran. After that, with the Gulf Countries and North Africa already put down and shut up, Israel would be “safe” and the oil fields from the Med Sea to the Indus River would be plunderable for US/EU investment interests.

    We all know how that worked out.

    So whats the plan now? Breakup Russia and China into small republics? At the same time?!? Before 2024?!!!?! I didn’t believe the powers that be could surprise me anymore yet the always seem to find a way…

    Where does North Korea factor into that play? They stand by while their Guardian (China, which doesnt like them much anyway but I diagress) is ground into dust? They’ll see the writing on the wall and mobilize for war.

    This plan has absolutely 0%*** chance of working in the current situation, under current leadership, under the current time frame.

    The time to do any of this foolishness (if one was hell bent on doing it in the first place, I thought we could all co-exist in mutual prosperity, but there I go again with the hippie talk) was 1993.

    I want to grab the decisions makers in DC by their fat necks and scream “Your 30 years too late you FOOLS!, you feed the Dragon and now the Dragon is king, you showed him all your secrets, your strengths your weakness. You let Russia rebuild, let the SCO and CIS gain momentum.”

    At every turn they made the wrong decision to get the outcome they’ve wanted. The outcome belies the psychology… we must be number #1 and if we aren’t number #1 (in $ terms because we already are not #1 is most everything else) then f**k it! Burn it all down! Im in awe, truly, in awe at the stupidity on display.

    Its evil, its Hitlerian, even till the end Stalin and Mao believed they were doing what was best for their peoples and states. Hitler lost sight of that in the end and offered up the German people as sacrifices. (Granted Stalin and Mao werent invaded, and still did plenty of innocent bloodshed) But what the West is doing now is the battle of the Bulge Max, China in the Pacific and (essentially) Russian in the Atlantic. More to the point squeezing Asia and Most of Africa out of Western Neoliberalism into… post modern Industrialized Robotic Captalism? Neo-Socalism? A new -ism yet to be defined?

    And Hitler didnt have 2000+ High yield nuclear explosives either… and now every big player does. What hell could be unleashed

    ***Unless the US has UFO level tech ready to be deployed. If that was the case? Why mess with any of this??? They are supposed to bend gravity as “propulsion” at speeds unimaginable to us. One in the mid-60s sat over a nuclear missile silo and “messed” with everyone at the base. Arming and disarming the nuke, turning the base power on and off. Was that a Deep State, like Deeeeepppp State experiment to see what we could do with those crafts recovered in the 50s? Or was it the Aliens flexing and showing how feeble and insignificant we really are. “Your strongest weapon is nothing to me”. If we actually had any of this that worked… I dont understand how either 1. The US Empire hasn’t already completed its Fourth Reich fantasy land or (in a better world) 2. we aren’t all living in absolute paradise. Taking for granted that its not all a psyop… I think we are like monkeys trying to work a jet engine. We have “something” that we don’t understand on a fundamental level, its alien to us, its a different “tech tree” to ours.

    Please excuse my barely coherent rant, felt fiery this morning!

    -Wyatt A. H. Powell

  3. PlutoniumKun

    I suspect there are a number of reasons why the US is now provoking China, but two particular ones come to mind:

    1. The Biden administration is very weak internally – he seems to be completely incapable of pulling the reins on any official who oversteps the mark. So the neocon crowd are using the opportunity to win internal battles to push for the hardest possible line. In other words, this is not ‘the US provoking China’, this is ‘an unelected clique within the US governmental system’ is provoking China in order to win internal bureaucratic battles.

    2. There may well be a calculation by otherwise more rational and cooler heads that a clash with China is inevitable, so better to have one now than when China is stronger militarily and economically. Many wars have started (not least the Pacific part of WWII) because one power judges that the longer things go on, the less the chance they will have to win. China at the moment is significantly weaker than the US militarily. It is also still dependent on the US, or US goodwill, for access to a range of technologies and commodities, not least oil and food.

    The strategic problem for the US with Taiwan is that if it fails to protect Taiwan, then this breaks the de facto tie to ROK and Japan. It is implicit that the price they pay for the *ahem* alliance with the US is that the US will protect them from the big dogs in the region, China and Russia. Both countries have clearly anticipated this for some years as they’ve been spending a lot of money on domestic independent weaponry (the ROK is far more advanced with this). So if the US does not intervene with Taiwan, this is the western Pacific lost. I don’t see any US president accepting this.

    As for Taiwan itself, there is no evidence whatever that public opinion is changing on uniting with China. The centre left and nationalist DPP has been growing stronger electorally, while the pro China KMT (yes, the formerly anti-China KMT) is weakening. Over the past 20 years the number of Taiwanese who identify as only Taiwanese (as opposed to Taiwan-Chinese) has gone from a large minority to a significant majority. This doesn’t of course mean they would volunteer to face Chinese missiles, but it is unquestionable that the majority of Taiwanese do not consider themselves Chinese and want independence.

    I very much doubt that China would take the blockade road with Taiwan. The problem for China is that yes, they can blockade and choke out Taiwan, but they simultaneously blockade themselves and cut themselves off from food and oil imports. Taiwan has the military capacity to send cruise missiles over much of the South China Sea, which even if the US stayed away, would essentially make most Chinese ports no-go zones for China bound cargo ships. Taiwan probably wouldn’t survive more than 6 months or so of a blockade, but China would struggle too, and China is nowhere near the autarky that Russia has achieved. China would win, but at a huge cost, and its not clear that they are in a position yet that they’d be willing to pay that cost. The economy is undergoing very severe strains at the moment, it doesn’t need any more problems.

    1. Yves Smith Post author

      Russia has been exporting S-400s to China since 2018 (see here) plus China’s S-300 imitation is supposed to be pretty good. Russia has the best missile defense systems in the world. From Military Watch:

      The S-400 was designed to engage targets up to 400km away using 40N6 missiles, but more widely deploys the 48N6 missile with a 250km range. The 48N6 has demonstrated the ability to neutralise Mach 8 hypersonic missiles flying at the edge of its range, and engages targets at speeds exceeding Mach 14


      The US does not even have a hypersonic missile that has been tested successfully. The S-400 with the 40N^ can take out anything the US makes.

