How Should the U.S. Respond to China’s Military-Civil Fusion Strategy?

To properly and effectively answer the question of how to assess and respond to China’s military-civil fusion (MCF) strategy requires a comprehensive understanding of what MCF is and how it relates to the broader project that China, under the leadership of Xi Jinping, has of turning the country into an advanced world-class military and innovation power.

There has so far been an insufficient amount of research and analysis carried out by both Western and Chinese analysts to provide a robust, nuanced, and coherent explanation of what MCF is. There has been plenty written about MCF, especially coming out of China, but much of it tends to be vague, descriptive, repetitive, and adhering closely to the official line.

The official MCF development strategy is still in its early stages of evolution. The Xi regime only began to seriously think about MCF development around 2016-2017, and the past few years have been primarily about laying the basic foundations of the MCF edifice. Consequently, it is still too early to definitively say what MCF is or how it contributes to the transformation of China into a global leader. Moreover, MCF as a term is no longer being used by the Chinese authorities, which begs the question of what term we should use to describe what is going on. Should we apply standard Western terminology of civil-military integration or dual-use integration? If we cannot get the terminology, concepts, and semantics right, then the policy debates going forward will become even more confusing and divorced from reality.

A useful starting point then is getting the Western analytical house in order to properly and rigorously assess MCF. First, we should make the analysis not just about what China is doing but how it compares with what is going on in the U.S. and other countries. The U.S. in many respects has a far more developed civil-military integration (CMI) set up. Second, there has to be the development of robust means to evaluate how MCF—or more appropriately CMI—is actually occurring in China, and elsewhere around the globe. The study of CMI stagnated in the 1990s (at the late industrial age and beginning of the information age), and there has not been much work on this topic in the 21st Century.

Without the cultivation of these state-of-the-art and forward-looking analytical tools and perspectives, the ability of U.S. and other policymakers to understand and respond to what China is doing in the civil-military economic, technological, and innovation spaces will be lagging, deepening the risk of the U.S. being caught by surprise as has happened in the past.

How can the Pentagon best position itself for advantage in military rivalry given the long-term challenge that China represents? The U.S. should not ignore Beijing’s civil-military agenda, but neither should it overreact in counter-productive ways. Instead of fixating on Beijing’s methods—or worse, emulating the P.R.C.’s inefficient, state driven approach—the U.S. should get its own innovation house in order.

To remain the innovation superpower and a global research and investment hub, the fight begins at home. While the U.S. should enact sensible, narrowly tailored export and investment protections for critical dual-use technologies, it should avoid blanket or arbitrary export bans, and (with some safeguards) welcome the world’s next generation of innovators into U.S. academic institutions.

The U.S. should build on an already world-leading research and innovation base and further incentivize public-private collaboration in cutting edge technology. It’s time for a revolution in Defense Department (DOD) procurement, as Christian Brose, Michele Flournoy, Kathleen Hicks, Anja Manuel, and many others have argued.

We’ve done this before. U.S. policymakers should harken back to the golden age of American public-private collaboration on defense. From the creation of the National Labs of the 1930s to the founding of the Defense Advanced Research Projects Agency (DARPA) in 1958, federal government-supported private sector innovation has led to breakthroughs such as the microprocessor, GPS, and the precursor to the modern Internet. Most recently, the Silicon Valley-based Defense Innovation Unit was founded to streamline collaboration between the Pentagon and the country’s most innovative companies.

As Kathleen Hicks (currently U.S. Deputy Secretary of Defense) and Anja Manuel wrote in Foreign Affairs recently, to better compete with China’s model, the U.S. federal government should provide financial incentives that support breakthroughs in emerging technologies. For example: direct grants for key projects, research and development tax credits, and collaborative research ventures with academic institutions.

The DOD should reduce new investments in outdated legacy systems while increasing funding for new technologies that our competitors have prioritized, such as autonomous submarines and defenses against hypersonic weapons. The DOD will need to invest in new technologies both to reduce costs and increase the efficacy and relevance of existing systems (e.g., expanding a legacy aircraft carrier’s arsenal with new electronic weapons systems or unmanned surveillance vehicles). In his recent book and article, Christian Brose argues that the DOD must prepare for tomorrow’s challenges—such as confronting China’s advanced anti-access/area-denial strategy in the South China Sea—rather than the wars of the past.

The DOD will also need to speed up procurement processes to help start-ups with tight budgetary timelines survive the so-called “valley of death” gap between a company’s development of a product and the Pentagon’s decision to initiate a program, through measures such as speedier purchasing and prototyping. For example, the National Security Commission on Artificial Intelligence suggests the DOD quadruple contracts with early-stage tech firms over the next five years and expand budgets for department entities that deliver viable prototypes. These processes, in turn, can spur further private sector investment.

