The US Needs to Impose Costs on China for Its Economic Warfare

The United States has failed to sufficiently deter China’s long-running campaign of cyber-enabled economic warfare. Beijing violated the Obama-era bilateral deal to cease economic espionage and then shirked the Trump-era agreement intended to recoup economic losses from its unfair trade practices. There are several components to a better deterrence policy, and it is time to find effective ways to impose costs on Beijing.

The costs to the United States, meanwhile, have been all but incalculable. Over the past decade, Chinese operatives have stolen plans for the latest fighter aircraft, missile defense systems, submarine technology, ships, helicopters, and personnel data. FBI director Christopher Wray called this campaign of cyber-enabled economic warfare “the greatest long-term threat to our nation’s information and intellectual property…and by extension, to our national security.” 

So Washington needs to find a better combination of policies to change Beijing’s calculations — what the congressionally mandated Cyberspace Solarium Commission called “layered cyber deterrence.” Work must continue on shaping international norms so that adversaries and allies alike understand what America considers unacceptable, but this will have little effect on a government that believes the rules do not apply to it. Crucial as well is accelerating efforts to make U.S. government and private-sector systems harder to hack and faster to mitigate the damage and recover. This kind of resiliency should warn adversaries that America “will survive to defeat them with speed and agility,” the commission explained, but this only works if our adversaries believe that when we recover, we will strike back.

And so the linchpin of a more effective deterrence is developing a more effective way to hurt the Chinese Communist Party if it will not stop hurting the United States. 

There is likely no silver bullet for inflicting this punishment. Rather, the United States needs to fire “silver shrapnel” because “shrapnel also wounds,” as our colleague Mark Dubowitz has explained. 

The Justice Department has wisely continued its China Initiative launched in 2018 to prosecute economic espionage and trade theft. The efficacy of indictments against cyber operators is debatable, but there is evidence that Chinese units have disbanded after Justice Department actions, according to information security expert Dmitri Alperovitch.

Economic sanctions, meanwhile, have become what Deputy Treasury Secretary Wally Adeyemo called a “tool of first resort” to address many national security issues. In mid-April, as part of the administration response to Russian cyber malfeasance, Treasury restricted dealings in Russian sovereign debt, adding to the Kremlin’s economic woes while minimizing the impact on U.S. investors and leaving room for greater escalation if Moscow’s mischief continues.

But past administrations have shied away from using sanctions against Chinese state cyber actors likely out of concern for blowback on U.S. companies. However, Washington’s restraint is not protecting American firms as China’s intellectual property theft is costing U.S. industry hundreds of billions of dollars each year. 

As with Russia, U.S. policymakers should design targeted measures to exploit the CCP’s pain points. Restrictions on exporting chips to telecom giant Huawei are hampering the company’s ability to turn a profit — and exploiting vulnerabilities in Beijing’s own supply chains. 

In cyberspace, meanwhile, Washington must take the fight to China. U.S. Cyber Command’s defend-forward strategy aims to “to disrupt or halt malicious cyber activity at its source” before hackers launch attacks. Under this strategy, CYBERCOM has reportedly carried out more than two dozen operations to prevent meddling in the 2020 presidential elections. There is no public reporting on Pentagon operations to thwart Chinese cyber theft. If not already occurring, defend forward operations against China should be part of a holistic response to protect U.S. national interests.

China is looting American innovation, and Washington has yet to find the optimal response to convince Beijing to stop. America must apply its world-renowned ingenuity to find solutions to China’s cyber-enabled economic warfare. The alternative is to watch as American inventions fuel Beijing’s aggression. 

Maj. Jared Thompson is a U.S. Air Force officer and visiting military analyst at the Foundation for Defense of Democracies. 

Annie Fixler is the deputy director of the Center on Cyber and Technology Innovation at Foundation for Defense of Democracies. FDD is a Washington, D.C.-based, nonpartisan research institute focusing on national security and foreign policy. 

The views expressed in this article are those of the authors and do not necessarily represent the views of the U.S. Defense Department or the U.S. Air Force.