      If Russia is willing to or has sold China 40N6 missiles, it can defeat Taiwan’s offensive missiles. It might even be able to take out Taiwan’s missiles with less advanced missiles, given the lack of Western hypersonic capabilities.

      1. PlutoniumKun

        If you use Google maps measuring tool and compare the ranges of the S-300 system and Taiwanese cruise missiles, you’ll see huge areas that the Chinese can’t cover, even with their new island chain (which would themselves be highly vulnerable to even quite crude missiles from Taiwan). The Chinese new bases are about as defendable as Snake Island. Anyway, in terms of commercial shipping, even a very small chance of getting ‘accidentally’ hit would surely constrain trade. Not to mention air travel. Taiwan would not hit the mainland (politically too dangerous). But any ships would be fair game. Most Chinese warships are small and only the most up to date designs have a full long range anti-aircraft defensive system (they have a naval version of the S-300, albeit one with a fairly limited number of missiles that can be carried). Taiwan also has submarines, albeit with limited capability. The advantage Taiwan has is that it does not have to defeat China or even inflict heavy costs. It just has to make life very difficult for China over a wide stretch of the South China Sea to set up a counter-blockade.

        IMO a blockade has far more high end risks for China than a direct assault, and they have not yet kitted up fully for an assault with a guarantee of success. Taiwan has an advanced domestic military industry, which includes anti-ballistic missile SAMs. Their main problem is the very small size of their navy and overall military, and that they have almost certainly being infiltrated heavily by Chinese agents. Plus nobody really knows if its reserves will turn up to fight.

        But then again, for all its new toys, China’s military has never impressed when used. Its similarly only been tested in bullying tribal people, just like the US. And its no secret that the CCP has valued loyalty over competence when choosing senior officers, it has never tolerated a military that can over rule the politburo – they are aware of the Vietnamese precedent where the Party was at least partly subsumed by the military leadership.

        1. hk

          What I always wondered was that ROC military was always dominated by KMT types while DPP and other pro-independence types have been hostile to them, at least historically. Regardless of the overall public opinion, will the ROC military be eager to fight PLA? Have the internal politics of ROC military changed to better match the evolving public sentiments?

          1. PlutoniumKun

            I have no idea about the internal dynamics of the Taiwan military. I do think they are very serious about defending the island, but there is always a suspicion that when it comes down to it, they would accept the inevitable when faced with a serious challenge. But its always impossible to know these things for sure.

            1. SocalJimObjects

              They are so serious, the government has gradually reduced mandatory military service period from 2 years to 4 months.

        2. Darthbobber

          I rather thought that achieving a draw with the United States and its allies in Korea (after coming within an Ace of actually winning) was fairly impressive.

          They also made pretty short work of the Indian forces when the border dispute turned hot in the sixties.

          1. PlutoniumKun

            And they also failed abjectly when they tried to go head to head with the Vietnamese, despite overwhelming numbers and the advantage of surprise. And their two attempts to take Kinmen Island were embarrassing flops. So you can read what you like into long ago history.

            1. Darthbobber

              One school of thought is that the purpose of the then-famous Quemoy-Matsu crisis was to get the United States to openly threaten a nuclear response (which we obligingly did) to help Mao overcome resistance within the party leadership to his desired nuclear weapons program. They also didn’t invest that much effort in either crisis, so one suspects that this was tied to the “diplomacy” of the high tide of Maoism, which involved striking the most belligerent poses possible against the “Imperialists and their running-dog lackeys”.

              I believe the second “crisis” the Joint Chiefs were also committed to a nuclear response if necessary.

              The “punitive expedition” against Vietnam was a fiasco, but at least they had the commendable good sense to cut their losses and declare victory (however unbelievable) rather than doubling down a couple of times and bleeding for the next decade.

              Most militaries fortunate to avoid major wars for a prolonged period are to some extent of unknown quality, because in spite of the fondness for prognostication the only ultimate test of combat capability is of course combat.

              1. Polar Socialist

                Even the rarely pro-Chinese Wikipedia sorta gives the punitive expedition to China: they had less troops with less experience and worse weapons, yet achieved all their targets and hold them until told to withdraw – which was done orderly. They also had less casualties in every category.

                As for the goals of the operation, I guess it did prove to USA that China was indeed warming up to it (as Deng Xiaoping intended), it did stress Vietnamese – Soviet relations (as Deng Xiaoping intended) and it causes economic distress in Vietnam for years (again, as intended).

        3. Bazarov

          The Chinese fought bravely/effectively in the Korean War, precipitating the longest retreat in US history.

          Granted this was a much harder generation of Chinese.

          You’re correct in saying that the modern PLA is pretty much untested. But I would not underestimate the Chinese in anything. My whole life, very smart and serious people have been predicting China’s collapse and the party’s fall. Just a few months ago I was rolling my eyes at the whole “Evergrande! This is it! China’s done for!” refrain played ad nauseam in the west.

          My rule of thumb has been: “When everyone predicts China to fail, expect them to succeed.” If China decides to go to war with Taiwan, my intuition is that the PLA will distinguish itself and Taiwan will be swiftly conquered.

          My further intuition (and hope) is that the US won’t do much about it beyond sanctions etcetera in a replay of Ukraine. The risk of nuclear annihilation is too high.

          1. SocalJimObjects

            It was also a much harder generation of Americans. If the modern PLA is pretty much untested, then America’s armed forces have not exactly covered themselves with glory either.

        4. Jams O'Donnell

          PK – “Most Chinese warships are small and only the most up to date designs have a full long range anti-aircraft defensive system”

          Wrong. Most Chinese ships are in fact small, but that doesn’t mean that the number of large (i.e. destroyer types) is either insignificant or dis-similar to equivalent US numbers, and China can concentrate them all in home waters, in numbers which the US fleet can’t match locally. (Even the ‘small’ ships can fire pretty lethal anti-ship weapons, and US aircover would be non-existent due to the carriers being 30 fathoms down).

