American CEOs overlook China risk at their own peril

In late March, Adm. John C. Aquilino, commander of the U.S. Indo-Pacific Command, warned Congressional leaders in no uncertain terms on Capitol Hill about the growing military threat posed by the People’s Republic of China.

He emphasized that the Chinese government has “continued the most extensive and swift policy.” [military] It’s something that’s been building up since World War II.” His words are echoed not just in the halls of Congress and around America’s dinner tables, but in the C-suite and boardrooms where America’s business leaders make decisions such as: It must have had a clear and powerful impact on the entire United States. It will determine the future strength and security of the U.S. economy and, by extension, the future of our military.

A week after Admiral Aquilino and other defense leaders issued a vivid update on the military challenge from China, American business leaders are seeking further investment and expansion into the Chinese market, with Beijing’s We gathered at the China Development Forum.

There, American and European business leaders from a variety of strategic industries, including energy, pharmaceuticals, industrials, finance and technology, met with Chinese Communist Party officials, including with Chinese Communist Party President Xi Jinping. was.

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According to the Wall Street Journal, American business leaders who co-chair the China Development Forum “defended the prerogative of Chinese leaders to pursue their own vision of national security, but at the same time It also emphasized the important role of the private sector in supporting the realization of security.” the goal. ”

Do the CEOs gathered in Beijing really understand the Chinese Communist Party’s goals? The contrast between the Beijing talks and military leaders’ warnings could not be more stark.

As Mr. Aquilino testified in Washington on March 21, “China is the only country with the ability, capacity, and intent to upend the international order. It continues its expansion, modernization, and coercive policies. All indications are that the PLA is complying with President Xi Jinping’s directive to be ready to invade Taiwan by 2027.”

Importantly, Mr. Aquilino also warned about the relationship between China’s military and economic power, saying, “As our economic and technological advantage over China continues to narrow, the United States will continue to strive for pre-eminence over time.” You can’t spend a lot of money,” he said.

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He also spoke about China’s economic power: “China has helped Russia rebuild and rebuild its defense industrial base, with real battlefield implications in Ukraine. Russia’s economy continues to suffer from the economic fallout from the illegal invasion of Ukraine. ”

At the China Development Forum held in Beijing, the forum’s US co-chair said, “China still needs the world’s capital, technology, and know-how.” In other words, given the broader strategic context, even if our economic and technological advantage over China is “narrowing,” even if the Chinese military is preparing for a possible invasion of Taiwan, and even if China’s This is despite the Communist Party’s support for President Putin’s rebuilding of the military industry. American companies need to continue supplying capital, technology, and know-how to the Chinese Communist Party.

There could not be a more dangerous idea for the United States, not only for national security reasons but also for the long-term interests of the very companies that flocked to Beijing last week.

Trade ties with China have already funneled capital, technology and know-how into the authoritarian state for decades. Indeed, the economic relationship between the United States and China has turned the People’s Republic of China into a superpower with advanced military capabilities that now poses a direct threat to the United States and its allies.

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Despite the obvious national security implications, American business continues to be a powerful factor in maintaining the flow of capital and technology to China today.

Xi also intends to maintain an influx of American capital, technology and know-how, understanding that without continued American investment China is unlikely to achieve its geopolitical goals. “It is important that we find points of agreement while respecting our differences,” he told business delegates.

The business leaders gathered in Beijing may believe that it is possible to separate business and national security, or even that deepening trade ties with China will help prevent a U.S.-China conflict.

But U.S. investment will probably continue to have an impact. China’s bigger strategic plan, which not only contributes to the erosion of our country’s military advantage, but also increases the risks of our companies in the Chinese market and other markets. For example, part of the Chinese Communist Party’s broader economic strategy is the rise of “national champions” of Chinese companies that can compete fiercely with domestic companies not only in China but around the world.

We ignore geopolitical risks at our peril. Moreover, the companies gathered in Beijing present a case study of all forms of China-related business risks. Some may be prime examples.

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These risks include intellectual property theft, supply chain risks, sanctions and countersanctions risks, revenue risks, and price competition in China and global growth markets, among others. Entire business models can be destroyed. Events of geopolitical conflict.

These will become increasingly important questions for decision makers at companies that continue to focus on the Chinese market. The impact on shareholders could be significant.

It is not unreasonable to expect that some of these companies will not survive this era of geopolitical competition between the United States and China. Unless, of course, they can see the big picture and change course.

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Business leaders returning from Beijing will need to reflect on some of their most important differences with host Xi Jinping and the potential impact on the companies they lead. This would include Xi’s focus on the largest military buildup since World War II and repeated instructions that China’s military “must be able to fight and win wars.” is.

There may still be time to move America’s great companies out of harm’s way, in the interests of both shareholders and the nation.

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