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Opinion

Cyberattacks reveal China's willingness to raise the temperature

Policymakers must anticipate future threats to US private sector

| China
Microsoft's office building in Beijing, pictured on July 20: the Biden administration and Western allies formally blamed China for a massive hack of Microsoft Exchange email server software.   © AP

Glenn Nye is a former Member of Congress and President and CEO of the Center for the Study of the Presidency & Congress (CSPC). Dan Mahaffee is Senior Vice President and Director of Policy at CSPC.

The growing competition with China over technology dominance is bridging divides both abroad and at home.

In response to Beijing's aggressive campaign of cyber espionage, intellectual property theft and bare-knuckle diplomacy, the U.S. and close partners are beginning to rally behind a more unified front.

Recently an unprecedented alliance of democracies, including NATO, the European Union, as well as Japan, the United Kingdom, Canada and New Zealand, publicly castigated China's malign cyberspace activities and recent attack on the Microsoft Exchange system as "posing a major threat to economic and national security."

In Beijing, President Xi Jinping continues to push China toward authoritarianism, cracking down on anyone or anything that could disrupt the Chinese Communist Party's strategy for achieving dominance and total control, especially in the high-tech arena.

Targets range from billionaire Chinese tech entrepreneurs to independent media and students in Hong Kong. Minorities are being subjected to a disgraceful campaign of ethnic cleansing, even as Beijing steps up its bullying and military coercion aimed at Taiwan. Meanwhile, Beijing's state media organs and "wolf warrior" diplomats openly celebrate China's more aggressive posture under Xi's leadership, and the ascendancy of China's authoritarian model over democratic systems apparently in decline.

In Washington, there are welcome -- if overdue signs -- of an emerging consensus.

The Senate has responded by passing the U.S. Innovation and Competition Act, or USICA, while the House of Representatives has moved forward legislation, including the Ensuring American Global Leadership and Engagement, or EAGLE, Act stewarded by Chairman Gregory Meeks of the House Foreign Affairs Committee.

Both USICA and the EAGLE Act pointedly raise concerns about reliance on China for key supply chains, while also warning of China's debt diplomacy via the Belt and Road Initiative and other tools of investment influence. Both legislative proposals also encourage closer cooperation with allies and partners on digital trade and data issues; lay out regional approaches to countering Beijing's influence on the global stage; and deepen avenues for partnership with Taiwan.

Democratic Representative Gregory Meeks, pictured on May 19: the chairman of the House Foreign Affairs Committee said the bill for the EAGLE Act included robust provisions addressing issues such as China's alleged human rights abuses of the Uyghur Muslim minority and closer ties to Taiwan.   © CQ Roll Call/AP

The Biden administration initially began circling the wagons against harmful Chinese activities by elevating the ongoing Quad security dialogue between the United States, Japan, Australia and India to summit level, and establishing a Quad working group on advanced technology.

The administration further clamped down on Chinese companies facilitating China's oppression of Muslims in Xinjiang, and in a recent public address, President Biden warned companies about the risks of continuing to do business in Hong Kong as Beijing bulldozes that enclave's rule of law.

The U.S. has also continued to make progress with allies in limiting Chinese companies' access to fifth-generation, or 5G, wireless networks, protecting advanced technologies, and better coordinating export controls and secure supply chains. While this growing consensus on the need to more forcefully engage in competition with China is coming into focus, the pressure will only grow on private sector companies that find themselves in the gyre of this political and economic decoupling.

Earlier this month, Microsoft found itself in the crosshairs of China's cyber warriors, who sought to steal intellectual property and lay the groundwork for future disruptions. Examples from Hollywood clearly show how Beijing's redlines influence decisions in American boardrooms, while Wall Street struggles to balance the lure of the giant Chinese market with the CCP's increasingly aggressive crackdowns on private enterprise, including thwarting their own companies listing on U.S. exchanges.

For many U.S. and allied companies, the need to do business in China is a reality of the global economy. Revenue from China is key to funding needed research and development, capital investment and workforce expansion back home. Yet companies have little choice but to acknowledge the growing division and tensions between Washington and Beijing. It will take significant time and money to fully adjust to this new geopolitical reality, and to sort out its impact on globalized operations. CEOs must carefully manage risk and opportunity as they shift supply chains to other Asian suppliers, and warily observe rapidly escalating tensions in the Taiwan Straits.

U.S. policymakers need to not only invest in more secure supply chains and homegrown technological innovation, but they must also anticipate the threat likely Chinese retaliation poses to our private sector. China's playbook demonstrates this threat. As Australia sought to strengthen ties with the United States and other allies and expose Beijing's influence both in the region and within Australian society, China has responded with embargoes and economic assault. Detentions of foreign executives or dual-nationals is another tactic routinely employed by the Chinese government.

Beijing has already demonstrated its willingness to raise the temperature and retaliate against Western companies and individuals for actions their governments take. The CCP's clampdown on the private sector in general demonstrates that smooth trade ties and business as usual are increasingly unrealistic.

As tensions and the competition with China grow more heated, U.S. policymakers and private sector leaders must better prepare for the likely consequences. Reaching across the political aisle for a bipartisan consensus on the dangers that lie ahead, and rallying together in an alliance of democracies in defense of the rules-based international order, are good places to start.

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