Chinese state-owned companies COSCO Shipping Corporation and China Merchants have a 30 percent stake in Kaohsiung Port’s Kao Ming Container Terminal (Terminal No. 6) and COSCO leases Berths 65 and 66. It is extremely dangerous to allow Chinese companies or state-owned companies to operate critical infrastructure.
Deterrence theorists are familiar with the concepts of deterrence “by punishment” and “by denial.” Deterrence by punishment threatens an aggressor with prohibitive costs (like retaliation or sanctions) that outweigh the benefits of their action, while deterrence by denial aims to make an attack so difficult that it becomes pointless.
Elbridge Colby, currently serving as the Under Secretary of War for Policy, wrote The Strategy of Denial: American Defense in an Age of Great Power Conflict, in which he argues that the US must shift its defense focus to a “denial strategy” to prevent China from achieving regional hegemony in Asia, especially regarding Taiwan. He proposes a realist perspective that prioritizes military and resource allocation to counter China’s power and build an “anti-hegemonic coalition” with regional allies to deter conflict through the credible threat of denying China a successful conquest. Specifically, this means being able to defend allies, particularly Taiwan, by defeating any military aggression.
However, Colby’s theory works only if the Chinese Communist Party (CCP) is rational, and countries dedicate resources to national defense despite being economically entangled with China. What additional actions might countries take to detach themselves so that they have freedom of action to pursue Colby’s deterrence by denial?
Deterrence by entanglement (DE) is an element of deterrence theory which discourages an actor from aggression by creating a situation where the costs of attacking are inextricably linked to the attacker’s own well-being, making the costs of aggression greater than potential benefits. By increasing mutual interdependencies such as economic, technological, or political dependence, an aggressor is deterred because the aggression would cause significant self-harm.
Why does the CCP employ a DE strategy? Early in its history the CCP learned they would have been defeated if they had not invested heavily in intelligence. Let us review five situations in which the Chinese Nationalist Party (KMT) almost defeated the CCP.
In April 1927, KMT leader Chiang Kai-shek (蔣介石) launched a coordinated, violent purge of communists and labor union members in Shanghai and other Chinese cities. The CCP lost approximately 80 percent of its total membership. This purge was the most devastating blow the KMT dealt the CCP.
In 1931, Gu Shunzhang (顧順章), a high-ranking CCP intelligence officer, defected to the KMT and helped formulate a mass arrest operation to capture the CCP’s Shanghai leadership. This attempt was only averted due to quick action by a CCP mole within KMT headquarters, Qian Zhuangfei (錢壯飛), who intercepted the message and alerted CCP leaders. A successful mass arrest would have decapitated the CCP at a critical time.
Between 1930 and 1934, Chiang conducted the Encirclement and Annihilation Campaigns against the CCP. During the fifth encirclement campaign, Chiang cornered the CCP’s Red Army and inflicted massive casualties. On the brink of annihilation, the Red Army conducted a desperate 12,500km retreat known as the Long March.
Throughout the Long March (1934–1936), the Red Army was pursued by KMT forces and local warlords. When the Red Army reached relative safety in Yan’an Province in late 1935, the 86,000-strong Red Army had shrunk to between 7,000–8,000.
During 1946–1947 period of the post-WWII Civil War, the KMT had a significant advantage in men, equipment, and US support, and achieved victories. In March 1947, the KMT even captured the CCP wartime capital of Yan’an. The CCP was badly depleted and confined to a remote rural enclave; its survival was again in doubt. The CCP was saved by a combination of its spies operating in KMT controlled areas, and KMT incompetence, corruption, and hyperinflation.
In these examples, the CCP’s intelligence operations against the KMT were the primary reason the CCP survived. Consequently, the CCP learned the importance of intelligence and counter-intelligence operations.
Today, the CCP conducts intelligence operations at a scale and complexity that surpasses traditional western methods and capabilities. The CCP organizes its intelligence operations through a three-prong process: (1) the CCP uses economic measures to gain access that (2) creates opportunities to collect intelligence and (3) the intelligence collected and analyzed enables the CCP to conduct operations at the time, place, and type of their choosing. Consider the following examples:
Maritime ports are key sources of any country’s economy because of the scale and throughput of cargo. Maritime transport moves over 80 percent of goods traded worldwide. Chinese and related Hong Kong shipping companies operate more than 115 active ports in at least 60 countries worldwide. Chinese firms own or operate terminals at more than ninety deepwater ports overseas, including 34 of the 100 busiest ports globally. COSCO Shipping Ports, a major Chinese state-owned enterprise, operates and manages 371 berths globally, which includes those in China and abroad.
