Hear no Evil, Invest in Evil

Beijing's New Marketing Plan For Davos and the World

I care extremely little about what some call the “Davos Crowd.” I don’t particularly care for what they have to say nor do I have some conspiratorial obsession about them like that which permeates radical American politics. Despite my uncanny ability to memorize geography and maps, I regularly confuse Doha and Davos in my head. Moreover, I can confidently say most natsec folks would rather spend their European vacation hammered at Oktoberfest instead of rubbing elbows at endless buzzword panels. Pointedly, former New York Times editor Jill Abramson aptly described the Switzerland conference of rich dweebs as “a corrupt circlejerk.” Therefore, it’s a perfect breeding ground for a brand new CCP influence campaign. That’s where this week’s Breaking Beijing comes in.

“The Gang Goes to Davos”

This year, the planets have aligned to make the conference particularly China-relevant: after repeated embarrassments and chaos in 2022, the Chinese Communist Party seems to be attempting to rebrand. I say attempt, because judging by recent US diplomatic surges in East Asia, we’re not buying it. But just because the prevailing winds of DC blow hard against Beijing today, doesn’t mean they will tomorrow. That’s what Beijing is betting on.

While most may not buy what Beijing is selling, a rough financial market and a sense of increasing fear among doves and casual observers has generated a market for new excuses sold by the Chinese Communist Party. As China reopens from COVID-Zero, in the bloodiest fashion possible, there will likely be a new market surge and desire for foreign investment at a time when the rest of the world economy is struggling to avoid recession, extended inflation, and continued supply shock. Moreover, more than a few folks in DC and in capitals around the world are spooked by the saber-rattling between the US and China, coupled with the stress of Ukraine, and thus are waking up to the idea that the era of “global politics for the fainthearted” is coming to an end. And they certainly don’t want it to end. This is the market for Beijing’s new charm offensive: the do-nothings, the doves, and the Davos crowd.

So what does this all mean for the average analyst, policymaker, or staffer? You’re likely in DC, Hawaii, or Canberra, what exactly do the feelings of peaceniks and hedgefund investors have to do with your work? Well, actually quite a lot. They may live on Wall Street, or be unable to tell a tank from an artillery piece, but their potential for influence grows as the market worsens or in the midst of scandal. And unless we suddenly live in a post-scarcity fantasy world, there will always be bad market cycles and bad news cycles abound. They key is to weather the storm and keep a steady helm at the ship. And if you want to weather this particular wave of CCP charm, then you have to understand how we got here, what they’re up to now, and how to press on their pain points so everyone can see the wolf’s fangs in the daylight.

The Guns of August

While the last few years have seen a resurgent US counter-CCP policy, the first real public gut-check for the CCP came in August of last year. As most of you surely remember, then-Speaker of the House Nancy Pelosi made her second attempt of the year at visiting Taiwan. I say second because her first planned trip was supposed to take place in April 2022, but was cancelled either due to admin pressure or positive COVID tests (depending on who you ask). To keep it short, when the CCP got wind of Pelosi’s planned visit, they went ballistic and in private and public made threats to, and I cannot emphasize this enough, *shoot down the plane carrying the Speaker of the House of the United States of America*. To put it plainly, the CCP and its wolf warriors had gotten so inebriated on their own kool-aid about their power and the US’ relative weakness, they actively threated the assassination of one of the most powerful US government officials for simply taking an island vacation. Despite the debate in the US, Pelosi went forward with the trip and nothing untoward happened (more on that later). Depending on who you ask, there may have been a double-dose of humiliation for the CCP when their systems were electronically jammed by Pelosi’s fighter escort, but I’ve not seen any US confirmation of those reports. Either way, the August crisis undoubtedly forced a rethink of PLA capabilities that was already being pushed after the Russian failure to conquer Ukraine. This was simply a real world case study of deterrence around Taiwan gone wrong. Given that the last 25 years of PLA reforms and modernization was supposed to prevent that, it had to hurt. The Kool-aid of years of ultranationalist propaganda wore off and the hangover hit. The CCP wouldn’t be able to simply bat the US away like the fly it thought it was.

The second 2022 humiliation came from within. The protests by college students and workers across the PRC were the first mass protests in China in decades. It’s hard to gauge the complete scale, so I won’t say “since Tiananmen” but certainly in the Xi Era. It was a challenge to Xi’s rule just as he was coronated for an unprecedented third term as emper…er, president. While it seems most protestors were not calling for regime change, and it would not be wise to assume that they were, challenging Xi’s policies is tantamount to challenging Xi. Dictator Logic 101. And while apologists may argue that Xi reversing his policies is a sign of temperance and his limitations, I would argue that the resulting deaths (somewhere in the tens of thousands to possibly millions, depending on who you ask) is far more in line with your run of the mill PRC dictator than some technocrat-constrained oligarchical leader. In fact, the general failure by the CCP to inoculate and protect the public from COVID-19 after years of mocking Western responses, is a mass humiliation in and of itself, but one which is simply a part of the wider insult to Xi himself.

