Date: Monday, October 9th, 2023
Source: The Wall Street Journal
Companies must prepare for the possible escalation of hostilities between the U.S. and China, partly by building more resilient global technology supply chains, said Jacob Helberg, a member of the U.S.-China Economic and Security Review Commission.
“National security people in Washington actually see a probably more than 50% chance of a hot conflict with China break out, potentially, in the next five years,” Helberg said Monday during an interview at The Wall Street Journal’s CIO Network Summit in New York.
The commission, formed by Congress in 2000, provides recommendations based on its evaluation of national security and trading risks associated with China. Prior annual reports from the commission have called for imposing restrictions on U.S. investment in China and limiting investors’ ability to buy U.S.-listed Chinese stocks. Last year the commission recommended that Congress direct the Biden administration to assess China’s compliance with a pact that granted the country “Permanent Normal Trade Relations” status over two decades ago. Helberg is also a senior policy adviser to data-analysis firm Palantir.
Business technology leaders must ready their technology supply chains and cybersecurity postures with the broader geopolitical situation in mind, he said.
“If we’re headed towards the climate where there is deepening friction between the U.S. and China, your organizations are going to feel it,” Helberg said. “If it’s not in the economic numbers, you’re going to feel it because of increased attempts of hacking and increased types of disturbances and so preparing, I think, is absolutely worthwhile.”
The hostile U.S.-China relationship poses especially big problems for certain kinds of businesses, such as hardware companies that rely on supply chains in China, or funds that have billions of dollars in investments tied up in illiquid assets in China, according to Helberg. The situation is potentially less dire for companies that already have started reshoring operations or perhaps never had such extensive supply chains in the first place.
For instance, companies can boost their resilience to deepening conflict by making sure their due diligence of vendors includes an assessment of exposure to China or Chinese influence. That could limit several sources of risk, including so-called insider threats posed by workers or overreliance on electronic devices that come out of Chinese supply chains.
Companies can also work with policy makers and help them understand their supply chain risks, pushing for sensible strategies that “move the ball,” according to Helberg.
For a long time, policy makers viewed the U.S. business community as being reflexively resistant to changes such as reshoring, but many of them could be persuaded to assist American companies—if they are asked, said Helberg.
“I think a lot of lawmakers will want to help you figure it out. It’s just that being able to have those candid conversations with them is very, very difficult,” Helberg said.
Many business people understand that the trend in Washington is moving toward more regulation and scrutiny of anything that involves transactions with China, he said.