The Pentagon has reportedly cleared over $311 million in domestic investment to reduce Chinese companies’ dominance in the US defense manufacturing sector.
The US Department of Defense is pushing for new guidelines to vet potential US investors in American defense infrastructure and technology.
Biden’s 2022 budget proposal, as issued last week, allocates $715 billion for the Defense Department. The budget identified China as the “top challenge” and at the behest of a bipartisan House Armed Services task force, prioritized financial support for domestic producers.
While ascertaining investment into the domestic defense sector, Biden also hopes to screen the investors.
Bill Lynn, a former Deputy Secretary of Defense, has stated that in recent years, the US military and its defense sector have “moved from being a net exporter of technology to a net importer.” This invites Chinese predatory investment practices, keeping the American national security reliant on Chinese money and resources.
The Chinese investment in the US defense supply chain has swelled by a whopping 420% in the last decade, according to Govini, a data and analytics firm. The Chinese companies’ control over the primary rungs of the supply chain gives Beijing the power to seriously disrupt them. Besides, they make the US military infrastructure vulnerable to Chinese espionage.
“They’re [China] just as adept to trying to find out ways that they can get in there without us seeing it, so that’s why this has to be a whole of government approach,” Tara Murphy Dougherty, CEO of Govini, said.
In December, The Eurasian Times ran a detailed analysis of how China runs the risk of becoming global espionage of hub. It cited a report published by The Australian, a leading publication from Australia, that obtained the database of around 2 million China Communist Party (CCP) members.
The data leak was unprecedented by any standard as it revealed how CCP members had allegedly been “embedded” in the biggest companies of the world, including banks, defense contractors, and pharmaceutical companies.
.@POTUS' discretionary funding request represents an important investment that will ensure DoD resources are matched with our strategy and policy to defend the nation & take care of our people, while revitalizing key alliances and partnerships to succeed. https://t.co/edKYpfvmnp
— Secretary of Defense Lloyd J. Austin III (@SecDef) April 9, 2021
American capitalism has a disadvantage when it comes to pushing back against authoritarian states such as China. While the former allows free investments, the latter ensures government control over investment into critical sectors. Thus, the relationship of interdependence becomes one-sided.
One of the first attempts by the Biden administration to counter Chinese influence included the launch of the Trusted Capital Digital Marketplace (TCDM), as announced by the Defense for Acquisition and Sustainment Under Secretary Ellen M. Lord on January 13.
The program screens funding into the defense industry to ensure secure investments by trusted sources. Till now, about 50 venture capital firms have been vetted. The program, in its initial stage, includes only smaller firms and will move onto the major prime contractors later.
The Alliance for American Manufacturing (AAM) had raised alarms as early as 2013 about the vulnerability of the American military supply chains. Its report had recommended federal support to the domestic manufacturing sector. Sound domestic production will also take care of the problem of imported counterfeit products.
The Pentagon had begun auditing the domestic supply chain in 2018 in response to a White House-commissioned report that revealed several risks in the defense-manufacturing sector.
Biden has also issued an Executive Order to increase American capabilities in semiconductor manufacturing, an industry that is almost monopolized by China, South Korea, and Taiwan. The region is also vulnerable to naval confrontations due to territorial disagreements and thus has the potential to disrupt American supplies.