The third and final 2022 humiliation came in the form of new US restrictions on tech exports to the PRC. There were several iterations throughout 2022, but the grand finale came with the mass restriction on semiconductors needed to enable Chinese AI development. Some analysts, like Paul Scharre at CNAS, argue this is a long-term error by the United States. I and many other hawks disagree, but I do take Paul’s opinion seriously on the issue and we may have to revisit this issue in the future. Either way, from the current Chinese perspective, the US cutting their AI-enabling chip production off at the knees was a humiliation and major obstacle compounded only by the ongoing addition of US allies like Japan agreeing to these restrictions as well. In fact, Japan’s renewed investment in defense modernization, coupled with their agreement to US tech restrictions, is the most clear and present danger to China’s military rise in the opinion of this author, but not the focus for today. I’ll have a future article on this very topic.

Now that we’ve covered the reasons for a CCP rebrand and who the target audience will be, let’s talk about what the rebrand might look like.

Charm, Offensive

What the CCP has convinced itself of is that the West will look away from most of its policies so long as they have the thinnest of top cover. Being too overt in its foreign aggression and rhetoric makes it hard for even most morally ambivalent Wall Street firms to ignore when the USG comes knocking. The August crisis broke the narrative that war couldn’t happen for Wall Street, Zero COVID protests made the seemingly docile PRC population volatile, and chips restrictions made real the price of ignoring US government viewpoints. And so the CCP seems to be headed in the direction of the charm offensive it conducted when it first opened up in the 1980s: woo greedy Westerners hurting in other markets, paint the US as the aggressor in the press (often through fellow travelers), and target third party nations that are more economically and influence-vulnerable (like Singapore) to disrupt a US trade bloc that can harm CCP efforts to compete and invest in things like AI and advanced manufacturing. These are neat tricks, but they’re not the first time we’ve faced them. Nor are they representative of the actual behavior of the CCP and PLA.

Seeing is Believing

While the wolf warriors mostly withdraw back into their basements and the CCP backs off from the egregious foreign-facing rhetoric that piqued in August 2022, their actions towards foreign entities hasn’t changed. They’re still operating overseas police (read: intimidation and kidnapping) offices throughout the world, with one just recently being raided in NYC. They’ve ramped up daily encroachments by aircraft and surface vessels against Taiwan and others. They’re still rapidly growing their Navy and conducting ever more complex combined arms and logistics exercises. They’re still building new islands and challenging territorial claims in the South China Sea. But China analysts have to remember one important thing: the news we read is not the news most of the public reads. While we may still track everything the CCP is up to around the world, they’re removing themselves from the headlines of media groups that most regular joes and janes consume. The problem with August 2022 was that the whole world had a microscope on the 1st Island Chain, not just those of us who eat, sleep, and breath the China threat. The new influence campaign is meant for the people who are looking for an excuse to ignore the CCP or even shake its hand, but who in August 2022 could no longer afford to ignore the threat.

If you’re the CCP, this influence campaign must focus on three groups of people I mentioned before: doves, do-nothings, and the Davos crowd. Davos itself is simply an annoying microcosm of a larger collection of financiers, influencers, and politicians from around the world that are more interested in business than doing the right thing. The doves are those who long for the pre-2017 US-China relationship and who more often than not see the US as the problem in the relationship, not China. The do-nothings are best described by Matt Pottinger: ‘"It’s a mindset that on Monday says “It’s too early to say whether Beijing poses a threat,” and by Friday says “They’re a threat, all right, but it’s too late to do anything about it now.”’ Most folks would rather not worry not have to worry about cataclysm and will actively seek out excuses to avoid confronting it. Xinjiang can be written away by whataboutisms, Taiwan threats by leaning on faulty nuclear deterrence logic, and techno-authoritarianism by “well I’ve done nothing wrong and what about Facebook/Twitter/etc.” By themselves none of these groups have enough influence these days to change policy, but enough of them together can be a real problem. Especially when the West suffers its own crises like recession and political dysfunction.

(Head)Lines of Effort

So if you’re a policymaker, staffer, or bureaucrat in the West, what are you supposed to do to fight the allure of simpler times, simpler narratives, and lots of cheap money?

Well, it starts with our friends.