Finally, as Michele Flournoy and Gabrielle Chefitz have written, improving the DOD’s training programs in advanced technology, establishing government-backed tech incubators, and expanding opportunities for fellowships and educational exchanges will all be key in producing a smart and adaptable defense industrial base. To keep pace with change, the DOD will need to develop a diverse talent pool across a broad range of subject matter experts from robotics technicians to AI ethicists.

These ideas are not novel. Many leading experts in technology and defense policy have argued for these changes for years. But it will take time to adapt the rigid structure of the defense-industrial complex to the quickly evolving security environment of today. We have no more time to lose.

Military-civil fusion (MCF) has deservedly grabbed the attention of U.S. policymakers. However, a few clarifications are needed to craft a proper response.

First, recognize that MCF is not a black box: While the Chinese political terminology used to describe MCF can be frustratingly vague, the strategy itself is not mysterious, nor should it be simply reduced to a scheme for acquiring technologies from abroad. Rather, according to Chinese strategists such as Jiang Luming (姜鲁鸣), MCF represents something more significant: China’s path to victory in a global confrontation of systems. While concepts of civilian support to the military have been present throughout Chinese history, Jiang’s and others’ innovation was to articulate MCF as a strategy for rapidly transforming China into a powerful nation. China’s leaders have since elevated MCF to the level of a national grand strategy “in response to complex security threats and as a means of gaining strategic advantages.” According to Jiang, states are in competition across all domains, pitting their adaptability and ability to muster the will and strength of society as a whole to support security and development goals. MCF is a way to better make use of all of these strengths, a critical advantage.

The goals for implementing this strategy are also clearly articulated. The near-term goal, described as achieving a “state of MCF deep development,” involves improved efficiency and resource-sharing to maximize the strategic effects of China’s economic growth and defense spending. It is also important to note that the focus of the strategy is internal and is on improving interactive ecosystems such as manufacturing, science and technology, education, social services, and public safety within China, not simply ensuring efficient cooperation between civilian organizations and the Chinese armed forces. Longer-term, China hopes to use MCF to rationalize and integrate all of its various economic and defense plans, a point that was made in the latest Five Year Plan. MCF is therefore not simply yet another addition to China’s list of national plans, but rather a strategy whose components are to be woven into China’s other national strategic priorities to advance the People’s Republic of China’s overarching security and development goals. Understanding MCF’s short- and long-term goals are important if we are to anticipate how deepening MCF delivers not only strategic effects in terms of more efficient transportation, robust communication networks, and better military equipment but also an economy that attracts greater investment and innovates faster.

Second, MCF should remind us of the importance of investing in our own competitiveness. While the U.S. should of course continue to shore up its strengths, reducing China’s ability to free-ride on U.S. development and tightening tech-transfer controls, China’s embrace of MCF should act as a reminder that competitiveness is grounded upon a much broader source of strength. In fact, China’s MCF strategy draws strongly from the United States’ experience and is intended in many ways to replicate the strengths of the American system. But the desired transparency, resource-sharing, and involvement in private industries that are foundational to carrying out the strategy have repeatedly challenged the limits of what the Chinese Communist Party regards as acceptable. If anything, Xi Jinping’s emphasis that the strategy be implemented with great speed is indicative of his assessment of China’s internal weaknesses and the imperative of addressing them. The U.S. should therefore double down not only on more concrete steps like roads, rail, and energy, but also on the values side, ensuring that the legal systems, vibrant universities, and free flow of information that underpin our systemic advantages remain strong. The investments in infrastructure, education, and research Joe Biden outlined in his recent Joint Address are a positive first step to ensuring success in that contest.

The breadth and depth of the Chinese government’s military-civil fusion (MCF) development strategy are impossible for those who craft U.S. policy towards China to ignore. Beijing’s MCF strategy aims to weave and embed all other national strategic priorities, both defense- and economic-oriented, into an integrated, whole-of society system. These efforts have undoubtedly contributed to China’s increasingly competitive position militarily as well as its growing position of global influence. U.S. policymakers will likely continue to grapple with the threats posed by the long-term competitive challenges for decades to come.

At its core, the “13th Five-Year Special Plan for S&T Military-Civil Fusion Development” aims to improve the mutually reinforcing two-way flow of technology and resources between the civilian and military sectors. U.S. policymakers have used this stated goal as a rationale in U.S. policy towards China, as demonstrating the intricacies of the relationships between the Chinese defense apparatus (the People’s Liberation Army (PLA) itself and defense companies) and ostensibly private firms and universities can be helpful in driving policy decisions. For instance, the Department of Commerce invoked MCF to justify the addition of Semiconductor Manufacturing International Corporation (SMIC) to the Entity List in December 2020, arguing that this partially-state-owned firm was “supporting China’s military modernization efforts.” Similarly, the Department of Energy introduced a presumption of denial for exports to China General Nuclear Power Group in 2018, citing illegal diversion of U.S. civil nuclear technology for military or other unauthorized purposes.”