          But the most killing counter argument to yours is that US’s own wargaming has given the Chinese victory in all or almost all realistic scenarios.

    2. Thuto

      US military strength against near peer adversaries needs to be put into context. US force projection is a global enterprise, which is another way of saying their much vaunted military strength is spread way too thin, so the point about US military strength in aggregate is moot because it simply can’t be summoned in its entirety and brought to bear to defeat a formidable opponent in a regional war. Can the US win in a hot war against the Chinese in China’s backyard is the more pertinent question in my view. My guess is no.

      1. Polar Socialist

        I gather US Navy could summon a combat fleet of 70-80 vessels on the Pacific, while China has something like 500. And likely some of that US fleet still would have to be deployed towards the 60 or so Russian Pacific fleet combat ships – at least the way things are at the moment.

        I understand that better weapons, better sensors, better design and better tactics do give an advantage, but also according to the “Fleet Tactics and Coastal Combat” by Wayne P. Hughes a naval battle is still, in the end, a slugging match and the side that brings most weapon platforms to the battle will win.

        1. RobertC

          the side that brings most weapon platforms to the battle will win.

          China has a three-prong fleet: tens of thousands of maritime militia fishing trawlers; hundreds of Coast Guard ships; and hundreds of Navy ships.

          The navalist literature has only recently addressed the implications of such a fleet. And the responses are limited and complex.

          I’ll offer an example (based on Israeli tactics of using commercial aircraft as cover): a half-dozen trawlers are moving together and in their midst is a Type 22 guided missile boat (China built 82 and each has 8 100-mile range anti-ship missiles). What weapon and platform will the USN/USAF use against trawlers and the boat? Before or after the boat pops out of the trawlers’ shelter, launches its salvo and pops back into their shelter? How close will the USN/USAF allow this trawler/boat combination approach its ships? 10 combinations? 50 combinations? Does the USN disperse its formations or concentrate them? Attack the trawlers (easy targets but no weapons) or the boats (difficult targets but with weapons)? Use ASCMs, torpedoes, 5-inch gun? If you have a solution, there are multiple forums eager to publish it.

      2. NotTimothyGeithner

        We are totally reliant on locals to run the bases. Surge pricing becomes all the rage.

      3. PlutoniumKun

        It depends on what you mean about ‘win’. The US has a vastly larger and more effective attack submarine fleet which could stop China operating pretty much anywhere outside its littoral waters. The Chinese off-shore bases would be sitting ducks if the US really decided to destroy them. So in the short term at least the US could quite easily force China back to mainland bases and destroy any navy ships that wander out too far.

        I’m all in favour of pointing out the vast waste and over rated combat systems in the US Navy and air force and military, but it is still a system capable of delivering a crippling blow to any military in the world in a short term conflict where the US can access by sea. The question is more a case of how far they are willing to push things if it goes wrong, and whether the US is capable of maintaining a long term conflict against a near-peer far from the US.

        I don’t believe the Chinese think that they can prevail in a conflict now – it will take them 10 to 20 years at least before they have proven and effective systems to keep the US well away from their sphere of influence. They will probably get there, but I doubt very much if even they are confident of their ability to do this yet. China is building a vast blue water navy, but it takes many years to make one effective.

        1. Polar Socialist

          The US has a vastly larger and more effective attack submarine fleet

          US Pacific Fleet has ~35 submarines, China has ~120. China additionally has over 60 modern, specialized anti-submarine frigates and corvettes. And also 22 or so Y-8Q submarine hunter aircraft.

          All those sensors can cover huge areas of South and East China Seas quickly. And when a submarine is found, it’s usually defeated in the encounter – they are one trick ponies, and the trick is “do not be found”. It’s almost as if China is preparing to counter the US submarine force.

          1. PlutoniumKun

            There is no evidence whatever that China (or anyone else, for that matter) has successfully tracked a modern submarine unless they got very lucky, and this includes in intensive exercises. And slow, lumbering submarine tracking aircraft won’t last long unless you have full air superiority over a huge area. And we know the US submarine fleet patrols the South China Sea regularly, as they’ve been known to run into sea mounts. The South China sea has a very complex and poorly understood marine topography that makes tracking anything particularly challenging. Pretty much everyone in the region from Pakistan to Vietnam to Japan is spending heavily on submarines precisely because they are so useful. Maybe they are all wrong about the usefulness of submarines, but the fact that nearly every Pacific Navy has come to the same conclusions has to be significant.

            China’s submarine fleet is based on outdated designs, and they can’t even export them as they need western engines. As with most things, they are catching up very fast, but they aren’t there yet unless you believe their sales brochures. The numbers game with Chinese ships is deceptive – only a small number of their current Navy is modern and useful for anything but littoral warfare.

            The one area that China seems to have established a lead is in robot submersibles and long range drones – my guess is that they could cover a large area of the South China Sea very rapidly with sensors. But in doing that, they’d give away their intentions very quickly which has its own issues.

            1. Polar Socialist

              We can obviously reuse the same logic here – if Chinese can’t detect and track submarines, why are they building so many ASW vessels? They do have their own submarines to train with and it seems those are rather hard to detect.

              I do doubt the usefulness of robot submersibles. At least I don’t think any navy has come up with a proper concept for their use. Nice tech, though.

            2. RobertC

              There is no evidence whatever that China (or anyone else, for that matter) has successfully tracked a modern submarine unless they got very lucky, and this includes in intensive exercises.

              Submarine detection has improved immensely with advances in quantum physics and high-performance computing. An example Could China’s New Quantum Radar Be a Submarine Killer?

              …But on June 21, 2017, a Chinese periodical announced that Professor XIamong Xie of the Shanghai Institute of Microsystems and Information Technology had developed cryogenic liquid-nitrogen-cooled SQUID which reduced the noise-problem—and in field-tests, had proven capable of detecting ferrous objects deep underground even when mounted on a helicopter.

              After a South China Morning Post article speculated on whether it amounted “to the world’s most powerful submarine detector?” the original article was taken down.

              Dave Hambling noted in the New Scientist that Xiamong’s new sensor used an array of SQUIDs to help cancel out background noise.

