Robert Spalding, formerly “the chief China strategist for the chairman of the Joint Chiefs,” described what he thought was at stake in the U.S.-China “trade war” in which the role of Beijing’s telecom giant Huawei figures prominently. In an interview with American thought leaders, Spalding argued that it was bigger than a trade war. “It’s really about what kind of world we want to live in.” China, like the U.S., realized that globalization was not content-free and was trying to shape it to its own purposes. The following are paraphrases from his interview found here.
We were so hubristic as Americans we failed to recognize that over long history China’s been invaded and conquered so many times that they have a unique ability to absorb those invaders and slowly change them into Chinese. We thought we’d turn them into Americans but in reality we’re becoming more and more — not Chinese — but certainly like the Chinese Communist Party, a Marxist-Leninist organization hybrid of what the Soviet Union and Nazi Germany was
Beijing is deliberately using the hyperconnectivity of the modern world to determine not only the character of globalization but even the destiny of civilization. While the Chinese understood that this the question in Spalding’s mind was whether anyone in the American establishment did. Beijing is calculating that if they push back hard, Washington will fold because many politicians don’t understand what is at stake.
Liu Hu, the Chinese negotiator, was educated in the West and understands global economics and might have compromised. But when the Trump administration has said no more, this has to stop that got back to the leadership and like June 4, 1989 they decided they were going to go another way. …
They are betting they can put enough harm into the US economy that the 2020 elections go to somebody else. Regions, industries. If you look at the Foxconn factory in Wisconsin, the natural gas agreement in West Virginia, each one of these are means for putting hooks into the local politics into those regions or states then turning around and saying ‘the President is making it very hard to continue making investments’, many of which they never had any actual intention of making. Then they can say ‘it is the President’s fault that your economy is failing.
Going all-out could backfire on Beijing because if it cannot completely overawe even weaker neighbors like India or Vietnam, against a rival like the U.S. it would have a much harder time.
It’s like squeezing jello in your hand. The tighter you squeeze the more it escapes between your fingers. As they squeeze they will lose more control. Let’s prevent rare earths from going to the US. All that’s going to do is force the US to look at alternatives. It’s actually going to destroy the market for rare earths in China.
But if the U.S. political elite is distracted by virtue signaling, China may have a chance. The U.S. government destroyed the American market for rare earths through regulation:
Defense One notes that, even though American mining companies extract enough rare earth ore, through mining other metals, to meet 85% of global demand, it is discarded because the regulations make it uneconomic to mine. How’s that for irony. … The final nail in the coffin for US rare earths came in 1998 when the US National Defense Stockpile sold the entire strategic reserve of rare earths. The same year, the last US producer of rare earth metals and alloys, Rhodia Incorporated, closed its processing facility in Texas and built a new one in Mongolia.
But Spalding does note how the U.S. economy is swallowing billions in dubious Chinese securities sold on the Western capital markets, financing Beijing.
Wall Street is essentially selling the stocks and bonds for China in Western capital markets because they make a fee on that. American retirement funds are invested in China … the rules say transparency is required for fiduciary responsibility to shareholders. The SEC, FASB … all of them are actually look at the companies to make sure they are actually portraying factual information. Of course you have China’s law which says “we can’t actually share that information with you.” If you couldn’t audit Intel, verify that their financial statements, 10-Ks etc were accurate, how would you know what you’re investing in? …
Yet we are selling that into the capital markets … recently there two companies in China were reporting to the market $6 billion cash on hand and suddenly did a restatement saying they didn’t know where it went. Now imagine if an American company did that and when asked to get to the bottom of the discrepancy could say that’s China’s national security data. You can’t have it. Have you seen the movie The China Hustle? They were doing reverse mergers into companies with no assets, walking away with the money….
Under the current regime that transparency will never be available. That’s what is being sold into the US on the pretext that China’s economy has been growing by double-digits for many years and is even now at 6.5%. You’re money is going to be safe over there and by the way, because it’s a totalitarian regime there’s an implicit guarantee that your investment will be protected.
This could result in or contribute to another financial crisis. The Narrative has downplayed the threat until now. One of the reasons China feels insulated from derogatory information is because they are confident they will dominate the global computer networks.
The study I did on 5G was technical, about physics and engineering. The question was was how do we leapfrog China in 5G because we’ve been asleep at the wheel in the race to create what will drive the next evolution of technical growth.
5G as proposed is made not for people but machines. … 4G can support 10,000 connections per square mile. 5G allows for 3 million. All that new capacity is not going to be filled by new people but machines, some of which, like self-driving cars, are big enough to run you over and bring danger. Even the cameras that today are connected to 4G are easily hackable and used in botnets and DDOS attacks. Imagine the threat scale of 3 million devices per square some of which could do harm to us.
Europe lead in 2G, 3G, the US lead in 4G. … The underlying technology was built mostly on Western values. China figured if America could lead in 4G it should lead in 5G. They started to think about this in 2008, 2009 before 5G was a thing. They saw that the West could build their values into the foundations of mobile computing and said: well we want to control the 5G world. … We need backdoors in hardware, backdoors in software”. That’s by Chinese law. …
Europe asserted extraterritorial power in GDPR. … They can’t enforce it. But China is building their enforcement in the technology. They can enforce it on the network, at the device level, through their undersea cable system … the physical layer not the paper layer is the key. … GDPR is almost a swan-song of liberal democracies. They can’t stop the FANGs — Facebook, Amazon, Netflix, Google — but coming up behind them is the BATs: Baidou, Alibaba, TenCents.
By dominating the network, Beijing can influence the Narrative. It can make itself seem small and small issues seem big. What Spalding describes is a strange sort of domain, the likes of which the founding fathers never have anticipated when they established an Army and Navy and warned against foreign entanglements. Yet this virtual world may now hold the key to world events.
Formerly every decision we’ve made with respect to technology has been for resiliency, connectivity and speed. Only after we started seeing people hacking into things did we say, let’s give some thought to security. … So the conclusion of my technical study is that we have to go back and … put the parts together in a way that redesigns the Internet …
Alexander Hamilton thought we needed an Army and Navy but not of course cyberspace because it didn’t exist. We’ve created this digital environment that is completely man made without considering in a governance or societal sense … politically we’re not even aware of the problem.
But if we don’t solve it we’ll lose all our precious freedoms not because someone will invade with an army but slowly eroded because our ability to understand what’s going on. Your phone knows more about you than you can imagine! Now where does that data go? To the highest bidder.
If you lose the network even the Second Amendment will be of little use. … If you live in a world where you don’t know you’re being oppressed or don’t know who’s doing it, what good is a gun?
What good is a gun if you can’t see who your fighting and it — the ineffable and ethereal — knows everything you do before you even do it?
What China figured out was that you had to align the profit motive with your national interest. … In fact they’ve incentivized US companies to supprt Chinese national interest! Under such circumstances if you’re hyperconnected to such an entity then you have to decouple. That’s the only way — to survive. If you embrace China you will lose.
We’re not going to have a trade agreement now. China is waiting on the 2020 elections. … I don’t care who gets elected but whoever does should know that the most significant threat to our future prosperity and freedom is the Chinese Communist Party.
Spalding’s observations are food for thought. But who thinks in these terms in a media cycle dominated by virtue signaling, gender politics and the echoes of the 2016 elections?
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