The Corner

National Security & Defense

IBM and China’s Military-Industrial Complex: A Troubling Report

Helping to modernize China’s industrial base may be good for business, but it is potentially dangerous for U.S. national security. A new report by a U.S. research firm (recently detailed in the New York Times) concludes that the U.S. is erring on the side of endangering national security. The report, by Defense Group Inc., takes a close look at IBM’s partnerships with Chinese companies that have “deep and troubling ties to the Chinese military, defense industry, and state security apparatus.” The report concludes: 

Through these partnerships IBM is endangering the national and economic security of the United States by providing the Chinese government with the means to perfect and innovate these sensitive, high-level technologies. In addition to risking the cybersecurity of their customers globally and undermining decades of U.S. non-proliferation policies regarding high-performance computing, IBM’s new China strategy has three important implications for U.S. technological security and economic competitiveness: 

  • Threatens U.S. commercial and technological advantages: The transfer of these IBM technologies threatens key American corporate advantages in this sector, permitting Chinese firms to close the gap with their foreign competitors and better compete with them globally.
  • Compromises U.S. military and government supply chains: The military and state security connections of IBM’s partners raise serious concerns about supply chain security, especially for U.S. military and government customers. Security concerns related to this sale have already forced the U.S. Navy to find new sources for procuring the servers critical to Ballistic Missile Defense upgrades for the Aegis Combat System.
  • Enhances Chinese military technological capabilities: The transfer of these technologies to Chinese firms will potentially give the People’s Liberation Army and the Chinese defense-industrial base access to new classes of advanced technologies, and thereby improve the sophistication of Beijing’s military modernization as it seeks to challenge the U.S. military in the Western Pacific.

The Pentagon’s latest report to Congress on China’s growing military power provides critical background:

China continues to leverage foreign investments, commercial joint ventures, academic exchanges, the experience of repatriated Chinese students and researchers, and State-sponsored industrial and technical espionage to increase the level of technologies and expertise available to support military research, development, and acquisition. China’s long-term goal is to create a wholly indigenous defense industrial sector, augmented by a strong commercial sector, to meet the needs of [People’s Liberation Army] modernization and to compete as a top-tier supplier in the global arms market. 

The Pentagon report goes on to explain that China intentionally tries to integrate “defense and civilian sectors to leverage output from China’s expanding science and technological base.” Information technology development is one of five areas of basic research that the Chinese government has identified as having military applications, and which it has targeted as a strategic priority.

Congress should take a close look at whether our export control laws need to be tightened in light of the increasingly sophisticated technology that companies like IBM are transferring to Chinese entities. In many fields of strategic competition, from cyber security to missile technology, offensive capabilities currently have a decided advantage over defensive ones, both in terms of effectiveness and cost. In these circumstances, the U.S. needs to be more wary of helping China develop its industrial and technological base in ways that have dangerous implications for cyber-security, non-proliferation, and the tenuous balance of power in the Far East. 

Mario Loyola — Mr. Loyola is a research associate professor and the director of the Environmental Finance and Risk Management Program at Florida International University and a senior fellow at the Competitive Enterprise Institute. From 2017 to 2019 he was the associate director for regulatory reform at the White House Council on Environmental Quality.


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