              And here’s work at our local R&D center Superconducting quantum interference device for concurrent 3D signal detection

              …To address this shortcoming, Navy researchers have developed a 3-D SQUID. The device has a very wideband flat response in frequencies from Hz to GHz, unlike today’s resonant antennas. Because of this the technology is not wavelength dependent and will be able to receive signals with very large wavelengths. The device currently is shaped like a pyramid with a SQUID or an array of SQUIDs on each side.

              And then there’s the issue who gets the science from the lab to the field faster Pluperfect’s Programmatic Imperfection on the Future Perfect’s Presentism

        2. Thuto

          I stumbled upon a Scott Ritter analysis a few days ago on this very subject, which I can’t seem to find now. He’s not very confident the US would prevail easily in a direct conflict with China, principally because it lacks the stomach for the casualties that such a confrontation would inflict (I think he put it at around 6000 KIA). My own hunch is that the US itself isn’t entirely confident about the outcome in such a confrontation being a formality and before the Russia-Ukraine war, I would have said we’ll see the usual “escalate to de-escalate” brinksmanship and another round of ill-conceived sanctions from Washington, but an empire clinging on to a fast receding unipolar world will likely vastly underestimate the Chinese while overestimating its own capabilities, and rush headlong into a war.

          1. Janie

            The Ritter piece may have been one with Ray McGovern on Garland Nixon’s show. In it, Ritter predicts 70 percent (I think) chance of nuclear war with China around year-end. It’s toward the end.

        3. Tony Wright

          10-20 years hence China’s demography will become a severe handicap on both military and economic fronts. The decades long one child policy has been relaxed and larger families are now officially encouraged, although thus far with minimal success.
          The cultural preference for boys during the one child policy ( and associated killing of some newborn girls ) has resulted in millions of young men who are unable to find partners, thus providing a plentiful supply of “cannon fodder” for the PLA in the near term. However these “surplus” men will be a bit past their best in ten or twenty years time.
          As in many western countries, much of the private wealth in China is tied up in real estate, some of it ( over 70 million units by all accounts) unproductively located in the notorious ghost cities.
          Local Governments in China are reportedly massively indebted due to infrastructure overbuilding, and their man source of income ( sales of land for development) has been massively curtailed by the recent economic downturn.
          How this plays out within the rather opaque banking and shadow banking systems within China remains to be seen, however, the recent financial difficulties experienced by Evergrande and several other large Chinese development companies do not bode well.
          And then there is the self-imposed (or at least, Xi imposed ) economic handicap resulting from the nationwide zero covid policy.
          All in all, not an entirely positive picture for Chinese economic and military aspirations in the medium to long term.
          And then you have Emperor Xi seeking lifetime dominance of China – I am reminded of the old adage “Power corrupts, and Absolute Power corrupts absolutely.”

    3. SocalJimObjects

      China shares a land border with Russia. Can’t the later transport oil and food by land to the former if need be?

      1. PlutoniumKun

        No, the terrain is too difficult and there is limited infrastructure, although many more pipelines and railways are planned.

        Plus, you cannot assume the Russians are enthusiastic about China taking Taiwan. They won’t object in the short term, because they owe China a big favour. However, the Chinese claim on Taiwan is based on the maximum extent of the Qing Dynasty, which Chinese nationalists usually argue is the ‘real’ China (this is also the basis for China’s claims on the Aksai Chin and parts of northern Vietnam). You will note from a map that this includes a chunk of what is now Russia, including Vladivostok. I very much doubt that Moscow is unaware of what it means to encourage China’s expansion to its ‘real’ borders.

        1. Ricardo

          Actually, while China likes to reminisce about the humiliations suffered at the hands of Japan, beginning with the loss of Taiwan as a result of its defeat in the first Sino-Japanese war, they do recognize that it was ceded to Japan. The claim on Taiwan is based on the Cairo Declaration in 1943, which says “The Three Great Allies (U.S., UK and China) are fighting this war to restrain and punish the aggression of Japan. They covet no gain for themselves and have no thought of territorial expansion. It is their purpose that Japan shall be stripped of all the islands in the Pacific which she has seized or occupied since the beginning of the first World War in 1914, and that all the territories Japan has stolen from the Chinese, such as Manchuria, Formosa, and The Pescadores, shall be restored to the Republic of China.”

          1. PlutoniumKun

            Actually, thats the basis for the old KMT claim on China (still rather embarrassingly lodged in Taiwans constitution), not vice versa. China repeatedly uses old Qing dynasty maps in its claims.

        2. Yves Smith Post author

          Huh? The Russians and the Chinese just did a major joint exercise in the Pacific, with China as the lead. Ritter took that as a clear signal to the West that Russia has China’s back if things heat up over Taiwan.

          1. Lex

            The relations have been long cultivated. When I was studying Russian in 99-00, there was a whole dorm of Chinese students. But, at least then, there was a general feeling of mistrust from Russians about Chinese intentions. Specifically taking over parts of the Far East, either militarily or by immigration/business power. That was a long time ago, and I assume that relationships built then have grown in power. But I’m not surprised to hear that public feelings still bend that way. It’s still a problem for another day that won’t affect geopolitical relations. Neither nation seems particularly adamant about territorial expansion either. If the US would quit meddling, I suspect China would be fine with a certain amount of autonomy for Taiwan and we wouldn’t be faced with WWIII over our fake concerns for the Taiwanese people. After all, the Dulles brothers were ready to let Taiwan go in the early 50’s to make sure there was no Sino-Soviet alliance. (My favorite historical “conspiracy theory” is Stalin ginning up the Korean War to thwart that effort. Promising Kim all sorts of help and then not delivering. China couldn’t let the US march to its borders.)

      2. Polar Socialist

        The same with Kazakhstan. China already buys a third of the hydrocarbons and fifth or so of the food product exports of Kazakhstan.

        And I’ve heard that China has been hoarding grains from everywhere for some time now.