At least five countries (Japan, India, Canada, Paraguay and Croatia) have no active Chinese operational or equity control in their ports. People’s Republic of China (PRC) firms partially own terminals in five US ports: Los Angeles, Long Beach, Seattle, Houston and Miami.
Chinese-made ship-to-shore (STS) cranes are 80 percent of cranes used at US ports and are also at the Port of Vancouver, Canada. In 2021, the FBI discovered intelligence collection devices and remote-control systems on the Chinese cranes.
China collects economic and other intelligence as it monitors sea traffic and trade at ports. In Mexico, Chinese companies, particularly Hutchison Ports (part of CK Hutchison Holdings Ltd.), have a more significant presence with port facilities on both coasts, including terminals or operations in ports such as Manzanillo, Lazaro Cardenas, Veracruz, and Ensenada.
The US government has repeatedly asked the CCP to cease and desist in sending fentanyl precursors to terrorist drug gangs in Mexico. With Hutchison Ports controlling ports that would receive these chemicals from China, these Chinese port operators know how to avoid Mexican customs and other legal authorities via their intelligence network and, consequently, they can covertly move the chemicals to the drug cartels that, since 2021, have caused fentanyl overdose deaths of more than 250,000 Americans.
With the CCP’s direction and financial support, Chinese companies underbid on contracts or conduct graft to gain placement and access to collect intelligence. For example, China gifted the construction of the African Union (AU) headquarters in Addis Ababa, Ethiopia, which opened in 2012. A 2018 report alleged that the building was bugged, with data being transferred to Chinese servers.
Heritage Foundation research discovered that between 1966 and 2020, Chinese companies constructed or renovated at least 186 buildings in Africa and constructed at least 40 of Africa’s 54 countries’ government buildings. Heritage Foundation infers that China could use intelligence accessed in these buildings for many operations, including to (1) facilitate influence operations on the continent; (2) recruit senior African government officials as intelligence assets; (3) gain insight into diplomatic strategies, military counterterrorism operations, or joint military exercises; and (4) disadvantage non-PRC companies competing against Chinese firms for Africa’s growing economic opportunities.
China also uses this three-prong method to gain economic access, gather intelligence, and conduct operations at the company and personal levels. Companies that moved operations to China to capture economic benefits of cheap labor costs were forced to transfer their intellectual property to Chinese companies, which resulted in major losses to their businesses. The CCP and Chinese companies used economic access to collect intelligence on these firms and conducted operations to control them.
The CCP uses economic incentives to recruit Chinese spies to collect intelligence and conduct operations to advantage the CCP’s position and diminish competitors. Well-known researchers, such as Bill Gertz, Sam Cooper, Isaac Stone Fish, Alex Joske, Peter Mattis, Nicholas Eftimiades, Matthew Brazil, and Peter Schweizer, have documented how the CCP creates and exploits opportunities.
Taiwan also suffers from Chinese espionage. In 2022, Taiwan prosecuted 28 people for spying, 86 in 2023, and the number surged to 168 in 2024.
China uses DE to ensure countries, companies, and people align with CCP dictates. Countering this DE strategy involves disentangling from China and building relationships with allies and partners.
What will the CCP seek to accomplish? How do countries, companies, and individuals counter and prevent these nefarious CCP actions? The first step is to develop an accurate understanding of the CCP’s strategy (DE) and tactics (three-prong process), and to use this knowledge to counter them.
Colby’s “anti-hegemonic coalition” that disentangle themselves from China can dedicate resources to their national defense and pose a credible threat of denying China any future desired illegal conquests (Taiwan, Japan’s Senkaku islands, parts of India, Bhutan, Nepal) and illegal maritime claims (Japan, South Korea, the Philippines, Vietnam, Brunei, Malaysia, Indonesia, and Taiwan). Politicians, economists, and researchers use “decoupling,” “de-risking,” “friendshoring,” and “slowbalization” to describe countering China’s entanglement.
We hope that disentangling from China exacerbates internal turmoil and sets conditions for China to emerge as a democratic country with Chinese characteristics.
Guermantes Lailari is a retired US Air Force Foreign Area officer specializing in counterterrorism, irregular warfare, missile defense, and strategy. He holds advanced degrees in international relations and strategic intelligence. He was a Ministry of Foreign Affairs Taiwan Fellow in 2022, a visiting scholar at National Chengchi University and National Defense University in 2023, and is a visiting researcher at the Institute for National Defense and Security Research in 2024.
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