As the Biden administration hones its China policy, officials must take a nuanced approach not only in understanding China’s MCF development strategy, but also in using it as a tool to shape policy. Invoking MCF only in the most discrete and targeted way will enable the U.S. to make the most effective policies. Moreover, misunderstandings around MCF can make the U.S. government vulnerable to needless mistakes. For instance, a now-removed announcement from the Department of Commerce alleged that the 2020 TikTok ban was because the company is “an active participant in civil-military fusion and is subject to mandatory cooperation with the intelligence services of the CCP,” when in fact the ban was based on issues pertaining to data collection and privacy.

In order to avoid these types of misunderstandings, the Biden administration should look to increase interagency dialogue and education on China’s MCF developments. Although different agencies and offices will need to base their focus on the various parts of MCF that fit within their individual jurisdictions, the U.S. government as a whole should work to ensure that all relevant parties are privy to the necessary information to make sure that everyone stays informed and up-to-date on the strategy’s evolution. Maintaining a solid baseline understanding of Beijing’s MCF inner workings and shifting dynamics will go a long way in helping policymakers make the most effective decisions.

By blurring the line between military and commercial endeavors, military-civil fusion (MCF) has heightened the risk that U.S. companies or universities may be unwittingly eroding U.S. military advantage through cooperation with Chinese companies, institutions, or individual researchers. These risks have naturally demanded the attention of policymakers. However, in drawing attention to such risks, the Trump administration turned MCF into something that it is not. It characterized the strategy as an ever-lurking boogeyman in order to justify a frenzy of drastic moves targeting Chinese entities, several of which proved self-defeating. During the Trump administration, MCF was used as a justification for various actions against Chinese nationals, including to limit and revoke Chinese student visas, as well as the blacklisting of major Chinese companies, all while reinforcing calls for decoupling. Going forward, competitive strategies on China will be ill-served by a “tough” or “hawkish” approach that is careless of the collateral or consequences.

A frequent misconception or misrepresentation in messaging had been that nearly every Chinese enterprise is already actively involved in MCF. As a result, that line of thought goes, it is all but inevitable that any collaboration between American and Chinese researchers is likely to end up directly or indirectly supporting military modernization. To the contrary, at present, a limited proportion of China’s high-tech enterprises have been actively or openly engaged in supporting the military, yet the numbers of companies and universities involved may continue to increase as this strategy gains traction.

Those who have continued to call for “decoupling” entirely or indiscriminately, informed in some cases by the view that MCF is all-encompassing, should recognize that a more targeted, effective response is still feasible. There are reasonable avenues by which to continue research collaborations between American and Chinese counterparts that are mutually beneficial and necessary, such as in efforts to combat COVID-19. Moreover, there is a case to be made that the benefits still outweigh the risks, given how much the United States has gained and continues to benefit from a highly integrated, globalized innovation ecosystem.

The mitigation of risk is attainable, such as through pragmatic parameters that enhance research security; to attempt to eliminate risk entirely would be infeasible and likely prove ultimately disadvantageous to U.S. interests and innovation. Of course, MCF is intended to blur boundaries and increase the connectivity of defense and commercial developments and applications in China. These issues will merit continued analytic attention as this agenda continues to evolve and progress in the years to come. This intellectual challenge thereby highlights the importance of robust investments in open-source intelligence, such as analytic exchanges that include information-sharing. Going forward, increased engagement, whether across agencies or with allies and partners, will be critical to analysis and policy responses.

Ultimately, American policymakers must also recognize that MCF is a competitive challenge, but not directly a policy issue, per se. Realistically, U.S. critiques about MCF are unlikely to change the fundamentals of the strategy and will only engender complaints of hypocrisy in return from Beijing, especially as the U.S. military expands its efforts to promote public-private partnerships. The primary threats linked to MCF involve IP theft and tech transfer tactics, which are often linked to, but hardly synonymous with, MCF. Going forward, American countermeasures should concentrate on trying to curb these recurrent behaviors that are illicit, illegal, or problematic, rather than focusing its messaging on the strategy itself. Curbing these behaviors will require improved measures for research integrity, enhanced cybersecurity protections for companies in critical industries, and reasonable prosecutions to hold threat actors accountable, among other measures. The success of those measures will hinge upon the capacity for effective coordination of these responses across the U.S. government and through alliances.

Beyond that, U.S. policies ought to take care not to reinforce the ends of the MCF strategy in their attempts to counter it, but rather ought to recognize the frictions and inherent contradictions. In particular, the Biden administration can take into account the incentives of Chinese companies, which are, in some respects, similar to those of their American counterparts when it comes to seeking profit in a competitive ecosystem. The Biden Administration can explore options to attempt to drive a wedge between Beijing and the technology companies upon which it depends. U.S. efforts to do so will require demonstrating to Chinese companies that doors to global markets may be more open to those that avoid involvement in MCF. Rather than treating all Chinese companies as possible accomplices to MCF, the administration could develop a calibrated, differentiated approach that places the burden of disclosure and transparency on Chinese companies, using access to the U.S. market as an incentive.