        1. PlutoniumKun

          China has huge stocks of grains. They claim to have a year and a half of storage of wheat. However, to prevent food inflation they would have to control this very strictly and most likely hugely reduce the pig herd. And depriving Chinese people of pork is like telling Americans they can’t drive trucks.

          So while China can survive a blockade, it creates huge potential for internal unrest over food and fuel. This is why I believe they would want a quick and clean assault on Taiwan if its needed, not opt for the uncertainty of a blockade. And they will only do so when they have a reasonable certainty of success, or if it becomes politically untenable for a leader to do otherwise.

    4. Bazarov

      “The economy is undergoing very severe strains at the moment, it doesn’t need any more problems.”

      Historically, one way to address economic strains is to mobilize for war. Economic problems make war more likely, not less. This goes doubly for the United States, a paranoid and aggressive power. I’m convinced that the only factor holding back such a war is the nuclear factor, but how long will the atomic dam hold? The pressure’s already high and getting worse–economic, climatic, geopolitical.

      1. jsn

        I think in ceding operational capabilities to the private sector and structuring military procurement to the quarterly needs of MIC corporate shareholders the US may well have lost the ability for war mobilization.

        COVID response is the model of what passes for mobilization. The military can still move stuff around at scale, but none of the other, prior links in the war mobilization chain appear to exist anymore.

        And why would they? War mobilization is a public good and since Thatcher’s we’ve all leaned the public doesn’t exist, its all just individuals. Well, except maybe the Russians and Chinese who haven’t figured this out yet and still act like pre-neoliberal states…

    5. Ricardo

      I find it hard to contemplate the Taiwanese holding out for 6 months, or that China needs 6 months to “starve out” Taiwan. Just blocking the coal, fuel oil and LNG supply ships will incapacitate power generation on the island since Taiwan imports much of it’s energy needs with nuclear and green energy currently making up only 10-15 percent of the power generated. Living in the subtropical heat without air conditioning, or having to climb 10 flights to your apartment without the elevator, not to mention the factory, business, and hospital shutdowns would seem to me to be good inducements for seeking a quick, peaceful resolution. And if China doesn’t want to wait for the fuel stockpiles to run out, they can always take out the conventional generation plants – minimal damage in lives, maximum effect. The on-going havoc in Ukraine also concentrates the mind on peace, especially since the Taiwanese people built up a prosperous society with their own hard work and will be more loath to see it all destroyed. While I agree few on Taiwan particularly wants to give up their de facto independence by being reunified with China, many Taiwanese are already doing business with China and the “forward looking” ones are sending their kids to Chinese universities. After all, everyone speaks Chinese and reads Chinese, the tie that has bound China together for 2200 years since the First Emperor.

    6. mikel

      Another possibility to go along with many:

      I think China has more personally damaging info on CEOs, intelligence operatives, etc and they don’t want it leaked. They probably underestimated China’s ability to collect data.
      Some people are just trying to stay out of jail or worse.

      But, likely more than one reason for warmongering.

    7. Lex

      I only disagree with the military assessment, and not because I think China has a particularly strong military but because the US military is significantly weaker than it looks; is effectively a long, long ways from China even with ROK and Japanese basing; and would have to be the attacker in the scenario. And without conquering territory, attacking China is pointless. That’s just not in the cards.

      Like with Russia, the US maintains the capability of doing a lot of damage to China through arms but not defeat it. Without being able to defeat it there is no real threat in the power the US has. And like Russia again, doing a lot of damage to China will come at pretty significant cost. Even without sinking a carrier, how many US jets get shot down? More than the US is willing to stomach. So pushing this issue (again, like Russia/Ukraine) demands a willingness to use nukes on the US side because they’ll be the only path to “victory” at some point on the escalation ladder.

  4. super extra

    I realize US civics is meaningless now, but I thought the FBI was dedicated to US citizens in the country and abroad but not, like, activities abroad. So why the eff is the FBI speeching to foreign agencies in this manner? US intellectual property is now casus belli? Is this like how cyber attacks ‘could possibly’ be seen as acts of war now? These people are completely insane.

    1. DJG, Reality Czar

      super extra: Thanks for the reminder. The FBI supposedly is concerned only with domestic matters.

      Yet Comey and the FBI’s setup of motormouth Gen Flynn indicates “mission creep” into foreign-policy matters.

      Meanwhile, no one in Congress can be roused to control the FBI.

      What could possibly go wrong?

    1. The Rev Kev

      Thirty years ago I was reading how the ECHELON program was being used to spy on allies and the information given to US corporations to benefit from. Things like secret negotiating strategies that country like France might have in trying to compete with a US corporation. Then about ten or fifteen years ago I read how German engineering companies were complaining that their work was being stolen – and it wasn’t by the Russians or the Chinese. So this sort of thing is still going on.

  5. The Rev Kev

    I saw excerpts of Christopher Wray’s speech on the TV tonight and found myself translating what he was saying. So as an example, when he said-

    ‘We consistently see that it’s the Chinese government that poses the biggest long-term threat to our economic and national security, and by “our,” I mean both of our nations, along with our allies in Europe and elsewhere.’

    What I think that he was actually saying was-

    ‘We consistently see that it’s the Chinese government that poses the biggest long-term threat to our economic and national dominance, and by “our,” I mean the rules-based western nations under our control.’

    But I was thinking about this speech and it sounded like he was warning corporations from dealing with China with anything technical. So I got in my plane to take a 10,000 foot view and what I think I see is this. The US has been demanding that corporations selling chip-making machinery like one in the Netherlands not do so.So what I think is happening is that the US has now decided to try to create a technological embargo on China to try to hobble it and give the US a chance to compete. Taiwan will just be an excuse to do so and perhaps something to stir China about.

    1. Yves Smith Post author

      I did think that he might be trying to ward companies away from China, but the big boys are too deeply invested to do so.

    2. Carolinian

      Looking at Wray’s bio on Wiki he seems about as deep statey as it gets and made millions of dollars a year at King and Spalding before Trump selected him as FBI head.


      Trump said he was going to clear out the Swamp and instead made it bigger. I’ve seen a story that Biden’s new gestures toward easing China tensions have faced opposition inside his administration. Perhaps State, Defense and now the FBI have their own agenda.