It can be hard to sell countering China to our friends in the developing world when we sell it as the US vs China. BUT, when we can roll up for a negotiation or flashpoint with allies, it makes it a lot harder for undecided states to back away from confronting China. In recent months alone, we’ve managed to get Japan and the Philippines to publicly talk about defense ties and modernization in ways that were difficult for decades. The August crisis and accompanying CCP rhetoric changed that much, it encouraged those countries to not only do more, but to do more publicly even when they were helping out behind closed doors for fear of CCP reciprocity. Every ally we bring on board confounds the CCP, and invites a new target for the wolf warriors that inevitably paints a new picture of how full of hate and vitriol the CCP still is (see some CCP commentary about Japan). Specifically, we can:

-Ramp up free trade talks with Taiwan and the rest of Southeast Asia and push for a deal before the end of Biden’s first term.

-Expand defense investment cooperation with Japan, Australia, and South Korea

-Expand the space security cooperation with other partner nations, modeled after the agreement we just made with Japan

-Expand multilateral exercises in the Indo-Pacific to include Taiwan, and focus on specific counter-invasion scenarios with public messaging focusing on that mission

-expand bilateral defense cooperation with Taiwan, most of which I’ve highlighted in other articles, and building messaging around countering CCP aggression that plays well in global headlines.

Cash Rules Everything Around Beijing

We can also do more than just alliance build, we can also do what the US government has gotten really good at in the last few decades: taking people’s money.

The Global War on Terror was a revolution for the weaponization of finance. And while I still believe we need a Department of Economic Warfare to execute an effective economic security strategy, our export controls and trade restrictions really do hit the CCP where it hurts. Everyone hates it when they lose money, and the CCP knows that if it can’t stop the foreign investment blood loss, and if it can’t get Wall Street to twist DC’s arm back into financial interdependence, then the game is up. Going forward, we have to do the following to keep the CCP’s bank accounts dry and keep them howling:

-Harden our own supply chains against CCP influence and control. This is an ongoing effort, but the green energy sector should be a priority effort as climate change accelerates. Reducing CCP economic leverage and competitive advantage frequently leads to CCP commentators and regulators lashing out in public fashion. See Huawei.

-Hold the feet of corporations to the fire on divesting from China. There’s multiple avenues of approach here but the two most important components are rewarding divestment and punishing backsliding. If a company moves its production from China to India or Vietnam, it should be applauded. And if any company (hedge funds would be prime targets) move their assets and funds back into China, then they should be named and shamed, if not financially punished. CCP economic talking points have for decades revolved around bragging about how Western money flows into China and makes China rich and they’ve been slowly bleeding that money since COVID-19 broke out. Now more big names are pulling out, and publicly talking about it, post August crisis and protests. In the past, the CCP has been quick to scream and swing at companies who dare cross their path.

United We Stand

Finally, the best but also hardest thing the US can do to break CCP narrative is to keep a united front and policy in the face of domestic discord. The further we get from January 6th, the more we fight disinformation and hate and domestic discontent, the harder it becomes for the CCP to tie real-life current events to their talking points. From “family values” bigotry to racial oppression and riots, the CCP has cherry picked the worst of American history and current events to swing segments of the US and global public in its favor. Every day is a challenge for us here. The fewer headlines we give them, the more room we make to write our own about the CCP. Specifically, we can:

-Support the Select Committee on Strategic Competition between the US and CCP. Passed with overwhelming support in the House, the bipartisan intent of this committee needs to be met, fostered, and spread throughout the rest of the House. I hope to have a full article breaking down the who and what of the committee by month’s end. I just need them to make personnel announcements. Any day now.

-Don’t run the US off a fiscal cliff, don’t shut down the government, don’t pass a full-year CR, and pass the budget on time, without $75 billion in cuts to the DoD.

-Party leaders and grassroots have a responsibility to reign in their radicals, not only to reduce violence and dysfunction, but to prevent the spread of CCP-enabling talking points like isolationism.

-Restrict the ability of CCP-owned and China-based companies from being able to own land in the US, have lobbying representation in the US, or from being listed on US exchanges or funds. The CCP has its embassy and consulates, it doesn’t need extra corporate lobbying power to disrupt US legislation. However, I’ve come around to the idea of keeping the wolf warriors on social media. Let them act a fool and show the world their arrogance, it worked so well during the August Crisis for them. Just remember to label them appropriately.

At the end of the day, unity matters above all else and the CCP knows it. Its influence campaigns are designed to divide, dissuade, and dissociate us from each other and the threat posed by Beijing. It’s not enough to simply stand strong, we have to push back, together. Poke the right buttons, press on the right pain points, and the real CCP will come back out and show itself to the world. A new coat of paint runs shallow for a house rotten to the core. Don’t fall for it.

If you would like to read more about the future of US-China conflict, the invasion of Taiwan, and what the world looks like if Taiwan falls, check out my book, EX SUPRA. It just got nominated for a Prometheus Award for best science fiction novel! And if you have any suggestions for topics for future newsletters, please send them my way on Twitter @Iron_Man_Actual.