Preparing the West for China's Next Crisis

Democracies face a strategic competitor in China, which is producing disruptive technologies at breakneck speed and in large quantities. The West must rethink quickly to stay ahead.

The conflict in Ukraine has raised deep questions about how we invest in defense. The United States spent more than $4 trillion on the wars in Iraq and Afghanistan. By comparison, China has spent less than a quarter of that on building a vast network of ports, highways, and a dominant global supply chain through its “Belt and Road” initiative, which connects much of the modern world to Beijing. The example highlights the radically different approaches to how the West and China prioritize strategic investments.

Consider that over the past 20 years, we have invested heavily in high-tech, high-precision weapons systems and counterinsurgency capabilities that take years to build and months to train highly skilled operators to use. These systems are proving of limited value to our friends in Ukraine, who need a secure resupply of basic munitions to survive a long war of attrition. Just over six months into the war, and this is already proving to be a major challenge, with the US, UK and France all reporting alarming reductions in key munitions. And remember, these take months (and sometimes) years to replenish.

Given the disparity in defense spending between NATO ($1.1 trillion) and Russia ($66 billion), we are perhaps right to ask how we ended up in this predicament. But the more important question is whether our approach to defense investment is sustainable. We already know that China and Russia offer much better value for money. We should also remember that significantly cheaper labor and production costs mean that the gap between their respective defense budgets and that of the United States is much closer in real terms.

One of the main problems is that the lead time for advanced weapons systems like the fifth-generation F-35 program sometimes lasts several decades and can fail to keep up with the fastest advances in computing, engineering, and robotics.

The F-35 may have impressive capabilities, but its complexity has kept the program years behind schedule and well over budget. Our competitors (namely China) have a very different strategy of mass-producing much cheaper platforms that can simply out-compete more sophisticated systems. Take the threat posed by autonomous systems (both airborne and underwater) and the prospect that within a few years we could have relatively inexpensive self-replicating nano-bots and drones operating independently and easily targeting our strategic weapons platforms, such as aircraft carriers and nuclear-armed submarines.

The lifetime cost of the F-35 program is about six times greater than China’s entire projected defense budget. However, consider that for roughly the same amount, China boasts an impressive arsenal of hypersonic missiles (the US is estimated to be “several years behind” in this area), a navy that has more warships than the entire US Navy fleet, as well as three new aircraft carriers, a nuclear modernization program, a large air force, and over 3 million military personnel.

The problem is not just that the West seems to be investing staggering amounts of capital in overly complex systems that almost play into the hands of our strategic competitors. The more serious underlying problem stems from the fact that all wars are ultimately won by the speed, efficiency, and reliability of defense industrial production. The reason China has managed to build a navy larger than the US in a few years is because China already builds 40% of the world’s merchant ships, compared to about 1% in the US and Europe combined.

This huge gap in shipbuilding is symptomatic of a broader dependence on China’s vast global supply chain. Indeed, rare earth materials, essential for many of our most sophisticated weapons and technologies, come almost exclusively from a country characterized as a “strategic threat.” Similarly, the world is dangerously reliant on Taiwan for semiconductors, and we know from numerous public statements that China plans to reclaim Taiwan by 2050, by force if necessary. China’s belligerent reaction to Nancy Pelosi’s visit to Taiwan on August 3 suggests that we may be one step further down this path.

As with Putin’s claim that Ukraine “isn’t a real country,” perhaps we should take President Xi at face value and plan accordingly. That means anticipating an imminent invasion of Taiwan, which could give China control of one of the world’s most important industries. It doesn’t take Nostradamus to conceive of a similarly nightmare scenario where China blackmails the West by using its control of critical industries and global supply chains in the same way that Russia has with energy supplies across Europe (despite passing legislation this month to provide more than $52 billion in aid to U.S. chipmakers.) And to be clear, China is already the global leader in AI, quantum computing, satellites, 5G, drones, UHV power, and digital currencies.

As we await the release of a new US National Security Strategy, the West must take a step back and fundamentally rethink how to prioritize collective defense investments and build much greater value, efficiency, and speed into its military-industrial complex.

This may require a collective mix of reducing regulatory burdens, increasing competition, AI-facilitated horizon scanning, supporting innovation and startups, expanding our industrial base and enabling allies to do the same, and even increasing our tolerance for risk. What is certain is that if we continue on the same path as we have for the past 20 years, our competitors will quickly and permanently overtake us.

Joel Hickman is Deputy Director of the Transatlantic Security and Defence Programme at the Centre for European Policy Analysis (CEPA). He was previously a British diplomat posted to Pakistan, where he led the UK government’s serious organised crime strategy, policy and programme across South Asia. Previously, Joel worked as a senior policy advisor in the UK Home Office, the Ministry of Defence and the Foreign, Commonwealth and Development Office.