  6. Watt4Bob

    America’s central planners, whose imaginations extend as far as the next three months, sold our industrial capacity to the Chinese.

    So now those same people are telling us that war with China is bound to fix all the resulting problems.

  7. Wukchumni

    Counterfeit coins were never really that big of a deal in numismatics when I was pushing old metal back in the day.

    There were some decent fakes out there, but on account of it costing a pretty penny to create the dies to perfection cut from steel to faithfully recreate a older coin was really a challenge, plus you needed a minting press, everything about it required knowhow & money in order to deceive, so everybody in the coin biz knew the telltale characteristics of counterfeits which were few and far between, not a problem.

    About when I retired almost 20 years ago, slowly but surely the problem with clever Chinese-made fake coins started to mushroom, and to add insult to injury it wasn’t against the law to do this in China, the wild west of capitalism.

    How did they do it?

    Pretty simple really, all you need is a digital photograph of both sides of an older coin and have the wizardry of the computer bang out a perfect set of dies of anything you’d like.

    Since the mid 1980’s there have been a couple of 3rd party coin grading firms named PCGS & NGC which have been the standard in the industry, and both firms grade coins and send them back to you in a sealed protective holder with the grade of the coin and serial #.

    Well, this was too much temptation for the wily Chinese, so they not only made perfect fakes, but they also made perfect fake PCGS & NGC sealed plastic holders with their counterfeit coins in them!

    Its a real problem now, is the scuttlebutt i’m hearing from those in the business.

  8. Tom Pfotzer

    Where was FBI, MI5, Wray et. al. when the decision to move our industrial capacity to China got made?

    Yes, we will happily accept your en masse resignations, and forfeit your pensions due to malfeasance and the huge adverse impact you’ve had on our society. Look at the mess you’ve made of the middle class’ economic prospects.


    Bureaucrats puff up problems to pad their budgets. It’s part of the craft of the bureaucrat.

    Investors and other stakeholders in Defense talk their book.

    “The sky is falling!” they shout. If it isn’t actually falling, well, they find a way to knock out a few pillars, and then behold. Somebody reacts to all the provocations, and then it is falling.

    I continue to hope that at some point enough U.S. citizens will see the pattern, and just tune out, or better yet ridicule them for the empty, manipulative, selfish and foolish suits they are.

    1. Tom Pfotzer

      Let me try this again, using a more modulated line of address:

      Dear Gov’t:

      I will get on board when you start doing things that are in my interest. Wars, social dividing, shipping entire industries overseas, dawdling while the rest of the world blows by us technically and culturally…those things are not in my interest.

      When Gov’t uses the massive array of social manipulation tools you’ve accumulated over the past few decades to force the public to accede to this foolishness, that’s when I get angry.

      I wasn’t asked if it’s OK to spy on me. I wasn’t asked if it’s OK to seed the media with stories and perspectives that come from … Gov’t.

      To be more precise, seed the media with story-lines that come from the people that direct the Gov’t. People I don’t see, don’t know, have no influence over, and whose decisions adversely impact me.

      That also makes me angry.

      Some of that anger leaked out in the prior message, and I thought I’d explain to other readers why that anger exists.

    2. spud

      this is a mess of their own making, how are they going to get out of it is any ones guess.

      this was all predicted.


      The High Cost of the China-WTO Deal, Administration’s own analysis suggests spiraling deficits, job losses

      Report • By Robert E. Scott • February 1, 2000

      “Despite the Administration’s(Bill Clinton)rhetoric, its own analysis suggests that, after China enters the WTO, the U.S. trade deficit with China will expand, not contract. The contradiction between the Administration’s claims and its own economic analysis makes it impossible to take seriously its economic argument for giving China permanent trade concessions.”

      1. drumlin woodchuckles

        Expanding the US-China trade deficit was a deliberate goal of bringing China into WTO, as part of the broader deliberate goal of exterminating industrial capacity in the US to exterminate industrial unions, among other goals.

        It is precisely what Clinton wanted to achieve, his public lies to the contrary notwithstanding.

  9. Ed Miller

    The real China story, in my humble opinion.

    Financial powers were happy to ship jobs and technical knowhow to China in order to destroy the heart of the US manufacturing base to both maximize short term profits and to destroy blue collar workers and their towns which depended on the jobs now lost. Goals achieved but they never imagined China wouldn’t fall for their “leadership” instead of becoming a real threat to their control.

    Now they finally realize how they have undermined the whole system, but as always they can’t and won’t ever admit to their failures. The standard strategy is to create a narrative blaming someone else. Crank up the propaganda machinery. Since propaganda has been cranked up to 11 for so long it’s necessary to not just maintain the high level of screaming but to also have many scream scenarios at once to get us more confused. Terminal decline is depressing to see in real time.

    1. Dr. John Carpenter

      IMO, you hit the nail on the head. When they felt they had China in a controllable and useful spot, they had zero issues. But now that what “nobody could have foreseen” is happening and China is using all we’ve given them to their advantage, combined with the decline of America and the unwillingness by TPTB to do anything to stop the slide, and it’s it’s time to deploy the blame cannons. I can hardly blame China for turning America’s exploitation against it.

  10. Michaelmas

    Yves S: why the escalation on yet another front?

    I’ve said this before, but forex that 2018 RAND paper on ‘Extending Russia’ —

    –stipulated a number of necessary adjunct conditions for successfully taking on Russia (e.g. low global energy prices), which have been simply ignored by the Biden administration and DC. Why? (Besides stupid is as stupid does.)

    It’s a strong bet that shadowy figures from State and CIA have for some months been going around doing presentations for DC policymakers that feature over-amped comparisons of the US position now with that of, say, the UK in the pre-WWII days when Hitler’s Germany was building up its military. There’ll be lots of graphics showing how with each month and year China and Russia are pulling ahead, gaining an insuperable advantage that the US will ‘soon not be able to overcome.’

    in other words, the smarter players in DC know on one level that it’s fatuous to simultaneously take on Russia, possibly the world’s biggest exporter of commodities and resources, and China, the world’s biggest manufacturer, to which the US offshored its manufacturing. But they also feel it’s now or never, because with every day the US position grows weaker vis a vis Russia, China, and the rest of the world.

    Parallels aren’t exact. Still, US instigation of the Ukraine conflict may appear in historical retrospective similar to the UK’s response to Suez — that is, it was the historical hinge when it became apparent that the empire was over.

    1. Mikel

      It’s not what or how, it’s when you ask why that rationales collapse. It all just starts to reveal itself as paranoid hysteria, racism, and greed.

      And I do believe there were warnings about what could happen with China when the businesses ran over there because they hated workers.

  11. SocalJimObjects

    “Also, Taiwan shouldn’t just rely on the U.S. and Japan for support. The U.S. is after their own benefits. Not just the U.S. It’s the same for all other countries. They all prioritize their own self-interest. Their own benefits come first before anything else. That means when the benefit that Taiwan can provide doesn’t meet the expectation of the U.S. we might be discarded like Afghanistan or Kurdish people in Turkey.
    — Street Interview with Taiwanese people. https://www.youtube.com/watch?v=C0YGLDafG1o. The old man at minute 19:25 certainly knows the score.

    Also, I might be biased, since I am going to move to Taiwan come September, but I don’t think there’s any need for China to attack Taiwan, for a number of simple reasons.
    1. Demographics. Taiwan’s population declined again over the last year, https://www.taiwannews.com.tw/en/news/4566153. Population growth has been negative the last few years. It’s hard to see how this trend will reverse.
    2. The Taiwanese are giving away the family heirloom. TSMC is building a 5 nm fabrication plant in Phoenix, Arizona. Granted the 3 nm plant will still be in Hsinchu, but one small pressure from the US, and I bet you, eventually most if not all of the critical stuff will be built in the US.

    Speaking about combat readiness, unlike South Korea, Taiwan has gradually reduced its military readiness from two years to four months. Does that sound like a “country” that’s willing to do whatever it takes to defend itself against China?

    1. SocalJimObjects

      Sorry, I had a typo. I meant to write Taiwan has gradually reduced its military service requirement from two years to four months.

    2. RobertC

      SJO — I don’t think Intel, et al will ever catch up to TSMC and Samsung as I noted here and here.

      I don’t think there’s any need for China to attack Taiwan, for a number of simple reasons … plus these here.

      Best wishes for your future in Taiwan.

  12. Wukchumni

    If you love manufacturing, set it free. If it comes back, it is yours. If it doesn’t, it never was.

  13. Ashburn

    I think in analyzing any US/China or US/Russia confrontation we need to factor in that Russia under Putin and China under Xi are growing much stronger, especially due to their joint economic, diplomatic, and security ties, as well as their own internal management. In the meantime, the US is in dramatic decline economically, politically, and culturally. China and Russia can afford to be patient and can afford to put up with most of the clumsy US provocations. It took more than a decade to provoke Russia over Ukraine.

    Time is on their side and in time many if not most Western Pacific countries may see greater benefit in aligning with the two Eurasian giants than with a declining US. Even Taiwan may see the benefit in rejoining China if they are allowed a certain level of autonomy.

    We are certainly in a desperation phase of US Empire. Maintaining an overseas military empire of 800 bases with a $1 trillion dollar national security budget while also ensuring domestic tranquillity will soon become impossible.

  14. Michael Ismoe

    So this is what the FBI does all day ? — and they still have time to plan the kidnap the governor of Michigan and infiltrate every campaign apparatus in the country.

    Why do we need them?

  15. Tom Stone

    I’m used to stupidity, incompetence and evil, but this is delusion.
    Which is terrifying.
    These people may well turn the world into a cinder because they have no conception of risk.
    And it goes beyond stupidity, which is saying something considering the people involved.

  16. David

    Several different things going on here, but it’s worth trying to disentangle a couple of them, remembering that the audience is businessmen worried about profits, not a bunch of politicians or political scientists.

    As you would expect from a country of their size and sophistication, the Chinese have a large programme of intelligence collection aimed at the West, using the overseas diaspora, students and visiting academics, salesmen for Chinese companies, military attachés, as well as the usual technical means, and targeting foreign governments and private companies, often through westerners going to China. This is quite normal and it would be astonishing if it was not happening. Likewise, Chinese Internet companies and IT and electronics goods manufacturers will certainly be ready to cooperate with the Chinese intelligence services, just as Chinese banks will hand over information on foreign customers. This is also entirely normal, and it doesn’t mean that the Party controls everything. Rather, as is typical of societies in the region, there is a strong collective sense of the national interest, and this sort of cooperation is standard: consider the historic use by the Japanese government of trading houses as intelligence agencies.

    A major source of interest for the Chinese is technology. Partly, this is about imitation and IP theft, which is far from new, and is indeed typical of the region (the Koreans were the big villains before the Chinese). But in many cases, it isn’t even theft: since the 90s, western companies have been happy to include technology transfer in their sales packages, and locals (Korea, Taiwan, even Thailand, now China) have eagerly demanded it, often as they key criterion for agreeing a deal. It’s a perfect marriage between the western desire for short-term profits and the desire of Confucian societies for long-term market dominance. But of course the other half of the interest is pure intelligence gathering: the Chinese want to know about the capabilities of western technology now, both for military and for industrial policy reasons.

    So it’s perfectly reasonable to talk about the “threat” from China in this context: it simply means that the Chinese are doing what everybody else does, although on a bigger scale than almost everyone else. And it’s perfectly legitimate to warn businessmen that, if they go to China they can expect to have their phone monitored, their room bugged and their laptop broken into. And contrariwise, the bright Chinese visiting researcher will be debriefed on his return to Beijing in case he saw anything interesting. That’s what intelligence agencies do, and the MSS wouldn’t be doing it’s job if it didn’t carry out those sorts of operations.

    But businessmen are frequently reluctant to believe this, and need to be forcibly reminded of it. In France, certainly, the intelligence agencies have been warning about the threat for a good fifteen years, and I imagine the FBI and “MI5” have been doing the same. But these agencies have lost out to commercial imperatives, especially because western economies have moved so far away from manufacturing towards finance that there’s hardly any political interest in manufacturing and technology any more. The FBI and “MI5” are domestic intelligence agencies: they aren’t influential in, still less in charge of, foreign policy. I suspect the timing of this has to do with the sudden sickening realisation over the last couple of years of how vulnerable western economies are, and the heads of these agencies probably feel that their message stands more chance of penetrating, and being influential, with the audience of businessmen to which it was addressed. These individuals don’t make policy, and it’s clear that the remarks about Taiwan, for example, are essentially an attempt to shock their audience into realising just how vulnerable they are.

    1. PlutoniumKun

      Back in the 1990’s I worked for a very large US construction management company that used to have major contracts in China. As one manager ruefully said to me ‘we built half the Shanghai metro. Then they kicked us out and built the rest of it using our former Chinese employees once they worked out how to do it’. They did the same to the Japanese with High Speed Rail. It was always understood from then that a Chinese employee would be in contact with various elements of the Chinese government and would be reminded of their national duty. So far as I’m aware, every single Chinese who applies for a study visa abroad is given a talk to remind them of this duty (one of my Chinese friends told me that it was several years living in the west before she realized that this was not considered ‘normal’ in other countries when applying for a visa). Mind you, the US pretty much stole a whole generation of Chinese talent in a period from the 1980’s to more recently, just by offering them Green Cards.

      The French, probably because of their history, always seem to be more capable of managing this aspect of foreign investments. They refused to get involved in the Chinese HSR for precisely this reason. The ongoing battle between China and their control of the Chinese based Airbus plants is very well know. So far, the French have managed to keep much of their design secrets secret (Chinese Comac aircraft are very obviously not Airbus derived).

      As you say, all countries do it to one degree or another. What is different about the Chinese is how organized and focused they are at it. Even within the last 5-7 years or so, they’ve made enormous strides in a wide range of manufacturing processes, at least partly because of espionage and reverse engineering. It never ceases to amaze me how willingly so many countries have been to trade away hard won technological gains for short term profits. Its not just a western thing – the Japanese and Koreans have been similarly arrogant and careless.

  17. Stephen

    The detailed speech is definitely “interesting”.

    My initial reaction was that all of this is known and was on the agenda of various commercial organizations I worked with over twenty years ago. I am sure other readers had similar experiences.

    My second reaction is that much (although obviously not all) of what is talked about happens in the west too, but we use different mechanisms. That includes the legal requirements on data hosting. It extends to the role of the consulting industry, hiring competitor executives and techniques such as “tear downs” that all enable IP to “walk”, despite the formality of our legal structures. Reality is quite messy in this respect.

    My final reaction is that “solutions” seem thin on the ground other than to talk to MI5 and the FBI. I agree with Yves: bringing these organizations into any business is not likely to be helpful. This might be a facetious comment but are they also seeking to create a consulting revenue stream for themselves?

    Stepping back, I do wonder what the logic of conflict with Russia and China both at once is. If indeed there is any. Zero point in picking a fight if it cannot be won. Whatever the alleged principles at stake. The logic of the school playground seems to be beyond our “leaders”.

    1. Louis Fyne

      the Atlantic West Establishment is desperate for any sort of geopolitical, “Great Game” win.

      And the never heard of “when you are in a hole, stop digging”.

      Hoping that WW3 stops *merely* with one sunk US aircraft carrier.

    2. Greg

      The bit about data sovereignty was really weird. Any business leader in the west will be familiar with the increasing consequences of those policies in western countries, so to try and portray it as a uniquely Chinese evil is just not going to fly.
      It’s sensible, everyone does it. You could even argue that the same principle was the basis of the big anti-Huawei push by five eyes countries a few years back.

  18. Glen

    If the FBI is serious, when this happens:

    U.S. Department of State Concludes $13 Million Settlement of Alleged Export Violations by Honeywell International, Inc.

    Fine the company a much bigger fine (say 10% of revenue), and throw the CEO in jail.

    Until the FBI does IT’S JOB, the wholesale destruction of America’s industrial base will continue.

    1. drumlin woodchuckles

      Until Free Trade is abolished and rigid militant Protectionism is restored, the wholesale destruction of America’s industrial base will continue, because that destruction is a goal of the International Free Trade Conspiracy and its agents like President Clinton during his time in office.

  19. Andrew Watts

    You would think the FBI might hesitate to partner openly with British intelligence after the Steele dossier. Regardless, can anybody not read the following and not laugh out loud?

    “The FBI battles the Chinese government’s transnational repression because it’s an evil in its own right and an assault on the freedoms of an open society.”

    I mean, come on! Do I have to post excerpts from COINTELPRO or something? I miss the days when the FBI Director larped as @Reinhold Niebuhr on Twitter.

  20. RobertC

    So what was the excuse for this first ever joint FBI-MI5 briefing?

    But I want to get back to the opening question: why the escalation on yet another front?

    It’s part Biden’s transition to Asia escalation.

    Recent related actions include

    June 29, 2022 NATO 2022 Strategic Concept Sections #13 and #14

    May 26, 2022 Blinken Outlines US Strategy to Outcompete China, While Not Seeking ‘Decoupling’

    US foreign policy has two tools: dollar-backed hegemony and whole-of-nation.

    Only the first can be used because the second is broken and forgotten.

  21. RobertC

    Yves and several others have posited a blockade, which is basically an act of war.

    Others have highlighted China’s (and Russia’s) efforts to remain within international legal boundaries to the extent circumstances permit. China, in particular, is a master at lawfare.

    While I believe China will work to keep any force-of-arms conflict outside the first-island chain, circumstances may require responses in the Taiwan Strait. I describe a lawfare-based response here.

    1. Yves Smith Post author

      China’s position is that Taiwan is Chinese territory. Ukraine had an economic blockade of Donbass and no one in the West said a peep. China could take the position it has to inspect ships for arms shipments. So I don’t see how there is any legal issue with respect to police actions in your own territory. China can pass legislation if it feels the need.


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